-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P0IAElQC20WrjrPeNZAywNv2kVIEhkvPMgpg0G5hHbc+Y4MGbiuvzXsgow8invfQ 7A3ilWHbTQnXRym/8QbrOw== 0000936772-04-000088.txt : 20040310 0000936772-04-000088.hdr.sgml : 20040310 20040310172949 ACCESSION NUMBER: 0000936772-04-000088 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040310 EFFECTIVENESS DATE: 20040310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND INC CENTRAL INDEX KEY: 0000825316 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05398 FILM NUMBER: 04661074 BUSINESS ADDRESS: STREET 1: 500 PLAZA DRIVE STREET 2: 1345 AVENUE OF THE AMERICAS 31ST FL CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2013194105 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANGEMENT LP STREET 2: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 N-CSR 1 vp-comb_ncsr.txt 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: 811-5398 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. Alliance Capital Management, 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, 2003 Date of reporting period: December 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. ALLIANCEBERNSTEIN ------------------------ VARIABLE PRODUCTS ------------------------ SERIES FUND ------------------------ ALLIANCEBERNSTEIN ------------------------ VALUE PORTFOLIO ------------------------ ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 9, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Value Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks long-term growth of capital. The Portfolio invests primarily in a diversified portfolio of equity securities of companies with relatively large market capitalizations that Alliance believes are undervalued. In selecting securities for the Portfolio, Alliance's Bernstein unit ("Bernstein") uses fundamental research to identify companies whose long-term earnings power and dividend paying capability are not reflected in the current market price of their securities. The Portfolio may invest up to 15% of its total assets in foreign securities. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS ---------------------------- SINCE 1 YEAR INCEPTION* ------------ ------------ ALLIANCEBERNSTEIN VALUE PORTFOLIO CLASS A 28.94% 26.98% RUSSELL 1000 VALUE INDEX 30.03% 23.44% * The portfolio's Class A inception date is 7/22/02. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Russell 1000 Value Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The index contains those securities in the Russell 1000 Index with a less-than-average growth orientation. The Russell 1000 Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Value Portfolio. During the 12-month period ended December 31, 2003, the Portfolio's Class A shares gained 28.94%, but underperformed the benchmark, the Russell 1000 Value Index, which returned 30.03% for the year. The Portfolio underperformed its benchmark for several reasons. The Portfolio was underweight in the consumer growth sector. In addition, the Portfolio's consumer growth holdings underperformed relative to those in the benchmark. Additionally, our stock selection in the industrial resources sector dampened returns due to our underweights in some of the smaller mining and steel stocks in the benchmark that outperformed in 2003. The Portfolio's positive stock selection in the technology and capital equipment sectors was outweighed by its underperformance in the areas discussed above. MARKET REVIEW AND INVESTMENT STRATEGY The stock market rally, which began in March 2003 after the U.S. invasion of Iraq, gathered strength as investors gained confidence in the outlook for the economy and corporate profits. All sectors participated in the rally, but cyclically-oriented sectors such as technology and consumer cyclicals led the rise. We expect U.S. economic growth to continue, and operating earnings look set to match or exceed the record levels of 2000. The value opportunity, as we measure it, has fallen from its high levels of a few years ago, and, consequently, we have diversified the Portfolio's holdings by reducing exposure to certain overweighted sectors. 1 VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN VALUE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 7/22/02* - 12/31/03 AllianceBernstein Value Portfolio Class A: $14,119 Russell 1000 Value Index: $13,543 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein Russell 1000 Value Portfolio Class A Value Index - ------------------------------------------------------------------------------- 7/22/02* $ 10,000 $ 10,000 12/31/02 $ 10,950 $ 10,415 12/31/03 $ 14,119 $ 13,543 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Value Portfolio Class A shares (from 7/22/02* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 1000 Value Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index contains those securities in the Russell 1000 Index with a less-than-average growth orientation. The Russell 1000 Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Value Portfolio. - -------------------------------------------------------------------------------- * Portfolio and benchmark data is from the Portfolio's inception date of 7/22/02. 2 VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Citigroup, Inc. $ 5,431,626 4.6% - ------------------------------------------------------------------------------- Exxon Mobil Corp. 4,997,900 4.2 - ------------------------------------------------------------------------------- Bank of America Corp. 3,000,039 2.6 - ------------------------------------------------------------------------------- Altria Group, Inc. 2,321,013 2.0 - ------------------------------------------------------------------------------- ChevronTexaco Corp. 2,263,418 1.9 - ------------------------------------------------------------------------------- Hewlett-Packard Co. 2,061,052 1.8 - ------------------------------------------------------------------------------- U.S. Bancorp 1,777,866 1.5 - ------------------------------------------------------------------------------- Wachovia Corp. 1,702,864 1.4 - ------------------------------------------------------------------------------- Comcast Corp. Cl.A 1,674,201 1.4 - ------------------------------------------------------------------------------- ConocoPhillips 1,613,022 1.4 - ------------------------------------------------------------------------------- $ 26,843,001 22.8% 3 VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS-95.6% FINANCIAL-35.3% BANKS-NYC-5.8% Citigroup, Inc. 111,900 $ 5,431,626 J.P. Morgan Chase & Co. 35,800 1,314,934 ------------- 6,746,560 ------------- FINANCE-PERSONAL LOANS-0.6% Countrywide Credit Industries, Inc. 8,733 662,423 ------------- LIFE INSURANCE-1.9% Jefferson-Pilot Corp. 13,100 663,515 John Hancock Financial Services, Inc. 19,200 720,000 MetLife, Inc. 24,800 835,016 Torchmark, Inc. 1,300 59,202 ------------- 2,277,733 ------------- MAJOR REGIONAL BANKS-13.5% AmSouth Bancorp 22,000 539,000 Bank of America Corp. 37,300 3,000,039 Bank One Corp. 18,100 825,179 Comerica, Inc. 14,500 812,870 FleetBoston Financial Corp. 36,300 1,584,495 Huntington Bancshares, Inc. 19,800 445,500 KeyCorp. 27,950 819,494 National City Corp. 28,000 950,320 PNC Financial Services Group 14,700 804,531 Popular, Inc. 2,500 112,350 Regions Financial Corp. 16,600 617,520 Suntrust Banks, Inc. 10,100 722,150 U.S. Bancorp 59,700 1,777,866 Wachovia Corp. 36,550 1,702,864 Wells Fargo & Co. 19,000 1,118,910 ------------- 15,833,088 ------------- MULTI-LINE INSURANCE-2.0% Aetna, Inc. 900 60,822 American International Group, Inc. 14,525 962,717 Humana, Inc. (a) 18,100 413,585 The Hartford Financial Services Group, Inc. 16,000 944,480 ------------- 2,381,604 ------------- PROPERTY-CASUALTY INSURANCE-3.8% ACE, Ltd. 6,000 248,520 Allstate Corp. 25,350 1,090,557 Chubb Corp. 12,500 851,250 Old Republic International Corp. 5,250 133,140 PartnerRe, Ltd. 4,300 249,615 RenaissanceRe Holdings, Ltd. 4,200 206,010 St. Paul Cos., Inc. 15,700 622,505 Travelers Property Casualty Corp. Cl.A 31,937 535,903 Travelers Property Casualty Corp. Cl.B 4,598 78,028 XL Capital, Ltd. Cl.A 6,200 480,810 ------------- 4,496,338 ------------- SAVINGS AND LOAN-3.1% Astoria Financial Corp. 14,500 539,400 Federal Home Loan Mortgage Corp. 8,100 472,392 Federal National Mortgage Assn. 7,000 525,420 Golden West Financial Corp. 7,850 810,042 Washington Mutual, Inc. 32,300 1,295,876 ------------- 3,643,130 ------------- MISCELLANEOUS FINANCIAL-4.6% Goldman Sachs Group, Inc. 11,675 1,152,673 Lehman Brothers Holdings, Inc. 12,100 934,362 MBIA, Inc. 11,800 698,914 Merrill Lynch & Co., Inc. 13,700 803,505 MGIC Investment Corp. 11,900 677,586 Morgan Stanley 19,900 1,151,613 ------------- 5,418,653 ------------- 41,459,529 ------------- UTILITIES-11.2% ELECTRIC COMPANIES-6.6% Alliant Energy Corp. 20,600 512,940 American Electric Power Co., Inc. 28,075 856,568 Cinergy Corp. 12,250 475,423 Constellation Energy Group, Inc. 14,500 567,820 Edison International (a) 5,600 122,808 Entergy Corp. 12,300 702,699 Exelon Corp. 13,100 869,316 FirstEnergy Corp. 21,700 763,840 Northeast Utilities 24,400 492,148 PG&E Corp. (a) 8,100 224,937 Pinnacle West Capital Corp. 10,000 400,200 PPL Corp. 11,000 481,250 Puget Energy, Inc. 9,500 225,815 Sempra Energy 17,300 520,038 TXU Corp. 13,500 320,220 Xcel Energy, Inc. 9,700 164,706 ------------- 7,700,728 ------------- 4 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- TELEPHONE-4.6% BellSouth Corp. 44,200 $ 1,250,860 Qwest Communications International, Inc. (a) 98,500 425,520 SBC Communications, Inc. 48,600 1,267,002 Sprint Corp. 50,500 829,210 Sprint Corp. (PCS Group) (a) 85,500 480,510 Verizon Communications 33,000 1,157,640 ------------- 5,410,742 ------------- 13,111,470 ------------- ENERGY-10.0% GAS PIPELINES-0.1% The Williams Cos., Inc. 11,400 111,948 ------------- OILS-INTEGRATED DOMESTIC-3.7% Ashland, Inc. 11,300 497,878 ConocoPhillips 24,600 1,613,022 Marathon Oil Corp. 23,300 770,997 Occidental Petroleum Corp. 22,100 933,504 Valero Energy Corp. 12,500 579,250 ------------- 4,394,651 ------------- OILS-INTEGRATED INTERNATIONAL-6.2% ChevronTexaco Corp. 26,200 2,263,418 Exxon Mobil Corp. 121,900 4,997,900 ------------- 7,261,318 ------------- 11,767,917 ------------- CONSUMER CYCLICALS-8.3% AUTO PARTS-AFTER MARKET-0.1% Genuine Parts Co. 5,300 175,960 ------------- AUTOS & AUTO PARTS-3.5% American Axle & Manufacturing Holdings, Inc. (a) 10,500 424,410 Autoliv, Inc. (Sweden) 15,700 591,105 BorgWarner, Inc. 3,500 297,745 Dana Corp. 15,900 291,765 Delphi Corp. 36,700 374,707 General Motors Corp. 20,400 1,089,360 Lear Corp. 9,200 564,236 Magna International, Inc. Cl.A 6,500 520,325 ------------- 4,153,653 ------------- HOME FURNISHINGS-0.6% Leggett & Platt, Inc. 10,000 216,300 Mohawk Industries, Inc. (a) 7,500 529,050 ------------- 745,350 ------------- HOUSEHOLD-APPLIANCES/DURABLES-0.5% Whirlpool Corp. 8,100 588,465 ------------- RETAILERS-2.5% AutoNation, Inc. (a) 34,500 633,765 Federated Department Stores, Inc. 16,500 777,645 May Department Stores Co. 22,400 651,168 Office Depot, Inc. (a) 33,700 563,127 Sears, Roebuck & Co. 5,600 254,744 ------------- 2,880,449 ------------- TEXTILES/SHOES-APPAREL MFG.-0.8% Liz Claiborne, Inc. 6,200 219,852 Reebok International, Ltd. 5,600 220,192 V.F. Corp. 11,350 490,774 ------------- 930,818 ------------- TIRES & RUBBER GOODS-0.3% Cooper Tire & Rubber Co. 14,100 301,458 ------------- 9,776,153 ------------- TECHNOLOGY-6.9% COMMUNICATION-EQUIP. MFRS.-2.3% ADC Telecommunications, Inc. (a) 117,700 349,569 Corning, Inc. (a) 96,000 1,001,280 Lucent Technologies, Inc. (a) 85,600 243,104 Nortel Networks Corp. (a) 174,300 737,289 Tellabs, Inc. (a) 41,500 349,845 ------------- 2,681,087 ------------- COMPUTERS-2.5% Hewlett-Packard Co. 89,728 2,061,052 International Business Machines Corp. 9,840 911,971 Quantum Corp. (a) 15,750 49,140 ------------- 3,022,163 ------------- COMPUTER/INSTRUMENTATION-0.8% Flextronics International, Ltd. (Singapore), (a) 39,400 584,696 Sanmina-SCI Corp. (a) 26,700 336,687 ------------- 921,383 ------------- MISCELLANEOUS INDUSTRIAL TECHNOLOGY-1.3% Arrow Electronics, Inc. (a) 1,200 27,768 Avnet, Inc. (a) 19,500 422,370 Ingram Micro, Inc. Cl.A, (a) 18,200 289,380 Solectron Corp. (a) 97,510 576,284 Tech Data Corp. (a) 5,550 220,280 ------------- 1,536,082 ------------- 8,160,715 ------------- 5 VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- CONSUMER GROWTH-6.5% DRUGS-2.1% Bristol-Myers Squibb Co. 18,850 $ 539,110 GlaxoSmithKline Plc (ADR) (United Kingdom) 11,700 545,454 Merck & Co., Inc. 15,200 702,240 Pfizer, Inc. 11,415 403,292 Wyeth 6,400 271,680 ------------- 2,461,776 ------------- ENTERTAINMENT-1.5% Time Warner, Inc. (a) 83,400 1,500,366 Viacom, Inc. 3,050 135,359 Walt Disney Co. 6,300 146,979 ------------- 1,782,704 ------------- HOSPITAL SUPPLIES-0.6% Guidant Corp. 10,400 626,080 ------------- OTHER MEDICAL-0.2% IMS Health, Inc. 8,800 218,768 ------------- PUBLISHING-0.4% R.R. Donnelley & Sons Co. 16,450 495,967 ------------- RADIO-TV BROADCASTING-1.4% Comcast Corp. Cl.A, (a) 50,934 1,674,201 ------------- MISCELLANEOUS CONSUMER GROWTH-0.3% Cendant Corp. (a) 16,300 363,001 ------------- 7,622,497 ------------- CONSUMER STAPLES-5.3% FOODS-0.6% Sara Lee Corp. 30,900 670,839 ------------- RESTAURANTS-0.6% McDonald's Corp. 27,300 677,859 ------------- RETAIL STORES-FOOD-1.0% Safeway, Inc. (a) 27,000 591,570 SUPERVALU, Inc. 500 14,295 The Kroger Co. (a) 34,100 631,191 ------------- 1,237,056 ------------- SOAPS-0.2% Procter & Gamble Co. 3,000 299,640 ------------- SUGAR REFINERS-0.3% Archer-Daniels-Midland Co. 19,805 301,432 ------------- TOBACCO-2.6% Altria Group, Inc. 42,650 2,321,013 UST, Inc. 20,100 717,369 ------------- 3,038,382 ------------- 6,225,208 ------------- CAPITAL EQUIPMENT-4.4% AEROSPACE-DEFENSE-0.6% B.F. Goodrich Corp. 21,700 644,273 ------------- AUTO TRUCKS-PARTS-1.1% Eaton Corp. 6,750 728,865 PACCAR, Inc. 7,000 595,840 ------------- 1,324,705 ------------- ELECTRICAL EQUIPMENT-0.7% Cooper Industries, Ltd. Cl.A 7,000 405,510 Hubbell, Inc. Cl.B 6,600 291,060 Rockwell Automation, Inc. 3,600 128,160 ------------- 824,730 ------------- MACHINERY-AGRICULTURAL-0.5% Caterpillar, Inc. 6,700 556,234 ------------- MISCELLANEOUS CAPITAL GOODS-1.5% Parker-Hannifin Corp. 6,000 357,000 Textron, Inc. 14,300 815,958 Tyco International, Ltd. (Bermuda) 23,500 622,750 ------------- 1,795,708 ------------- 5,145,650 ------------- COMMODITIES-2.4% CHEMICALS-1.3% Cabot Corp. 11,700 372,528 E.I. du Pont de Nemours & Co. 12,500 573,625 The Dow Chemical Co. 11,800 490,526 The Lubrizol Corp. 5,050 164,226 ------------- 1,600,905 ------------- PAPER-1.1% Boise Cascade Corp. 11,200 368,032 Georgia-Pacific Group 24,950 765,216 Smurfit-Stone Container Corp. (a) 7,450 138,347 ------------- 1,271,595 ------------- 2,872,500 ------------- INDUSTRIAL COMMODITIES-2.2% ALUMINUM-1.1% Alcan, Inc. (Canada) 12,900 605,655 Alcoa, Inc. 17,000 646,000 ------------- 1,251,655 ------------- FERTILIZERS-0.6% Monsanto Co. 26,000 748,280 ------------- PAPER-0.5% MeadWestvaco Corp. 18,737 557,426 ------------- 2,557,361 ------------- 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- SERVICES-1.6% RAILROADS-1.6% Burlington Northern Santa Fe Corp. 19,900 $ 643,765 CSX Corp. 16,600 596,604 Norfolk Southern Corp. 27,050 639,732 ------------- 1,880,101 ------------- NON-FINANCIAL-1.5% BUILDING MATERIALS-CEMENT-0.4% Martin Marietta Materials, Inc. 9,600 450,912 ------------- HOME BUILDING-0.9% Centex Corp. 3,100 333,715 Pulte Homes, Inc. 8,300 777,046 ------------- 1,110,761 ------------- MISCELLANEOUS BUILDING-0.2% The Sherwin-Williams Co. 7,500 260,550 ------------- 1,822,223 ------------- Total Common Stocks (cost $94,583,153) 112,401,324 ------------- SHORT-TERM INVESTMENT-4.5% State Street Euro Dollar 0.50%, 1/02/04 (cost $5,261,000) $5,261 5,261,000 ------------- TOTAL INVESTMENTS-100.1% (cost $99,844,153) 117,662,324 Other assets less liabilities-(0.1%) (100,631) ------------- NET ASSETS-100% $ 117,561,693 ============= - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 7 VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $99,844,153) $ 117,662,324 Cash 315 Dividends and interest receivable 189,134 Receivable for capital stock sold 23,312 ------------- Total assets 117,875,085 ------------- LIABILITIES Payable for capital stock redeemed 198,589 Advisory fee payable 49,970 Distribution fee payable 24,004 Accrued expenses 40,829 ------------- Total liabilities 313,392 ------------- NET ASSETS $ 117,561,693 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 10,536 Additional paid-in capital 101,487,181 Undistributed net investment income 1,116,995 Accumulated net realized loss on investment Transactions (2,871,190) Net unrealized appreciation of investments 17,818,171 ------------- $ 117,561,693 ============= CLASS A SHARES Net assets $ 239.13 ============= Shares of capital stock outstanding 21.351 ============= Net asset value per share $ 11.20 ============= CLASS B SHARES Net assets $ 117,561,454 ============= Shares of capital stock outstanding 10,536,049 ============= Net asset value per share $ 11.16 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 VALUE PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $3,232) $ 2,198,942 Interest 24,574 ------------- Total investment income 2,223,516 ------------- EXPENSES Advisory fee 657,864 Distribution fee -- Class B 219,288 Custodian 110,584 Administrative 75,000 Audit 40,964 Legal 29,604 Printing 19,340 Directors' fees and expenses 1,082 Transfer agency 947 Miscellaneous 11,275 ------------- Total expenses 1,165,948 Less: expenses waived and reimbursed (see Note B) (75,000) ------------- Net expenses 1,090,948 ------------- Net investment income 1,132,568 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions (1,657,272) Net change in unrealized appreciation/depreciation of investments 24,092,056 ------------- Net gain on investment transactions 22,434,784 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 23,567,352 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 1,132,568 $ 631,492 Net realized loss on investment transactions (1,657,272) (1,123,959) Net change in unrealized appreciation/ depreciation of investments 24,092,056 (7,013,699) ------------- ------------- Net increase (decrease) in net assets from Operations 23,567,352 (7,506,166) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (2) -0- Class B (642,210) (93,486) CAPITAL STOCK TRANSACTIONS Net increase 26,270,250 48,679,834 ------------- ------------- Total increase 49,195,390 41,080,182 NET ASSETS Beginning of period 68,366,303 27,286,121 ------------- ------------- End of period (including undistributed net investment income of $1,116,995 and $626,639, respectively) $ 117,561,693 $ 68,366,303 ============= ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 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"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek long-term growth of capital. The Portfolio commenced operations on May 1, 2001. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 11 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding, 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .75 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. On May 1, 2002, the Adviser agreed to waive its fee and to reimburse additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the average daily net assets for Class A and Class B shares, respectively. Any expense waivers or reimbursements are accrued daily and paid monthly. For the year ended December 31, 2003, the Portfolio received no such waivers/reimbursements. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 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. For the year ended December 31, 2003, the Adviser voluntarily waived such reimbursement in the amount of $75,000. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Brokerage commissions paid on investment transactions for the year ended December 31, 2003, amounted to $139,185, of which $87,947 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates Alliance Global Investors 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $46,924,775 $22,761,571 U.S. government securities 248,254 -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $ 99,848,420 ============= Gross unrealized appreciation $ 19,226,012 Gross unrealized depreciation (1,412,108) ------------- Net unrealized appreciation $ 17,813,904 ============= 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. 13 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 selling or buying a security or currency at a price different from the current market value. NOTE E: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT -------------------------- ------------------------------ JULY 22, JULY 22, YEAR ENDED 2002(a) TO YEAR ENDED 2002(a) TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold -0- 21 $ -0- $ 171 Shares issued in reinvestment of dividends -0-(b) -0- 2 -0- Shares redeemed -0-(b) -0- (2) -0- ----------- ----------- ------------ ------------- Net increase (decrease) -0-(b) 21 $ -0- $ 171 =========== =========== ============ ============= (a) Commencement of distribution. (b) Share amount is less than one full share. 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES AMOUNT -------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS B Shares sold 4,251,131 6,081,829 $ 40,598,585 $ 57,396,118 Shares issued in reinvestment of dividends 65,001 9,491 642,210 93,485 Shares redeemed (1,591,340) (990,865) (14,970,545) (8,809,940) ----------- ----------- ------------ ------------- Net increase 2,724,792 5,100,455 $ 26,270,250 $ 48,679,663 =========== =========== ============ ============= NOTE F: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE G: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE H: DISTRIBUTIONS TOSHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 642,212 $ 93,486 ------------- ------------- Total distributions paid $ 642,212 $ 93,486 ============= ============= As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 1,116,995 Accumulated capital and other losses (2,866,923)(a) Unrealized appreciation/(depreciation) 17,813,904(b) ------------- Total accumulated earnings/(deficit) $ 16,063,976 ============= (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $2,866,923 of which $89,959 expires in the year 2009, $1,034,044 expires in the year 2010, and $1,742,920 expires in the year 2011. 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. During the current fiscal year, there were no permanent differences. NOTE I: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. 15 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 VALUE PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS A --------------------------- YEAR JULY 22, ENDED 2002(a) TO DECEMBER 31, DECEMBER 31, 2003 2002 ------------- ------------- Net asset value, beginning of period $ 8.76 $8.00 ------ ----- INCOME FROM INVESTMENT OPERATIONS - --------------------------------- Net investment income (b)(c) .16 .07 Net realized and unrealized gain on investment transactions 2.36 .69 ------ ----- Net increase in net asset value from operations 2.52 .76 ------ ----- LESS: DIVIDENDS - --------------- Dividends from net investment income (.08) -0- ------ ----- Net asset value, end of period $11.20 $8.76 ====== ===== TOTAL RETURN - ------------ Total investment return based on net asset value (d) 28.94% 9.50% RATIOS/SUPPLEMENTAL DATA - ------------------------ Net assets, end of period $239 $187 Ratio to average net assets of: Expenses, net of waivers and reimbursements .99% 1.20%(e) Expenses, before waivers and reimbursements 1.06% 2.28%(e) Net investment income (c) 1.51% 4.22%(e) Portfolio turnover rate 27% 12% - -------------------------------------------------------------------------------- See footnote summary on page 18. 17 VALUE PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS B ------------------------------------ YEAR ENDED MAY 1, DECEMBER 31, 2001(f) TO ------------------------ DECEMBER 31, 2003 2002 2001 ----------- ----------- ----------- Net asset value, beginning of period $ 8.75 $10.07 $10.00 ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS - --------------------------------- Net investment income (b)(c) .12 .12 .08 Net realized and unrealized gain (loss) on investment transactions 2.36 (1.42) (.01) ------ ------ ------ Net increase (decrease) in net asset value from operations 2.48 (1.30) .07 ------ ------ ------ LESS: DIVIDENDS - --------------- Dividends from net investment income (.07) (.02) -0- Net asset value, end of period $11.16 $ 8.75 $10.07 ====== ====== ====== TOTAL RETURN - ------------ Total investment return based on net asset value (d) 28.46% (12.95)% 0.70% RATIOS/SUPPLEMENTAL DATA - ------------------------ Net assets, end of period (000's omitted) $117,561 $68,366 $27,286 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.24% 1.21% 1.20%(e) Expenses, before waivers and reimbursements 1.33% 1.43% 2.47%(e) Net investment income (c) 1.29% 1.27% 1.29%(e) Portfolio turnover rate. 27% 12% 4% (a) Commencement of distribution. (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 annulaized. (e) Annualized. (f) Commencement of operations. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN VALUE PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Value Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Value Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 TAX INFORMATION (unaudited) - -------------------------------------------------------------------------------- For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2003 qualifies for the corporate dividends received deduction. 19 VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. BOX 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 20 VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered invest- Greenwich, CT 06830 ment adviser, with which he had been associ- (14) ated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001- Annandale, NY 12504 2002, Senior Advisor from June 1999-June (12) 2000 and President of Historic Hudson Valley (historic preservation) from December 1989- May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
21 VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 and Gladstone, NJ 07934 a partner of that firm for more than twenty-five (12) years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 22 VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - -------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Marilyn G. Fedak, 57(1) Vice President Chief Investment Officer - U.S. Value Equities and Executive Vice President of ACMC** since October 2000. Prior thereto, she was Chief Investment Officer and Chairman of the U.S. Equity Investment Policy Group at Sanford C. Bernstein & Co., Inc. since prior to 1999. Ranji H. Nagaswami, 40(1) Vice President Senior Vice President of ACMC**, with which she has been associated since 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Mses. Fedak and Nagaswami are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS January 26, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein International Value Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks long-term growth of capital. The Portfolio will invest primarily in a diversified portfolio of foreign equity securities. The Portfolio's investment policies emphasize investment in companies that are determined by Alliance to be undervalued, using the fundamental value approach of Alliance's Bernstein unit ("Bernstein"). In selecting securities for the Portfolio, Bernstein uses its fundamental research to identify companies whose long-term earnings power is not reflected in the current market price of their securities. In order to hedge a portion of currency risk, the Portfolio may from time to time invest in currency futures contracts or currency forward contracts. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS ------------------------- SINCE 1 YEAR INCEPTION* ----------- ----------- ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO CLASS A 44.36% 12.07% MSCI EAFE INDEX 39.17% 1.40% * The Portfolio's Class A share inception date is 5/10/01. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. During the reporting period, the Advisor waived a portion of its advisory fee or reimbursed the Fund for a portion of its expenses to the extent necessary to limit the Fund's expenses to 1.20% for Class A and 1.45% for Class B. This waiver extends through the Fund's current fiscal year and may be extended by the Advisor for additional one-year terms. Without the waiver, the fund's expenses would have been higher and its performance would have been lower than that shown above. The unmanaged Morgan Stanley Capital International (MSCI) Europe, Australasia And Far East (EAFE) Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a market capitalization-weighted index that measures stock performance in 21 countries in Europe, Australasia and the Far East. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein International Value Portfolio. The Portfolio outperformed its benchmark, the MSCI EAFE Index, for the 12-month period ended December 31, 2003. The biggest contributor to outperformance during the year of 2003 was individual stock selection. Cyclical sectors rallied over much of the year because of growing optimism about economic growth prospects, and many of the Portfolio's cyclical holdings contributed meaningfully to the premium. The Portfolio's most successful investments included holdings in the energy sector, among merchandisers, among steel manufacturers and in the financial sector. Moreover, the Portfolio benefited particularly from a number of holdings in emerging markets, especially among energy stocks. For both the six- and 12-month periods ended December 31, 2003, the Portfolio also gained as foreign currencies rose against the U.S. dollar. The euro rose to record levels against the U.S. dollar, and the Canadian and Australian dollars rose to multi-year highs. All else being equal, rising foreign currencies mean higher international returns for U.S. investors. The single biggest detractor to the Portfolio's performance for both the year and the last six months was Parmalat. This Italian-based dairy company stunned the market in December when it ran into cash flow problems and subsequently declared itself bankrupt, even though its audited financial statements had indicated that it had several billion euros in liquid assets. Parmalat seemingly went to great pains to conceal what now quite obviously appears to be a precarious financial position, not only in its financial statements, but also in direct research meetings that we--and other investors--held with management. They obscured the facts through all investment inquiries, including our own intensive research. Once the controversy began to surface, we moved to reduce the Portfolio's holdings in Parmalat. Even so, we did not escape the abrupt decline in the value of Parmalat's shares. The Portfolio's holding in Parmalat inevitably detracted from returns. However, its worth noting that the Portfolio still outperformed its benchmark solidly for the 12-month period under review, even after taking this factor into account. 1 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MARKET REVIEW AND INVESTMENT STRATEGY The year began badly with investors concerned about deflation, poor corporate earnings prospects, geopolitical risk and corporate governance and accounting problems. During the period from January 1, 2003 to March 12, 2003--the day the market hit bottom--the MSCI EAFE Index lost 13.2% of its value. Losses in the consumer cyclical, finance and capital equipment sectors led the market down. Since then, geopolitical risk factors have receded as the conflict in Iraq unfolded without extreme military or oil price outcomes being realized. Investors have begun to realize that the interest rate cuts that began in 2002 combined with massive fiscal stimulus in the U.S. and a recovery of domestic demand growth in Asia were fueling a broad-based economic recovery and a sharp earnings rebound. Since the MSCI EAFE bottomed in mid-March, the Index has gained 59.7% through December 31, 2003. The markets have been led up by the cyclically oriented sectors such as technology, finance, capital equipment and industrial commodities. The Portfolio lost significantly less than the market during the downturn, and meaningfully outperformed in the subsequent rally. During the market downturn, the Portfolio benefited from overweighting the construction sector, which did better than many observers expected because interest rates were at the lowest levels in decades, and from key holdings in the consumer cyclical sector. During the rally over the rest of the year, much of the Portfolio's outperformance was driven by cyclical stocks, notably in emerging markets. Many investments in the energy, financial, steel and automobile manufacturing industries performed very well. The Portfolio also benefited from having limited exposure to the medical and consumer staples sectors as they lagged the market. 2 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 5/10/01*-12/31/03 AllianceBernstein International Value Portfolio Class A: $13,515 MSCI EAFE Index: $10,073 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein International MSCI EAFE Value Portfolio Index - ------------------------------------------------------------------------------- 5/10/01* $ 10,000 $ 10,000 12/31/01 $ 9,870 $ 8,582 12/31/02 $ 9,362 $ 7,238 12/31/03 $ 13,515 $ 10,073 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein International Value Portfolio Class A shares (from 5/10/01* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a market capitalization-weighted index that measures stock performance in 21 countries in Europe, Australasia and the Far East. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein International Value Portfolio. - ------------------------------------------------------------------------------- * Portfolio and benchmark data are from the Portfolio's inception date of 5/10/01. 3 INTERNATIONAL VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Canon, Inc. $ 4,890,559 3.4% - ------------------------------------------------------------------------------- Arcelor 4,682,947 3.3 - ------------------------------------------------------------------------------- Nissan Motor Co., Ltd. 4,661,334 3.2 - ------------------------------------------------------------------------------- GlaxoSmithKline Plc 4,290,978 3.0 - ------------------------------------------------------------------------------- Vodafone Group Plc 4,238,999 2.9 - ------------------------------------------------------------------------------- Eni S.p.A. 3,692,492 2.6 - ------------------------------------------------------------------------------- PTT Public Co., Ltd. 3,632,683 2.5 - ------------------------------------------------------------------------------- DSM NV 3,575,085 2.5 - ------------------------------------------------------------------------------- Continental AG 3,402,227 2.4 - ------------------------------------------------------------------------------- Honda Motor Co., Ltd. 3,394,446 2.4 ------------- ---- - ------------------------------------------------------------------------------- $ 40,461,750 28.2% - ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION December 31, 2003 PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Finance $ 38,399,328 26.7% - ------------------------------------------------------------------------------- Capital Equipment 18,066,603 12.5 - ------------------------------------------------------------------------------- Industrial Commodities 17,410,666 12.1 - ------------------------------------------------------------------------------- Energy 15,673,956 10.9 - ------------------------------------------------------------------------------- Construction 10,071,522 7.0 - ------------------------------------------------------------------------------- Consumer Cyclical 10,020,080 7.0 - ------------------------------------------------------------------------------- Technology 8,861,478 6.2 - ------------------------------------------------------------------------------- Medical 7,916,413 5.5 - ------------------------------------------------------------------------------- Telecommunications 5,542,956 3.8 - ------------------------------------------------------------------------------- Consumer Staples 2,700,136 1.9 - ------------------------------------------------------------------------------- Transportation 1,516,565 1.0 ------------- ---- - ------------------------------------------------------------------------------- Total Investments* 136,179,703 94.6 - ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 7,783,991 5.4 ------------- ---- - ------------------------------------------------------------------------------- Net Assets $ 143,963,694 100.0% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- * Excludes short-term obligations. 4 INTERNATIONAL VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS-94.6% AUSTRALIA-0.8% Qantas Airways, Ltd. 457,800 $ 1,134,065 ------------- BRAZIL-1.9% Petroleo Brasileiro, SA (ADR) 100,800 2,669,365 ------------- CANADA-7.1% Bank of Nova Scotia 65,949 3,357,793 Magna International, Inc. Cl.A 23,550 1,895,881 Petro-Canada 60,400 2,986,934 Royal Bank of Canada 40,100 1,917,577 ------------- 10,158,185 ------------- FRANCE-15.7% Arcelor 268,900 4,682,947 Assurances Generales de France (a) 55,700 3,021,918 Aventis, SA 41,800 2,759,695 BNP Paribas, SA 29,200 1,836,585 Compagnie de Saint Gobain 43,200 2,112,423 France Telecom, SA (a) 45,672 1,303,957 PSA Peugeot Citroen 35,950 1,829,927 Societe Generale 26,220 2,312,513 Vivendi Universal, SA (a) 111,500 2,707,136 ------------- 22,567,101 ------------- GERMANY-7.6% AMB Generali Holding AG 19,250 1,476,586 Continental AG 89,800 3,402,227 Hannover Rueckversicherungs-AG 43,550 1,521,020 Heidelberger Zement AG 26,250 1,108,300 MAN AG 7,300 221,203 Volkswagen AG 56,100 3,120,664 ------------- 10,850,000 ------------- HUNGARY-0.8% MOL Magyar Olaj-es Gazipari Rt. (GDR) 39,850 1,215,425 ------------- IRELAND-1.3% Bank of Ireland 134,200 1,826,122 Depfa Bank Plc 480 60,538 ------------- 1,886,660 ------------- ISRAEL-1.0% Bank Hapoalim, Ltd. 600,700 1,476,795 ------------- ITALY-3.5% Banco Popolare di Verona e Novara Scrl 77,700 1,313,793 Eni S.p.A. 195,900 3,692,492 ------------- 5,006,285 ------------- JAPAN-16.4% Canon, Inc. 105,000 4,890,559 Honda Motor Co., Ltd. 76,400 3,394,446 JFE Holdings, Inc. 56,700 1,548,024 Nippon Meat Packers, Inc. 119,000 1,164,064 Nissan Motor Co., Ltd. 408,000 4,661,334 Promise Co., Ltd. 53,450 2,329,878 Sumitomo Mitsui Financial Group, Inc. 520 2,771,457 UFJ Holdings, Inc. (a) 600 2,884,211 ------------- 23,643,973 ------------- KOREA-5.2% Hyundai Motor Co., Ltd. (a) 33,900 1,436,803 Kookmin Bank (a) 25,800 966,823 POSCO 23,900 3,269,576 Shinhan Financial Group Co., Ltd. (a) 115,600 1,848,242 ------------- 7,521,444 ------------- MEXICO-1.4% Cemex SA de CV (ADR) 76,406 1,997,306 ------------- NETHERLANDS-2.5% DSM NV 72,700 3,575,085 ------------- PEOPLES REPUBLIC OF CHINA-1.0% China Petroleum & Chemical Corp. (Sinopec) 3,300,000 1,477,057 ------------- SINGAPORE-1.2% Flextronics International, Ltd. (a) 94,400 1,400,896 Singapore Airlines, Ltd. 58,000 382,500 ------------- 1,783,396 ------------- SOUTH AFRICA-1.1% SAPPI, LTD. (ADR) 121,600 1,657,773 ------------- SPAIN-1.3% ACS, Actividades de Construccion y Servicios, SA 38,239 1,864,548 ------------- SWEDEN-3.1% Electrolux AB Cl.A 81,700 1,794,656 Svenska Cellulosa AB Cl.B 65,500 2,677,260 ------------- 4,471,916 ------------- SWITZERLAND-2.0% Credit Suisse Group 77,700 2,841,611 ------------- TAIWAN-1.8% Compal Electronics, Inc. (GDR) (a) 375,279 2,570,023 ------------- THAILAND-2.5% PTT Public Co., Ltd. 832,000 3,632,683 ------------- 5 INTERNATIONAL VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- UNITED KINGDOM-15.4% Aviva Plc 323,800 $ 2,833,643 George Wimpey Plc 166,800 1,111,339 GlaxoSmithKline Plc 187,800 4,290,978 InterContinental Hotels Group Plc 126,864 1,197,967 Lloyds TSB Group Plc 64,000 511,810 Persimmon Plc 79,131 758,528 Royal & Sun Alliance Insurance Group Plc 819,150 1,290,413 Safeway Plc 303,000 1,536,072 Shire Pharmaceuticals Group Plc (a) 89,400 865,741 Taylor Woodrow Plc 234,800 1,119,077 Vodafone Group Plc 1,714,600 4,238,999 Whitbread Plc 188,900 2,424,440 ------------- 22,179,007 ------------- Total Common Stocks (cost $104,329,102) 136,179,703 ------------- PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-3.6% TIME DEPOSIT-3.6% State Street Euro Dollar 0.50%, 1/02/04 (cost $5,181,000) $5,181 $ 5,181,000 ------------- TOTAL INVESTMENTS-98.2% (cost $109,510,102) 141,360,703 Other assets less liabilities-1.8% 2,602,991 ------------- NET ASSETS-100% $ 143,963,694 ============= FINANCIAL FUTURES CONTRACTS PURCHASED (SEE NOTE D)
VALUE AT NUMBER OF EXPIRATION ORIGINAL DECEMBER 31, UNREALIZED TYPE CONTRACTS MONTH VALUE 2003 APPRECIATION - ------------------------------------------------------------------------------------------------------ EURO STOXX 50 54 Mar 2004 $ 1,830,292 $ 1,877,150 $ 46,858 TOPIX INDEX FUT 16 Mar 2004 1,491,203 1,560,648 69,445 --------- $ 116,303 =========
- ------------------------------------------------------------------------------- (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 December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $109,510,102) $ 141,360,703 Cash 32 Foreign cash, at value (cost $3,227,435) 3,339,694(a) Dividends and interest receivable 313,398 Receivable for capital stock sold 115,398 Receivable for investment securities sold 44,353 Receivable for variation margin on futures contracts 145 ------------- Total assets 145,173,723 ------------- LIABILITIES Payable for investment securities purchased 571,430 Payable for capital stock redeemed 157,097 Advisory fee payable 100,833 Distribution fee payable 22,072 Accrued expenses 358,597 ------------- Total liabilities 1,210,029 ------------- NET ASSETS $ 143,963,694 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 10,739 Additional paid-in capital 111,892,948 Undistributed net investment income 869,587 Accumulated net realized loss on investment and foreign currency transactions (602,012) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 31,792,432 ------------- $ 143,963,694 ============= CLASS A SHARES Net assets $ 31,627,936 ============= Shares of capital stock outstanding 2,351,745 ============= Net asset value per share $ 13.45 ============= CLASS B SHARES Net assets $ 112,335,758 ============= Shares of capital stock outstanding 8,387,387 ============= Net asset value per share $ 13.39 ============= - ------------------------------------------------------------------------------- (a) An amount of U.S. $197,537 has been segregated as collateral for the financial futures contracts outstanding at December 31, 2003. See Notes to Financial Statements. 7 INTERNATIONAL VALUE PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $223,604) $ 1,785,759 Interest 36,809 ------------- Total investment income 1,822,568 ------------- EXPENSES Advisory fee 829,506 Distribution fee -- Class B 146,670 CUSTODIAN 190,481 Administrative 75,000 Legal 51,872 Audit 39,592 Printing 26,611 Directors' fees and expenses 973 Transfer agency 947 Miscellaneous 17,758 ------------- Total expenses 1,379,410 Less: expenses waived and reimbursed (see Note B) (237,331) ------------- Net expenses 1,142,079 ------------- Net investment income 680,489 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions (948,686) Futures 757,176 Foreign currency transactions 201,945 Net change in unrealized appreciation/depreciation of: Investments 33,384,935 Futures 154,338 Foreign currency denominated assets and liabilities (183,144) ------------- Net gain on investment and foreign currency transactions 33,366,564 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 34,047,053 ============= - ------------------------------------------------------------------------------- See Notes to Financial Statements. 8 INTERNATIONAL VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 680,489 $ 226,607 Net realized gain (loss) on investment and foreign currency transactions 10,435 (366,274) Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 33,356,129 (1,762,087) ------------- ------------- Net increase (decrease) in net assets from operations 34,047,053 (1,901,754) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (88,130) (12,481) Class B (155,555) (11,716) CAPITAL STOCK TRANSACTIONS Net increase 69,636,068 36,708,436 ------------- ------------- Total increase 103,439,436 34,782,485 NET ASSETS Beginning of period 40,524,258 5,741,773 ------------- ------------- End of period (including undistributed net investment income of $869,587 and $230,838, respectively) $ 143,963,694 $ 40,524,258 ============= ============= - ------------------------------------------------------------------------------- See Notes to Financial Statements. 9 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 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"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek long-term growth of capital. The Portfolio commenced operations on May 10, 2001. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes toFinancial 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annualized rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. On May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the average daily net assets for Class A and Class B shares, respectively. Any expense waivers or reimbursements are accrued daily and paid monthly. For the year ended December 31, 2003, the Adviser waived fees in the amount of $162,331. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 11 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) 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. Because of the Adviser's agreement to limit total operating expenses as described above, the Adviser waived reimbursement for such services in the amount of $75,000 for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003, amounted to $162,924, of which $16,922 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 76,738,287 $ 10,383,043 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding futures and foreign currency transactions) are as follows: Cost $ 109,551,670 ============= Gross unrealized appreciation $ 32,420,859 Gross unrealized depreciation (611,826) ------------- Net unrealized appreciation $ 31,809,033 ============= 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 as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolio agrees to receive 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 selling or buying a security or currency at a price different from the current market value. 13 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE E: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 1,698,934 2,153,269 $ 17,079,554 $ 20,639,995 Shares issued in reinvestment of dividends 8,034 1,136 88,130 12,481 Shares redeemed (894,222) (1,011,732) (9,125,866) (9,235,236) ----------- ----------- ------------ ------------- Net increase 812,746 1,142,673 $ 8,041,818 $ 11,417,240 =========== =========== ============ ============= CLASS B Shares sold 10,300,772 4,278,977 $109,827,156 $ 40,702,331 Shares issued in reinvestment of dividends 14,219 1,068 155,555 11,717 Shares redeemed (4,729,080) (1,663,844) (48,388,461) (15,422,852) ----------- ----------- ------------ ------------- Net increase 5,585,911 2,616,201 $ 61,594,250 $ 25,291,196 =========== =========== ============ ============= NOTE F: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE G: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE H: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 243,685 $ 24,197 ------------- ------------- Total distributions paid $ 243,685 $ 24,197 ============= ============= 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 1,268,461 Accumulated capital and other losses (960,036)(a) Unrealized appreciation/(depreciation) 31,751,582(b) ------------- Total accumulated earnings/(deficit) $ 32,060,007 ============= (a) During the fiscal year, the Portfolio utilized capital loss carryforwards of $164,056. 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 the Portfolio's net taxable year. For the year ended December 31, 2003, the Portfolio deferred to January 1, 2004, post October capital losses of $960,036. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses, resulted in a net increase in accumulated net investment income and an increase in accumulated net realized loss on investment and foreign currency transactions. This reclassification had no effect on net assets. NOTE I: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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. 15 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ On October 2, 2003, a putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 INTERNATIONAL VALUE PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS A ------------------------------------- MAY 10, YEAR ENDED DECEMBER 31, 2001(a) TO ------------------------ DECEMBER 31, 2003 2002 2001 ----------- ----------- ----------- Net asset value, beginning of period $9.35 $9.87 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .13 .13 .04 Net realized and unrealized gain (loss) on investment and foreign currency transactions 4.01 (.64) (.17) Net increase (decrease) in net asset value from operations 4.14 (.51) (.13) LESS: DIVIDENDS Dividends from net investment income (.04) (.01) -0- Net asset value, end of period $13.45 $9.35 $9.87 TOTAL RETURN Total investment return based on net asset value (d) 44.36% (5.15)% (1.30)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $31,628 $14,391 $3,913 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.20% 1.17% .95%(e) Expenses, before waivers and reimbursements 1.49% 2.20% 8.41%(e) Net investment income (c) 1.16% 1.30% .59%(e) Portfolio turnover rate 14% 19% 22% - ------------------------------------------------------------------------------- See footnote summary on page 18. 17 INTERNATIONAL VALUE PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS B ------------------------------------ MAY 10, YEAR ENDED DECEMBER 31, 2001(f) TO ------------------------ DECEMBER 31, 2003 2002 2001 ----------- ----------- ----------- Net asset value, beginning of period $9.33 $9.87 $10.25 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .08 .08 .01 Net realized and unrealized gain (loss) on investment and foreign currency transactions 4.01 (.61) (.39) Net increase (decrease) in net asset value from operations 4.09 (.53) (.38) LESS: DIVIDENDS Dividends from net investment income (.03) (.01) -0- Net asset value, end of period $13.39 $9.33 $9.87 TOTAL RETURN Total investment return based on net asset value (d) 43.95% (5.36)% (3.71)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $112,336 $26,133 $1,828 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.45% 1.44% 1.20%(e) Expenses, before waivers and reimbursements 1.74% 2.47% 9.31%(e) Net investment income (c) .38% .86% .17%(e) Portfolio turnover rate 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) Annualized. (f) Commencement of distribution. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein International Value Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, and the statement of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein International Value Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 19 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - ------------------------------------------------------------------------------- (1) Member of the Audit Committee. 20 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Suite 100 Manager of Barrett Associates, Inc., a Greenwich, CT 06830 registered investment adviser, with which (14) he had been associated since prior to 1999. Chairman of the Board He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Invest- ment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Associ- ation of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC"), (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Manage- ment since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001 - Annandale, NY 12504 2002, Senior Advisor from June 1999 - June (12) 2000 and President of Historic Hudson Valley (historic preservation) from December 1989 - May 1999. Previously, Director of the National Academy of Design and during 1988 - 1992, Director and Chairman of the Audit Committee of ACMC.
21 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- ------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 22 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ----------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Kevin F. Simms, 37 (1) Vice President Senior Vice President of ACMC and a co-Chief Investment Officer of International Value Equities in 2003, which he has assumed in addition to his role as Director of Research of Global and International Value Equities at ACMC since 2000. Prior thereto he was Director of Research for Emerging-Markets Equities at Sanford C. Bernstein & Co., Inc. since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
(1) Mr. Simms is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ----------------------------------- VARIABLE PRODUCTS ----------------------------------- SERIES FUND ----------------------------------- ALLIANCEBERNSTEIN ----------------------------------- INTERNATIONAL PORTFOLIO ----------------------------------- Annual Report December 31, 2003 Investment Products Offered - --------------------------- > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. International Portfolio AllianceBernstein Variable Products Series Fund LETTER TO INVESTORS February 11, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein International Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks 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-United States companies (or United States companies having their principal activities and interests outside the United States), companies participating in foreign economies with prospects for growth, and foreign government securities. As a secondary objective, the Portfolio attempts to increase its current income without assuming undue risk. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns ------------------------------------------- 1 Year 5 Years 10 Years ------------------------------------------- AllianceBernstein International Portfolio Class A 31.59% -0.55% 3.63% MSCI EAFE Index 39.17% 0.26% 4.78% Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a market capitalization-weighted index that measures stock performance in countries in Europe, Australasia and the Far East. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein International Portfolio. During the 12-month period ended December 31, 2003, the Portfolio underperformed its benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, with a 31.59% return for the Portfolio's Class A shares versus a 39.17% return for the benchmark. A defensive positioning of the Portfolio hurt performance relative to the benchmark during the market rotation in 2003. Poor stock selection in the energy/utility and finance sectors was the primary reason for the Portfolio's underperformance versus the benchmark. Although energy prices remained higher than expected during 2003, energy-related stocks underperformed the market. This underperformance was offset somewhat by positive stock selection in the technology and basic materials sectors. MARKET REVIEW AND INVESTMENT STRATEGY Global markets rallied in 2003, as evidenced by a gain of 39.17% for the MSCI EAFE Index for the 12-month period ended December 31, 2003. The rally commenced as victory came early to the coalition forces in Iraq. Global economic news also became progressively more positive during the year. Consumers continued to help boost the U.S. economy. China's increasing demand for raw materials also helped propel global economic growth. The Portfolio began 2003 with neutral sector positions to the market and was positioned in a defensive manner following a three-year bear market. As lower quality stocks rapidly rallied in 2003 on the heels of better economic news, the Portfolio began to lag its benchmark. 1 International Portfolio AllianceBernstein Variable Products Series Fund PERFORMANCE UPDATE ALLIANCEBERNSTEIN INTERNATIONAL PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/93-12/31/03 MSCI EAFE Index: $15,950 AllianceBernstein International Portfolio Class A: $14,283 [TABLE BELOW REPRESENTS MOUNTAIN CHART IN PRINTED MATERIAL.] AllianceBernstein International Portfolio Class A MSCI EAFE Index ----------------------- --------------- 12/31/93 $10,000 $10,000 12/31/94 $10,670 $10,806 12/31/95 $11,722 $12,054 12/31/96 $12,571 $12,821 12/31/97 $12,990 $13,085 12/31/98 $14,681 $15,746 12/31/99 $20,587 $20,044 12/31/00 $16,499 $17,246 12/31/01 $12,811 $13,589 12/31/02 $10,854 $11,461 12/31/03 $14,283 $15,950 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein International Portfolio Class A shares (from 12/31/93 to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a market capitalization-weighted index that measures stock performance in countries in Europe, Australasia and the Far East. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein International Portfolio. 2 International Portfolio AllianceBernstein Variable Products Series Fund TEN LARGEST HOLDINGS December 31, 2003 PERCENT OF COMPANY U.S. $ VALUE NET ASSETS - ------------------------------------------------------------------------- BHP Billiton Plc $ 1,825,165 3.2% Credit Suisse Group 1,786,887 3.2 Vodafone Group Plc 1,454,692 2.6 HSBC Holdings Plc 1,358,483 2.4 IHC Caland NV 1,232,439 2.2 UBS AG 1,227,475 2.2 UniCredito Italiano SpA 1,149,543 2.1 JSR Corp. 1,140,104 2.0 Total, SA Cl.B 1,134,543 2.0 Novartis AG 1,118,235 2.0 ----------- ----- $13,427,566 23.9% SECTOR DIVERSIFICATION December 31, 2003 PERCENT OF SECTOR U.S. $ VALUE NET ASSETS - ------------------------------------------------------------------------- Basic Industries $ 5,921,461 10.5% Capital Goods 2,180,222 3.9 Consumer Manufacturing 2,152,490 3.8 Consumer Services 6,717,316 12.0 Consumer Staples 4,579,828 8.2 Energy 4,855,057 8.6 Finance 14,240,725 25.3 Healthcare 5,015,787 8.9 Multi Industry Companies 1,452,227 2.6 Technology 4,088,840 7.3 Transportation 282,821 0.5 Utilities 3,005,905 5.4 ----------- ------ Total Investments* 54,492,679 97.0 Cash and receivables, net of liabilities 1,698,086 3.0 ----------- ------ Net Assets $56,190,765 100.0% * Excludes investment of cash collateral for securities loaned. 3 International Portfolio AllianceBernstein Variable Products Series Fund PORTFOLIO OF INVESTMENTS December 31, 2003 Company Shares U.S. $ Value - ------------------------------------------------------------------------ COMMON STOCKS & OTHER INVESTMENTS-97.0% AUSTRALIA-2.1% News Corp., Ltd. 69,787 $ 630,028 St. George Bank, Ltd. 28,247 414,738 Telstra Corp., Ltd. 42,855 155,530 ------------ 1,200,296 ------------ BRAZIL-0.6% Petroleo Brasileiro, SA (ADR) 12,400 362,576 ------------ CANADA-1.1% Talisman Energy, Inc. 10,500 597,330 ------------ FINLAND-0.5% Nokia AB Corp. 17,368 300,014 ------------ FRANCE-10.4% BNP Paribas, SA 16,306 1,025,594 Dassault Systemes, SA (a) 2,412 109,890 France Telecom, SA (a) 13,142 375,211 L' Oreal, SA 10,015 820,196 LVMH Moet Hennessy Louis Vuitton, SA 11,739 853,415 Sanofi-Synthelabo, SA 6,060 455,828 Schneider Electric, SA 16,558 1,082,751 Total, SA Cl.B 6,109 1,134,543 ------------ 5,857,428 ------------ GERMANY-7.0% Adidas-Salomon AG 2,692 306,278 Altana AG 5,707 342,629 BASF AG 17,672 992,612 Bayerische Motoren Werke (BMW) AG (a) 8,270 382,927 Deutsche Telekom AG (a) 15,715 287,300 Porsche AG Pfd. 638 378,227 SAP AG 3,131 525,264 Siemens AG (a) 8,609 688,779 ------------ 3,904,016 ------------ HONG KONG-1.2% China Resources Power Holdings Co., Ltd. (a) 686,000 318,094 Li & Fung, Ltd. 205,000 351,183 ------------ 669,277 ------------ INDIA-0.5% Dr. Reddy's Laboratories, Ltd. (ADR) 8,100 256,365 ------------ IRELAND-1.7% Allied Irish Banks Plc 58,110 926,179 ------------ ISRAEL-0.5% Teva Pharmaceutical Industries, Ltd. (ADR) 4,900 277,879 ------------ ITALY-6.4% Alleanza Assicurazioni 58,834 643,430 ENI SpA (a) 36,287 683,969 Luxottica Group SpA 16,590 286,365 Telecom Italia Mobile SpA 43,764 237,655 Telecom Italia SpA (a) 91,224 270,104 Tods SpA 7,593 330,055 UniCredito Italiano SpA 213,171 1,149,543 ------------ 3,601,121 ------------ JAPAN-19.2% Asahi Glass Co., Ltd. 9,000 73,925 Canon, Inc. 7,200 335,353 East Japan Railway Co. 60 282,821 Funai Electric Co., Ltd. 1,400 192,225 Hoya Corp. 4,400 404,126 ITO EN, Ltd. 8,600 370,056 JFE Holdings, Inc. 13,000 354,926 JSR Corp. 51,000 1,140,104 KDDI Corp. 25 143,277 Kissei Pharmaceutical Co., Ltd. 8,000 147,776 KOSE Corp. 12,200 439,558 Mitsubishi Corp. 72,000 763,448 Mitsubishi Tokyo Financial Group, Inc. 58 452,588 NEC Electronics Corp. (a) 8,800 643,972 Nikon Corp. (a) 24,000 362,010 Nissan Motor Co., Ltd. 70,400 804,309 Nitto Denko Corp. 2,900 154,291 Nomura Securities Co., Ltd. 26,000 442,899 NTT DoCoMo, Inc. 81 183,721 Ricoh Co., Ltd. 6,000 118,449 Sanken Electric Co., Ltd. 15,000 209,875 Seven-Eleven Japan Co., Ltd. 7,000 212,349 Shin-Etsu Chemical Co., Ltd. 16,400 670,481 Shionogi & Co., Ltd. 27,000 503,029 Sumitomo Mitsui Financial Goup, Inc. 44 234,508 Sumitomo Trust & Banking Co., Ltd. 57,000 335,185 Suzuki Motor Corp. 15,200 225,017 Takeda Chemical Industries, Ltd. 6,300 249,918 Tokyo Electron, Ltd. 4,800 364,699 ------------ 10,814,895 ------------ NETHERLANDS-3.7% ASML Holdings NV (a) 17,000 336,709 IHC Caland NV 22,748 1,232,439 Koninklijke (Royal) KPN NV (a) 13,884 107,058 Koninklijke (Royal) Philips Electronics NV 13,459 392,570 ------------ 2,068,776 ------------ 4 AllianceBernstein Variable Products Series Fund Company Shares U.S. $ Value - ------------------------------------------------------------------------ PORTUGAL-0.2% Portugal Telecom, SGPS, SA 9,334 $ 93,848 ------------ RUSSIA-1.5% YUKOS (ADR) 20,100 844,200 ------------ SOUTH AFRICA-0.7% ABSA Group, Ltd. 60,500 381,081 ------------ SOUTH KOREA-1.2% Kookmin Bank (a) 12,890 483,037 Samsung Electronics Co., Ltd. 500 189,257 ------------ 672,294 ------------ SPAIN-1.2% Antena 3 Television, SA (a) 148 6,522 Telefonica, SA 43,794 642,275 ------------ 648,797 ------------ SWEDEN-1.5% AG SKF Cl.B 22,361 864,247 ------------ SWITZERLAND-8.5% Credit Suisse Group 48,860 1,786,887 Novartis AG 24,641 1,118,235 Swiss Reinsurance (a) 9,459 638,347 UBS AG 17,931 1,227,475 ------------ 4,770,944 ------------ TAIWAN-2.7% AU Optronics Corp. 127,000 148,510 Chinatrust Financial Holding Co., Ltd. 346,000 347,529 MediaTek, Inc. 3,850 36,175 Quanta Computer, Inc. (GDR) (a) 5,400 66,420 Taiwan Semiconductor Manufacturing Co., Ltd. ABN Amro Bank warrants, expiring 1/12/05 (a) 74,653 138,108 Taiwan Semiconductor Manufacturing Co., Ltd. Merrill Lynch International & Co. warrants, expiring 11/21/05 (a) 190,000 374,110 United Microelectronics Corp. 491,000 420,857 ------------ 1,531,709 ------------ UNITED KINGDOM-24.6% Alea Group Holdings (Bermuda), Ltd. (a) 50,000 230,606 AstraZeneca Group Plc 17,127 819,345 BHP Billiton Plc 209,523 1,825,165 Boots Group Plc 29,165 359,742 British Sky Broadcasting Group Plc (a) 43,888 550,747 Carnival Plc 13,056 524,610 Centrica Plc 162,808 613,209 Diageo Plc 49,584 650,548 GlaxoSmithKline Plc 36,973 844,783 GUS Plc 39,315 542,837 Hilton Group Plc 120,084 481,765 HSBC Holdings Plc 86,678 1,358,483 Legal & General Group Plc 309,308 553,511 Mm02 Plc (a) 97,842 134,483 Reckitt Benckiser Plc 26,846 605,728 Royal Bank of Scotland Group Plc 28,929 849,990 Standard Chartered Plc 37,712 621,007 Tesco Plc 104,453 480,585 Vodafone Group Plc 588,397 1,454,692 WPP Group Plc 35,499 347,571 ------------ 13,849,407 ------------ Total Common Stocks & Other Investments (cost $43,124,829) 54,492,679 ------------ TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL-97.0% (cost $43,124,829) 54,492,679 ------------ INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED*-0.6% SHORT-TERM INVESTMENT-0.6% UBS Private Money Market Fund, LLC,1.01% (cost $371,460) 371,460 371,460 ------------ TOTAL INVESTMENTS-97.6% (cost $43,496,289) 54,864,139 Other assets less liabilities-2.4% 1,326,626 ------------ NET ASSETS-100% $ 56,190,765 ============ - ------------------------------------------------------------------------------- * See Note E for securities lending information. (a) Non-income producing security. Glossary of Terms: ADR - American Depositary Receipt GDR - Gobal Depositary Receipt See Notes to Financial Statements. 5 International Portfolio AllianceBernstein Variable Products Series Fund STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 ASSETS Investments in securities, at value (cost $43,496,289-including investment of cash collateral for securities loaned of $371,460) $ 54,864,139(a) Cash 431,214 Foreign cash, at value (cost $1,372,635) 1,381,248 Receivable for investment securities sold 1,130,465 Dividends and interest receivable 118,520 ------------ Total assets 57,925,586 ------------ LIABILITIES Payable for investment securities purchased 811,594 Payable for capital stock redeemed 399,123 Payable for collateral on securities loaned 371,460 Advisory fee payable 46,506 Distribution fee payable 1,265 Accrued expenses 104,873 ------------ Total liabilities 1,734,821 ------------ NET ASSETS $ 56,190,765 ============ COMPOSITION OF NET ASSETS Capital stock, at par $ 4,321 Additional paid-in capital 66,920,706 Undistributed net investment income 147,472 Accumulated net realized loss on investment and foreign currency transactions (22,264,752) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 11,383,018 ------------ $ 56,190,765 ============ Class A Shares Net assets $ 53,424,578 ============ Shares of capital stock outstanding 4,107,026 ============ Net asset value per share $ 13.01 ============ Class B Shares Net assets $ 2,766,187 ============ Shares of capital stock outstanding 213,962 ============ Net asset value per share $ 12.93 ============ - ------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $355,699 (see Note E). See Notes to Financial Statements. 6 International Portfolio AllianceBernstein Variable Products Series Fund STATEMENT OF OPERATIONS Year Ended December 31, 2003 INVESTMENT INCOME Dividends (net of foreign taxes withheld of $108,319) $ 962,422 Interest 7,198 ------------ Total investment income 969,620 ------------ EXPENSES Advisory fee 481,191 Distribution fee-Class B 3,811 Custodian 243,081 Administrative 75,000 Audit 37,258 Legal 12,810 Printing 9,943 Directors' fees and expenses 1,055 Transfer agency 947 Miscellaneous 6,553 ------------ Total expenses 871,649 ------------ Net investment income 97,971 ------------ REALIZED AND UNREALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on: Investment transactions 1,792,409 Foreign currency transactions 82,842 Net change in unrealized appreciation/depreciation of: Investments 11,993,025 Foreign currency denominated assets and liabilities 6,581 ------------ Net gain on investment and foreign currency transactions 13,874,857 ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 13,972,828 ============ - ------------------------------------------------------------------------------- See Notes to Financial Statements. 7 International Portfolio AllianceBernstein Variable Products Series Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended Year Ended December 31, December 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 97,971 $ 23,441 Net realized gain (loss) on investment and foreign currency transactions 1,875,251 (9,323,331) Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 11,999,606 1,391,129 ------------- ------------- Net increase (decrease) in net assets from operations 13,972,828 (7,908,761) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (65,147) (26,587) Class B (1,610) -0- CAPITAL STOCK TRANSACTIONS Net decrease (4,660,978) (9,567,731) ------------- ------------- Total increase (decrease) 9,245,093 (17,503,079) NET ASSETS Beginning of period 46,945,672 64,448,751 ------------- ------------- End of period (including undistributed net investment income of $147,472 and $33,416, respectively) $ 56,190,765 $ 46,945,672 ============= ============= - ------------------------------------------------------------------------------- See Notes to Financial Statements. 8 International Portfolio AllianceBernstein Variable Products Series Fund NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE A: Significant Accounting Policies The AllianceBernstein International Portfolio (the "Portfolio"), formerly Alliance International Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is 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 Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 9 International Portfolio AllianceBernstein Variable Products Series Fund NOTES TO FINANCIAL STATEMENTS (continued) 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a Portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and reimburse additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 10 AllianceBernstein Variable Products Series Fund Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $164,709, none of which was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: Purchases Sales ============ ============ Investment securities (excluding U.S. government securities) $ 44,981,791 $ 50,375,535 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows: Cost $43,916,990 =========== Gross unrealized appreciation $11,092,854 Gross unrealized depreciation (145,705) ----------- Net unrealized appreciation $10,947,149 =========== 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 International Portfolio AllianceBernstein Variable Products Series Fund NOTES TO FINANCIAL STATEMENTS (continued) 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had loaned securities with a value of $355,699 and received cash collateral of $371,460 which was invested in a money market fund as included in the accompanying portfolio of investments. For the year ended December 31, 2003, the Portfolio earned fee income of $4,659 which is included in interest income in the accompanying statement of operations. 12 AllianceBernstein Variable Products Series Fund NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: Shares Amount --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- Class A Shares sold 1,549,813 12,142,412 $ 16,548,722 $ 129,220,352 Shares issued in reinvestment of dividends 5,933 2,320 65,146 26,587 Shares redeemed (2,144,595) (12,924,689) (22,845,563) (138,926,945) ------------ ------------ -------------- -------------- Net decrease (588,849) (779,957) $ (6,231,695) $ (9,680,006) ============ ============ ============== ============== Class B Shares sold 2,579,858 43,037 $25,688,833 $ 420,107 Shares issued in reinvestment of dividends 147 -0- 1,610 -0- Shares redeemed (2,413,375) (31,049) (24,119,726) (307,832) ------------ ------------ -------------- -------------- Net increase 166,630 11,988 $1,570,717 $112,275 ============ ============ ============== ============== NOTE G: Concentration of Risk Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ========= ========= Distributions paid from: Ordinary income $ 66,757 $ 26,587 --------- --------- Total taxable distributions 66,757 26,587 --------- --------- Total distributions paid $ 66,757 $ 26,587 ========= ========= 13 International Portfolio AllianceBernstein Variable Products Series Fund NOTES TO FINANCIAL STATEMENTS (continued) As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 147,472 Accumulated capital and other losses (21,844,051)(a) Unrealized appreciation/(depreciation) 10,962,317 (b) ------------ Total accumulated earnings/(deficit) $(10,734,262) ============ (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $21,844,051 of which $1,383,309 will expire in the year 2008, $7,972,319 will expire in the year 2009, $11,004,034 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 prior year merger with Brinson Series Trust Global Equity Portfolio, may apply. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to foreign currency transactions, resulted in a net increase in undistributed net investment income and a corresponding increase in accumulated net realized loss on investment and foreign currency transactions. These reclassifications had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee an internal investigation and a comprehensive review of the facts and circumstances relevant to the SEC's and the NYAG's investigations. 14 AllianceBernstein Variable Products Series Fund 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 15 International Portfolio AllianceBernstein Variable Products Series Fund FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A --------------------------------------------------------------- Year Ended December 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $9.90 $11.69 $16.01 $21.78 $16.17 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .02 -0-(b) .03(b) .01(b) .12(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.11 (1.78) (3.55) (4.01) 6.13 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value from operations 3.13 (1.78) (3.52) (4.00) 6.25 ----------- ----------- ----------- ----------- ----------- LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.02) (.01) -0- (.03) (.15) Distributions from net realized gain on investment transactions -0- -0- (.78) (1.74) (.49) Distributions in excess of net realized gain on investment transactions -0- -0- (.02) -0- -0- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.02) (.01) (.80) (1.77) (.64) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $13.01 $9.90 $11.69 $16.01 $21.78 =========== =========== =========== =========== =========== TOTAL RETURN Total investment return based on net asset value (c) 31.59% (15.28)% (22.35)% (19.86)% 40.23% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $53,425 $46,478 $64,036 $78,990 $81,370 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.80% 1.36% .95% .95% .95% Expenses, before waivers and reimbursements 1.80% 1.66% 1.44% 1.34% 1.36% Net investment income .22% .04%(b) .23%(b) .07%(b) .69%(b) Portfolio turnover rate 96% 70% 56% 57% 111%
- ------------------------------------------------------------------------------- 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 -------------------------------------- Year Ended October 26, December 31, 2001(d) to ------------------------ December 31, 2003 2002 2001 ----------- ----------- ----------- Net asset value, beginning of period $9.87 $11.68 $11.31 ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.02) (.03)(b) (.02)(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.09 (1.78) .39 ----------- ----------- ----------- Net increase (decrease) in net asset value from operations 3.07 (1.81) .37 ----------- ----------- ----------- LESS: DIVIDENDS Dividends from net investment income (.01) -0- -0- ----------- ----------- ----------- Net asset value, end of period $12.93 $9.87 $11.68 =========== =========== =========== TOTAL RETURN Total investment return based on net asset value (c) 31.11% (15.50)% 3.27% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $2,766 $467 $413 Ratio to average net assets of: Expenses, net of waivers and reimbursements 2.05% 1.63% 1.20%(e) Expenses, before waivers and reimbursements 2.05% 1.92% 2.26%(e) Net investment loss (.17)% (.25)%(b) (.88)%(b)(e) Portfolio turnover rate 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) Commencement of distribution. (e) Annualized. 17 AllianceBernstein Variable Products Series Fund REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein International Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein International Portfolio, formerly Alliance International Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein International Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP - --------------------- New York, New York February 4, 2004 18 International Portfolio AllianceBernstein Variable Products Series Fund BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6033 Toll-free 1-(800) 221-5672 - ------------------------------------------------------------------------------- (1) Member of the Audit Committee. 19 International Portfolio AllianceBernstein Variable Products Series Fund MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from (12) June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
20 International Portfolio AllianceBernstein Variable Products Series Fund
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 and Gladstone, NJ 07934 a partner of that firm for more than twenty-five (12) years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- ------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 21 International Portfolio AllianceBernstein Variable Products Series Fund Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ------------------------------------------------------------------------------------------------------------------ Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Russell Brody, 37 Vice President Vice President of ACMC**, with which he has been associated since prior to 1999. Sandra Yeager, 39(1) Vice President Senior Vice President of ACMC**, with which she has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- ------------------------------------------------------------------------------- (1) Ms. Yeager is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS, and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800)227-4618 for a free prospectus or SAI. 22 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN -------------------------------------------------- VARIABLE PRODUCTS -------------------------------------------------- SERIES FUND -------------------------------------------------- ALLIANCEBERNSTEIN -------------------------------------------------- U.S. LARGE CAP -------------------------------------------------- BLENDED STYLE -------------------------------------------------- PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 9, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein U.S. Large Cap Blended Style Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES This Portfolio seeks long-term growth of capital. The Portfolio invests primarily in the equity securities of U.S. companies. Under normal circumstances, the Portfolio will invest at least 80% of its net assets in large-capitalization companies. In managing the Portfolio, Alliance Capital Management, L.P. ("Alliance") applies its proprietary portfolio optimization model to a selection of "growth" and "value" stocks identified through application of its fundamental Large Cap Growth and Large Cap Value investment disciplines. Through this process, Alliance seeks to construct a single, unified investment portfolio, efficiently diversified between the "growth" and "value" equity investment styles, which is optimized to provide the highest level of long-term return for a given level of risk. Normally, approximately 50% of the value of the Portfolio will consist of growth stocks and 50% of value stocks, although this allocation will vary within a narrow range around this 50/50 target. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns Since 6 Months Inception* ------------- ------------- AllianceBernstein U.S. Large Cap Blended Style Portfolio Class A 10.71% 9.60% S&P 500 Stock Index 15.14% 13.43% * The Portfolio's Class A shares inception date is 6/6/03. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Standard & Poor's (S&P) 500 Stock Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index includes 500 U.S. stocks and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein U.S. Large Cap Blended Style Portfolio. While the Portfolio posted strong absolute gains for the six-month and since inception periods ended December 31, 2003, it underperformed its benchmark, the S&P 500 Stock Index, over both periods. The underperformance stemmed primarily from a weak showing in the growth portion of the Portfolio, which was hurt by its low exposure to the small-capitalization, high-beta and low-quality stocks that performed strongly in 2003. We typically avoid these types of stocks, as our disciplined growth investment process focuses on high-quality growth companies. This underperformance in the growth portion of the Portfolio was partially offset by robust performance in the value segment of the Portfolio. From a sector perspective, our underperformance for both periods under review can be attributed to unfavorable stock selection in the finance, medical and consumer cyclical sectors, particularly retailers and media. MARKET REVIEW AND INVESTMENT STRATEGY U.S. stocks staged a rally in 2003, ending a three-year losing streak as mounting signs of an economic recovery bolstered consensus expectations for a continued expansion of corporate profits into 2004. Glimmers of an upturn became apparent first in the consumer sector, but quickly spread to include a solid rebound in manufacturing and continued vigorous activity in the housing market. The improving environment culminated in a 30% gain for corporate earnings in the third quarter of 2003, the largest year-over-year change in 19 years. Signs of a rebound in Europe, which flirted with recession earlier in the year, and Japan, which spent most of the last decade stuck in economic doldrums, also contributed to the positive mood, reinforcing profit expectations for U.S. firms with broad exposure to global markets. 1 U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ As a result, the S&P 500 Index finished 2003 up 28.7%, with 12.2% of that gain coming in the fourth quarter. The benchmark is now back to early-2002 levels, but still remains down 18.1% from its March 2000 peak. Outperformance of the Portfolio's value holdings continued in 2003, and has reduced the valuation differential between the cheapest and most expensive stocks in the value segment of the Portfolio. In this setting, we have reduced the risk level of the value portion of the Portfolio through increased sector diversification. On the growth side of the Portfolio, we continue to focus on the factors that have proved relatively trustworthy in determining a company's ability to sustain exceptional growth over the long term, such as an emphasis on Research & Development (R&D), talented and experienced management and a strong balance sheet. 2 U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund PERFORMANCE UPDATE ================================================================================ ALLIANCEBERNSTEIN U.S. LARGE CAP BLENDED STYLE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 6/6/03*-12/31/03 S&P 500 Stock Index: $11,343 AllianceBernstein U.S. Large Cap Blended Style Portfolio Class A: $10,960 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein U.S. Large Cap Blended Style Portfolio Class A shares (from 6/6/03* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Standard & Poor's (S&P) 500 Stock Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index includes 500 U.S. stocks and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein U.S. Large Cap Blended Style Portfolio. AllianceBernstein U.S. Large Cap Blended Style Portfolio S&P 500 Stock Index 6/6/03* $10,000 $10,000 6/30/03 $ 9,900 $ 9,852 7/31/03 $10,110 $10,025 8/31/03 $10,150 $10,221 9/30/03 $10,101 $10,113 10/31/03 $10,521 $10,684 11/30/03 $10,541 $10,778 12/31/03 $10,960 $11,343 - -------------------------------------------------------------------------------- * Portfolio and benchmark data is from the Portfolio's Class A shares inception date of 6/6/03. 3 U.S. LARGE CAP BLENDED STYLE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ================================================================================ Pfizer Inc. $ 365,664 4.7% ================================================================================ Citigroup, Inc. 349,488 4.5 ================================================================================ Microsoft Corp. 338,742 4.4 ================================================================================ Intel Corp. 328,440 4.3 ================================================================================ General Electric Co. 305,928 4.0 ================================================================================ Wal-Mart Stores, Inc. 259,945 3.4 ================================================================================ Dell, Inc. 258,096 3.3 ================================================================================ Hewlett-Packard Co. 250,373 3.3 ================================================================================ Viacom, Inc. Cl.B 245,199 3.2 ================================================================================ Cisco Systems, Inc. 241,686 3.1 --------- ----- $2,943,561 38.2% ================================================================================ 4 U.S. LARGE CAP BLENDED STYLE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund Company Shares U.S. $ Value COMMON STOCKS-93.3% FINANCE-24.9% BANKING - REGIONAL-4.0% Bank of America Corp. ..... 2,350 $ 189,010 FleetBoston Financial Corp. 2,700 117,855 ------------ 306,865 ------------ BROKERAGE & MONEY MANAGEMENT-1.1% Lehman Brothers Holdings, Inc. ................... 1,125 86,873 ------------ INSURANCE-8.3% American International Group, Inc. ............ 3,300 218,724 John Hancock Financial Services, Inc. ......... 2,400 90,000 MetLife, Inc. ............. 3,300 111,111 Renaissancere Holdings (Bermuda)............... 425 20,846 The Chubb Corp. ........... 2,200 149,820 Travelers Property Casualty Corp. Cl.A.............. 3,100 52,018 ------------ 642,519 ------------ MORTGAGE BANKING-3.8% Fannie Mae................. 1,550 116,343 Federal Home Loan Mortgage Corp. .................. 700 40,824 Washington Mutual, Inc. ... 3,400 136,408 ------------ 293,575 ------------ MISCELLANEOUS-7.7% Citigroup, Inc. ........... 7,200 349,488 MBNA Corp. ................ 9,700 241,045 ------------ 590,533 ------------ 1,920,365 ------------ TECHNOLOGY-22.3% COMMUNICATION EQUIPMENT-3.8% ADC Telecommunications, Inc. (a)................ 17,700 52,569 Cisco Systems, Inc. (a).... 9,950 241,686 ------------ 294,255 ------------ COMPUTER HARDWARE/ STORAGE-6.6% Dell, Inc. (a)............. 7,600 258,096 Hewlett-Packard Co. ....... 10,900 250,373 ------------ 508,469 ------------ CONTRACT MANUFACTURING-3.2% Cooper Industries, Ltd. Cl.A (a)................ 1,525 88,343 Flextronics International, Ltd. (Singapore) (a)......... 5,100 75,684 Solectron Corp. (a)........ 13,700 80,967 ------------ 244,994 ------------ SEMI-CONDUCTOR COMPONENTS-4.3% Intel Corp. ............... 10,200 328,440 ------------ SOFTWARE-4.4% Microsoft Corp. ........... 12,300 338,742 ------------ 1,714,900 ------------ HEALTH CARE-13.9% BIOTECHNOLOGY-2.8% Amgen, Inc. (a)............ 3,475 214,755 ------------ DRUGS-7.4% GlaxoSmithKline Plc (ADR) (United Kingdom)........ 3,400 158,508 Pfizer, Inc. .............. 10,350 365,664 Wyeth...................... 1,150 48,818 ------------ 572,990 ------------ MEDICAL PRODUCTS-1.4% Medtronic, Inc. ........... 2,150 104,511 ------------ MEDICAL SERVICES-2.3% UnitedHealth Group, Inc. .. 3,000 174,540 ------------ 1,066,796 ------------ CONSUMER SERVICES-11.6% BROADCASTING & CABLE-5.4% Comcast Corp. Special Cl. A (a)............... 5,350 167,348 Viacom, Inc. Cl.B.......... 5,525 245,199 ------------ 412,547 ------------ CELLULAR COMMUNICATIONS-0.2% Sprint Corp. (PCS Group) (a)......... 3,500 19,670 ------------ RETAIL - GENERAL MERCHANDISE-6.0% Lowe's Cos., Inc. ......... 3,600 199,404 Wal-Mart Stores, Inc. ..... 4,900 259,945 ------------ 459,349 ------------ 891,566 5 U.S. LARGE CAP BLENDED STYLE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ----------------------------------------------------- CONSUMER STAPLES-4.7% BEVERAGES-0.9% PepsiCo, Inc. ............. 1,400 $ 65,268 ------------ RETAIL - FOOD & DRUG-2.3% Kroger Co. (a)............. 3,300 61,083 Safeway, Inc. (a).......... 5,425 118,862 ------------ 179,945 ------------ TOBACCO-1.5% Altria Group, Inc. ........ 2,100 114,282 ------------ 359,495 ------------ UTILITIES-4.2% ELECTRIC & GAS UTILITY-3.2% American Electric Power Co., Inc. ................... 5,350 163,229 Entergy Corp. ............. 1,200 68,556 PPL Corp. ................. 275 12,031 ------------ 243,816 ------------ TELEPHONE UTILITY-1.0% Sprint Corp. (Fon Group)... 5,000 82,100 ------------ 325,916 ------------ CAPITAL GOODS-4.0% MISCELLANEOUS-4.0% General Electric Co. ... 9,875 305,928 ------------ TRANSPORTATION-2.4% RAILROAD-2.4% CSX Corp. ................. 1,800 64,692 Norfolk Southern Corp. .... 5,200 122,980 ------------ 187,672 ------------ Shares or Principal Amount Company Shares U.S. $ Value - ----------------------------------------------------- ENERGY-1.8% MISCELLANEOUS-1.8% ConocoPhillips............. 1,900 $ 124,583 Valero Energy Corp. ....... 250 11,585 ------------ 136,168 ------------ CONSUMER MANUFACTURING-1.4% AUTO & RELATED-1.4% Lear Corp. (a)............. 550 33,732 Magna International, Inc. Cl.A.................... 900 72,045 ------------ 105,777 ------------ MULTI-INDUSTRY COMPANIES-1.1% Textron, Inc. ............. 1,550 88,443 ------------ BASIC INDUSTRY-1.0% PAPER & FOREST PRODUCTS-1.0% MeadWestvaco Corp. ........ 2,500 74,375 ------------ Total Common Stocks (cost $6,693,474)....... 7,177,401 SHORT-TERM INVESTMENT-7.1% TIME DEPOSIT-7.1% State Street Euro Dollar 0.50%, 1/02/04 (cost $549,000)......... $549 549,000 ------------ TOTAL INVESTMENTS-100.4% (cost $7,242,474)....... 7,726,401 Other assets less liabilities-(0.4%)...... (29,953) ------------ NET ASSETS-100%............ $ 7,696,448 ============ - -------------------------------------------------------------------------------- (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 December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $7,242,474)....... $ 7,726,401 Cash........................................................ 712 Receivable for investment securities sold................... 129,292 Receivable due from Adviser................................. 33,004 Dividends and interest receivable........................... 9,280 -------------- Total assets................................................ 7,898,689 -------------- LIABILITIES Payable for investment securities purchased................. 172,591 Payable for capital stock redeemed.......................... 2,506 Distribution fee payable.................................... 1,286 Accrued expenses............................................ 25,858 -------------- Total liabilities........................................... 202,241 -------------- NET ASSETS..................................................... $ 7,696,448 ============== COMPOSITION OF NET ASSETS Capital stock, at par....................................... $ 705 Additional paid-in capital.................................. 7,218,830 Undistributed net investment income......................... 7,358 Accumulated net realized loss on investment transactions.... (14,372) Net unrealized appreciation of investments.................. 483,927 -------------- $ 7,696,448 ============== Class A Shares Net assets.................................................. $ 1,096,492 ============== Shares of capital stock outstanding......................... 100,000 ============== Net asset value per share................................... $ 10.96 ============== Class B Shares Net assets.................................................. $ 6,599,956 ============== Shares of capital stock outstanding......................... 605,383 ============== Net asset value per share................................... $ 10.90 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 U.S. LARGE CAP BLENDED STYLE PORTFOLIO STATEMENT OF OPERATIONS May 2, 2003(a) to December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $193)........... $ 38,331 Interest.................................................... 823 -------------- Total investment income..................................... 39,154 -------------- EXPENSES Advisory fee................................................ 21,843 Distribution fee--Class B................................... 4,290 Administrative.............................................. 50,000 Custodian................................................... 37,294 Audit ...................................................... 35,092 Legal....................................................... 24,138 Printing.................................................... 5,670 Directors' fees and expenses................................ 958 Transfer agency............................................. 582 Miscellaneous............................................... 2,543 -------------- Total expenses.............................................. 182,410 Less: expenses waived and reimbursed (see Note B)........... (150,614) -------------- Net expenses................................................ 31,796 -------------- Net investment income....................................... 7,358 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions................ (14,372) Net change in unrealized appreciation/depreciation of investments........................................... 483,927 -------------- Net gain on investment transactions......................... 469,555 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS..................... $ 476,913 ============== - -------------------------------------------------------------------------------- (a) Commencement of operations. See Notes to Financial Statements. 8 U.S. LARGE CAP BLENDED STYLE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================ May 2, 2003(a) to December 31, 2003 ---------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income..................................... $ 7,358 Net realized loss on investment transactions.............. (14,372) Net change in unrealized appreciation/depreciation of investments............................................ 483,927 -------------- Net increase in net assets from operations................ 476,913 CAPITAL STOCK TRANSACTIONS Net increase.............................................. 7,219,535 -------------- Total increase............................................ 7,696,448 NET ASSETS Beginning of period....................................... -0- -------------- End of period (including undistributed net investment income of $7,358)........................... $ 7,696,448 ============== - -------------------------------------------------------------------------------- (a) Commencement of operations. See Notes to Financial Statements. 9 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 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"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek long-term growth of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty separately managed pools of assets which have differing investment objectives and policies. The Portfolio commenced operations on May 2, 2003. 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 10 AllianceBernstein Variable Products Series Fund ================================================================================ 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 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 investment advisory fee at an annual rate of .95% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. During the period ended December 31, 2003, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the average daily net assets of Class A and Class B shares, respectively. Any expense waivers or reimbursements are accrued daily and paid monthly. For the period ended December 31, 2003, the Adviser waived fees in the amount of $100,614. 11 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 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 $50,000 for the period ended December 31, 2003. Brokerage commissions paid on investment transactions for the period ended December 31, 2003, amounted to $11,112, of which $5,579 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $582 for the period ended December 31, 2003. 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 Investment Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 period ended December 31, 2003, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $ 7,056,967 $ 517,752 U.S. government securities.............................................. 168,631 -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost........................................................................................ $ 7,242,474 ============== Gross unrealized appreciation............................................................... 521,263 Gross unrealized depreciation............................................................... (37,336) -------------- Net unrealized appreciation................................................................. $ 483,927 ==============
12 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 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: =================== =================== SHARES AMOUNT =================== =================== June 6, 2003(a) to June 6, 2003(a) to December 31, December 31, 2003 2003 ---------------- ---------------- Class A Shares sold............................. 100,000 $ 1,000,000 -------------- -------------- Net increase............................ 100,000 $ 1,000,000 -------------- -------------- - -------------------------------------------------------------------------------- (a) Commencement of distribution. 13 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================
SHARES AMOUNT May 2, 2003(b) to May 2, 2003(b) to December 31, December 31, 2003 2003 ---------------- ---------------- Class B Shares sold............................................................. 614,483 $ 6,314,718 Shares redeemed......................................................... (9,100) (95,183) -------------- -------------- Net increase............................................................ 605,383 $ 6,219,535 -------------- -------------- NOTE F: Component of Accumulated Earnings (Deficit) As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income............................................................... $ 7,358 Accumulated capital and other losses........................................................ (14,372)(a) Unrealized appreciation/(depreciation)...................................................... 483,927 ------------ Total accumulated earnings/(deficit)........................................................ $ 476,913 ============
(a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $8,021 all of which will expire in the year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. 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, 2003, the Portfolio deferred to January 1, 2004, post October capital losses of $6,351. During the current fiscal period ended December 31, 2003, there were no permanent differences. NOTE G: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. - -------------------------------------------------------------------------------- (b) Commencement of operations. 14 AllianceBernstein Variable Products Series Fund ================================================================================ In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 15 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 CLASS B =========================== June 6, May 2, 2003(a) to 2003(b) to December 31, December 31, 2003 2003 ----------- ----------- Net asset value, beginning of period................................................ $ 10.00 $ 10.00 ---------- ---------- Income From Investment Operations - --------------------------------- Net investment income (c)(d)........................................................ .03 .01 Net realized and unrealized loss on investment transactions......................... .93 .89 ---------- ---------- Net increase in net asset value from operations..................................... .96 .90 ---------- ---------- Net asset value, end of period...................................................... $ 10.96 $ 10.90 ========== ========== Total Return - ------------ Total investment return based on net asset value (e)................................ 9.60 % 9.00% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)........................................... $1,096 $6,600 Ratio to average net assets of: Expenses, net of waivers and reimbursements (f).................................. 1.20 % 1.43% Expenses, before waivers and reimbursements (f).................................. 6.65 % 8.25% Net investment income (d)(f)..................................................... .45 % .27% Portfolio turnover rate............................................................. 13 % 13%
- -------------------------------------------------------------------------------- (a) Commencement of distribution. (b) Commencement of operations. (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 redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (f) Annualized. 16 AllianceBernstein Variable Products Series Fund REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein U.S. Large Cap Blended Style Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein U.S. Large Cap Blended Style Portfolio (the "Portfolio"), (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statements of operations and changes in net assets and financial highlights for the period from May 2, 2003 (commencement of operations) to December 31, 2003. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein U.S. Large Cap Blended Style Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations, the changes in its net assets and the financial highlights for the period from May 2, 2003 to December 31, 2003, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young - ----------------- New York, New York February 4, 2004 17 U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee 18 U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Suite 100 Manager of Barrett Associates, Inc., a Greenwich, CT 06830 registered investment adviser, with which (14) he had been associated since prior to 1999. Chairman of the Board He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 1994, 100 None P.O. Box 167 he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from (12) June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
19 U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, 15 St. Bernard's Road Gordon & Reindel since February 2001 Inc. Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 20 U.S. LARGE CAP BLENDED STYLE PORTFOLIO AllianceBernstein Variable Products Series Fund Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Seth A. Masters, 44(1) Vice President Senior Vice President of ACMC** and Chief Investment Officer of Style Blend and Core Equity Services and headed the US and Global Style Blend teams at ACMC** since October 2000. Prior thereto, he was Chief Investment Officer for Emerging Markets Value at Sanford C. Bernstein & Co., Inc. since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Mr. Masters is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS, and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800)227-4618 for a free prospectus or SAI. ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. WORLDWIDE PRIVATIZATION PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Worldwide Privatization Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks long-term capital appreciation. The Portfolio invests principally in equity securities of companies that are undergoing, or have undergone, privatization. The Portfolio also invests in securities of companies Alliance believes will benefit from privatizations. INVESTMENT RESULTS PERIODS ENDED DECEMBER 31, 2003 RETURNS --------------------------------------- SINCE 1 YEAR 5 YEARS INCEPTION* ----------- ----------- ----------- ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO CLASS A 43.46% 6.81% 9.22% MSCI WORLD INDEX (MINUS THE U.S.) 40.01% 0.77% 4.49% * The since inception return for the Portfolio is from the Portfolio's actual inception date of 9/23/94. The since inception return for the Msci World Index (minus the U.S.) is from the closest month-end to the Portfolio's inception date, which is 9/30/94. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Morgan Stanley Capital International (MSCI) World Index (minus the U.S.) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The index is a market capitalization-weighted index that measures the performance of stock markets in 22 countries outside the United States. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Worldwide Privatization Portfolio. The Portfolio's Class A shares, which returned 43.46% over the 12-month reporting period ended December 31, 2003, outperformed the benchmark, the MSCI World Index (minus the U.S.), which returned 40.01% over the same period. The Portfolio's outperformance was due to a combination of positive results from both stock selection and asset allocation. During the more recent six-month period ended December 31, 2003, the Portfolio's Class A shares also outperformed its benchmark. This outperformance was due primarily to strong returns from the Portfolio's relative overweight position in emerging market equities. Notable contributions were made from holdings in Brazil, China and the EMEA (East Europe, Middle East and Africa) region. Stock selection results from the Portfolio's European holdings were also a major contributor to its relative investment return. MARKET REVIEW AND INVESTMENT STRATEGY During the 12-month reporting period ended December 31, 2003, both developed and emerging market equities posted strong positive returns. Within developed markets, the European and the Pacific ex-Japan regions registered the strongest performance, while Japan marginally lagged behind them. North America was the worst relative performer in U.S. dollar terms. Among the emerging markets group, Latin America proved the strongest performer, driven by a rebound in the Brazilian equity market. The EMEA region also posted positive returns. Returns from Asia were also strong but lagged the overall emerging markets group. The broad strength in the equity markets in 2003 was due to a combination of factors. The investment environment improved and investor appetite for risk grew, as the uncertainty that had previously overshadowed the markets was somewhat removed with the swift resolution of the conflict in Iraq. Actions taken by global policy makers to stimulate economic activity also started to bear fruit, as economic growth began to accelerate across all the major regions. North America and Asia registered the strongest recovery, while recovery in Europe and Japan was more tentative. Equity market valuations were further enhanced by a dramatic improvement in corporate profitability and cash flow, based on cost cutting efforts and better top line results. The Portfolio continued to emphasize diversification with strong representation in both developed and emerging markets, and in a wide array of economic sectors. Privatization activity gained momentum over the review period and a number of large privatization deals were successfully completed. 1 WORLDWIDE PRIVATIZATION PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 9/23/94* - 12/31/03 AllianceBernstein Worldwide Privatization Portfolio Class A: $22,647 MSCI World Index (minus the U.S.): $15,021 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein Worldwide Privatization MSCI World Index Portfolio Class A (minus the U.S.) - ------------------------------------------------------------------------------- 9/23/94* $ 10,000 $ 10,000 12/31/94 $ 10,100 $ 9,880 12/31/95 $ 11,198 $ 11,042 12/31/96 $ 13,271 $ 11,837 12/31/97 $ 14,697 $ 12,140 12/31/98 $ 16,289 $ 14,460 12/31/99 $ 25,871 $ 18,547 12/31/00 $ 19,922 $ 16,106 12/31/01 $ 16,477 $ 12,698 12/31/02 $ 15,786 $ 10,729 12/31/03 $ 22,647 $ 15,021 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Worldwide Privatization Portfolio Class A shares (from 9/23/94* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Morgan Stanley Capital International (MSCI) World Index (minus the U.S.) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a market capitalization-weighted index that measures the performance of stock markets in 22 countries outside the United States. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Worldwide Privatization Portfolio. - -------------------------------------------------------------------------------- * Portfolio data is from the Portfolio's inception date of 9/23/94. Data for the MSCI World Index (minus the U.S.) is from the closest month-end to the Portfolio's inception date, which is 9/30/94. 2 WORLDWIDE PRIVATIZATION PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Mitsubishi Tokyo Financial Group, Inc. $ 1,147,076 2.8% - ------------------------------------------------------------------------------- Vodafone Group Plc 1,016,625 2.4 - ------------------------------------------------------------------------------- Japan Tobacco, Inc. 1,003,827 2.4 - ------------------------------------------------------------------------------- BNP Paribas, SA 985,340 2.4 - ------------------------------------------------------------------------------- Deutsche Post AG 895,243 2.2 - ------------------------------------------------------------------------------- France Telecom 893,173 2.1 - ------------------------------------------------------------------------------- ENI SpA 884,388 2.1 - ------------------------------------------------------------------------------- East Japan Railway Co. 843,749 2.0 - ------------------------------------------------------------------------------- Nomura Securities Co., Ltd. 800,625 1.9 - ------------------------------------------------------------------------------- National Grid Group Plc 794,151 1.9 ------------- ---- - ------------------------------------------------------------------------------- $ 9,264,197 22.2% - ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION December 31, 2003 PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Finance $ 8,916,175 21.4% - ------------------------------------------------------------------------------- Utilities 7,656,953 18.4 - ------------------------------------------------------------------------------- Consumer Services 6,450,827 15.5 - ------------------------------------------------------------------------------- Energy 4,707,397 11.3 - ------------------------------------------------------------------------------- Transportation 3,082,776 7.4 - ------------------------------------------------------------------------------- Technology 2,873,179 6.9 - ------------------------------------------------------------------------------- Basic Industries 2,267,695 5.4 - ------------------------------------------------------------------------------- Healthcare 1,847,743 4.4 - ------------------------------------------------------------------------------- Consumer Staples 1,257,449 3.0 - ------------------------------------------------------------------------------- Multi-Industry Companies 892,585 2.1 - ------------------------------------------------------------------------------- Consumer Manufacturing 282,193 0.7 ------------- ---- - ------------------------------------------------------------------------------- Total Investments* 40,234,972 96.5 - ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 1,443,417 3.5 ------------- ---- - ------------------------------------------------------------------------------- Net Assets $ 41,678,389 100.0% - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * Excludes short-term obligations and investment of cash collateral for securities loaned. 3 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON & PREFERRED STOCKS-96.6% AUSTRALIA-1.1% CSL, Ltd. 34,246 $ 460,272 ------------- AUSTRIA-1.3% Bank Austria Creditanstalt (a) 5,072 258,814 Boehler-Uddeholm AG 4,200 283,323 ------------- 542,137 ------------- BRAZIL-5.3% Brasil Telecom Participacoes, SA (ADR) 5,000 189,000 Companhia Paranaense de Energia-Copel (ADR) (a) 12,000 57,240 Companhia Vale do Rio Doce (ADR) 9,200 517,230 Gerdau, SA (ADR) 12,000 242,640 Gerdau, SA (ADR) Pfd. 7,596 160,331 Itausa-Investimentos Itau, SA Pfd. 278,088 328,124 Petroleo Brasileiro, SA (ADR) 23,500 626,510 Telesp Celular Participacoes, SA (ADR) (a) 6,800 44,744 Uniao de Bancos Brasileiros, SA (GDR) 1,700 42,415 ------------- 2,208,234 ------------- CHILE-0.1% Enersis, SA (ADR) 6,000 44,160 ------------- CZECH REPUBLIC-0.6% Cesky Telecom AS (GDR) 23,400 263,250 ------------- EGYPT-0.9% Eastern Co. for Tobacco & Cigarettes 13,374 167,018 Egyptian Co. for Mobile Services 15,618 191,292 ------------- 358,310 ------------- FINLAND-2.2% Fortum Oyj 24,117 248,559 Sampo Oyj 22,544 232,915 TietoEnator Oyj 15,527 424,523 ------------- 905,997 ------------- FRANCE-10.8% BNP Paribas, SA 15,666 985,340 Dassault Systemes, SA 8,900 405,482 France Telecom (a) 31,284 893,173 Sanofi-Synthelabo, SA 4,983 374,817 Societe Television Francaise 1 14,079 491,011 STMicroelectronics NV 6,851 185,586 TotalFinaElf, SA 2,856 530,407 Veolia Environment 23,004 617,357 ------------- 4,483,173 ------------- GERMANY-4.2% Deutsche Lufthansa AG 12,086 201,768 Deutsche Post AG 43,458 895,243 Fraport AG (a) 14,363 412,604 Rhoen-Klinikum AG 4,211 236,101 ------------- 1,745,716 ------------- GHANA-0.7% ASHANTI GOLDFIELDS CO., LTD. (GDR) (a) 21,800 284,272 ------------- GREECE-1.6% Greek Organization of Football Prognostics 23,140 334,702 Public Power Corp. 13,880 342,767 ------------- 677,469 ------------- HONG KONG-2.6% China Petroleum & Chemical Co. Cl.H 586,000 262,289 China Resources Enterprise, Ltd. 182,000 206,292 China Resources Power Holdings Co., Ltd. (a) 526,000 243,903 China Telecom Co., Ltd. 52,000 159,408 Legend Group, Ltd. 546,000 233,837 ------------- 1,105,729 ------------- HUNGARY-1.7% Magyar Tavkozlesi Rt. 57,791 218,811 MOL Magyar Olaj-es Gazipari Rt. 6,165 186,590 OTP Bank Rt. (a) 22,553 289,141 ------------- 694,542 ------------- INDIA-0.6% Canara Bank, Ltd. 37,300 111,818 Punjab National Bank, Ltd. 23,600 125,184 ------------- 237,002 ------------- INDONESIA-0.2% PT Hanjya Mandala Sampoerna Tbk 163,000 86,604 ------------- ISRAEL-0.7% Bank Hapoalim, Ltd. 119,300 293,294 ------------- ITALY-5.0% Acegas SpA 31,700 205,294 ENI SpA 46,920 884,388 Telecom Italia Mobile SpA (a) 39,555 214,799 Telecom Italia SpA (a) 63,272 187,341 Unicredito Italiano 110,177 594,139 ------------- 2,085,961 ------------- JAPAN-14.0% East Japan Railway Co. 179 843,749 Japan Airlines System Corp. 72,000 190,190 4 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- Japan Tobacco, Inc. 137 $ 1,003,827 KDDI Corp. 87 498,605 Mitsubishi Tokyo Financial Group, Inc. 147 1,147,076 Nippon Telegraph & Telephone Corp. 71 342,624 Nissan Motor Co., Ltd. 24,700 282,193 Nomura Securities Co., Ltd. 47,000 800,625 NTT Docomo, Inc. 230 521,678 West Japan Railway Co. 51 200,411 ------------- 5,830,978 ------------- LUXEMBOURG-0.8% Tenaris, SA (ADR) 10,546 351,393 ------------- MALAYSIA-0.3% Astro All Asia Networks Plc (a) 18,000 20,937 Maxis Communications Berhad 49,300 97,951 ------------- 118,888 ------------- MEXICO-3.6% America Movil, SA de CV Series L (ADR) 13,800 377,292 Grupo Aeroportuario del Sureste, SA de CV Series B (ADR) 3,000 52,800 Grupo Financiero Banorte, SA de CV Cl.B 52,100 180,822 Grupo Financiero BBVA Bancomer, SA de CV (a) 639,600 546,424 Telefonos de Mexico, SA de CV Cl.L (ADR) 10,000 330,300 ------------- 1,487,638 ------------- NETHERLANDS-1.1% ING Groep NV 20,222 471,101 ------------- NORWAY-0.5% Telenor AS 31,963 208,579 ------------- PEOPLES REPUBLIC OF CHINA-1.0% Beijing Capital International Airport Co., Ltd. 482,000 164,521 CNOOC, Ltd. 120,000 235,711 ------------- 400,232 ------------- PERU-0.4% Explosivos, SA Cl.C (b) 219,255 155,188 ------------- POLAND-0.9% Bank Pekao, SA 6,550 189,499 Polski Koncern Naftowy, SA (GDR) 14,918 199,901 ------------- 389,400 ------------- RUSSIA-2.4% AO VimpelCom (ADR) (a) 3,800 279,300 Lukoil Holdings (ADR) 3,871 360,390 Mobile Telesystems (ADR) 2,100 173,880 YUKOS (ADR) 4,000 168,000 ------------- 981,570 ------------- SINGAPORE-1.5% DBS Group Holdings, Ltd. 35,172 304,439 Singapore Post, Ltd. 248,000 101,490 Singapore Telecommunications, Ltd. 185,000 213,507 ------------- 619,436 ------------- SOUTH AFRICA-1.0% MTN Group, Ltd. (a) 97,800 415,900 ------------- SOUTH KOREA-5.4% Kookmin Bank (a) 15,120 566,603 Kookmin Bank (ADR)(a) 8,635 326,748 POSCO 4,180 571,834 SK Telecom Co., Ltd. (a) 2,000 334,033 SK Telecom Co., Ltd. (ADR)(a) 24,900 464,385 ------------- 2,263,603 ------------- SPAIN-3.2% Amadeus Global Travel Distribution, SA 38,928 252,594 Iberia Lineas Aereas de Espana, SA 80,444 231,090 Indra Sistemas, SA 13,903 178,149 Red Electrica de Espana 13,870 227,182 Telefonica, SA 29,949 439,227 ------------- 1,328,242 ------------- SWEDEN-0.9% Eniro AB 39,588 379,765 ------------- SWITZERLAND-0.3% Unique Zurich Airport (a) 2,420 127,132 ------------- TAIWAN-3.3% Cathay Financial Holding Co., Ltd. (GDR) (a) 16,500 247,500 Chunghwa Telecom Co., Ltd. (ADR) 25,400 368,300 Fubon Financial Holding Co., Ltd. 251,149 240,423 Taiwan Semiconductor Co. 262,461 490,906 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 3,200 32,768 ------------- 1,379,897 ------------- 5 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- THAILAND-1.5% Ratchaburi Electricity Generating Holding Public Co., Ltd. 299,600 $ 370,507 Siam Commercial Bank (a) 178,000 249,328 ------------- 619,835 ------------- TURKEY-1.3% Dogan Yayin Holding AS 45,726,656 176,022 Turkiye Is Bankasi 94,603,335 384,401 ------------- 560,423 ------------- UNITED KINGDOM-10.2% BP Plc (ADR) 55,398 447,964 British Airways Plc (a) 60,006 249,039 British Sky Broadcast Group Plc (a) 37,458 470,057 Centrica Plc 131,400 494,913 Mersey Docks & Harbor Co. 25,520 301,799 National Grid Group Plc 111,153 794,151 Vedanta Resources Plc (a) 31,674 208,066 Vodafone Group Plc 411,207 1,016,625 Wolfson Microelectronics Plc (a) 46,892 267,855 ------------- 4,250,469 ------------- UNITED STATES-3.4% Affiliated Computer Services, Inc. Cl.A (a) 11,800 642,628 Pfizer, Inc. 21,980 776,553 ------------- 1,419,181 ------------- Total Common & Preferred Stocks (cost $30,562,354) 40,234,972 ------------- SHORT-TERM INVESTMENT-3.6% TIME DEPOSIT-3.6% State Street Euro Dollar 0.50%, 1/02/04 (cost $1,515,000) $1,515 1,515,000 ------------- Total Investment Before Security Lending Collateral-100.2% (cost $32,077,354) 41,749,972 ------------- INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED*-1.0% SHORT-TERM INVESTMENT-1.0% UBS Private Money Market Fund, LLC, 1.01% (cost $424,960) 424,960 424,960 ------------- TOTAL INVESTMENTS-101.2% (cost $32,502,314) 42,174,932 Other assets less liabilities-(1.2%) (496,543) ------------- NET ASSETS-100% $ 41,678,389 ============= - -------------------------------------------------------------------------------- * See Note E for securities lending information. (a) Non-income producing security. (b) Illiquid security valued at fair value (see Note A). Glossary of Terms: ADR - American Depositary Receipt GDR - Global Depositary Receipt See Notes to Financial Statements. 6 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $32,502,314--including investment of cash collateral for securities loaned of $424,960) $ 42,174,932(a) Cash 765 Foreign cash, at value (cost $159,499) 159,014 Dividends and interest receivable 95,804 ------------- Total assets 42,430,515 ------------- LIABILITIES Payable for collateral on securities loaned 424,960 Payable for capital stock redeemed 162,524 Advisory fee payable 33,930 Distribution fee payable 1,498 Accrued expenses 129,214 ------------- Total liabilities 752,126 ------------- NET ASSETS $ 41,678,389 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 2,562 Additional paid-in capital 40,296,175 Undistributed net investment income 85,457 Accumulated net realized loss on investment and foreign currency transactions (8,310,237) Net unrealized apppreciation of investments and foreign currency denominated assets and liabilities 9,604,432 ------------- $ 41,678,389 ============= CLASS A SHARES Net assets $ 34,302,092 ============= Shares of capital stock outstanding 2,107,439 ============= Net asset value per share $ 16.28 ============= CLASS B SHARES Net assets $ 7,376,297 ============= Shares of capital stock outstanding 454,261 ============= Net asset value per share $ 16.24 ============= - -------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $408,500 (see Note E). See Notes to Financial Statements. 7 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $84,496) $ 806,727 Interest 15,466 ------------- Total investment income 822,193 ------------- EXPENSES Advisory fee 327,976 Distribution fee -- Class B 12,515 Custodian 211,973 Administrative 75,000 Audit 45,563 Printing 26,356 Legal 7,786 Transfer agency 947 Directors' fees and expenses 927 Miscellaneous 13,441 ------------- Total expenses 722,484 ------------- Net investment income 99,709 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on: Investment transactions 1,226,529 Foreign currency transactions 2,270 Net change in unrealized appreciation/depreciation of: Investments 11,238,916 Foreign currency denominated assets and liabilities (73,949) ------------- Net gain on investment and foreign currency transactions 12,393,766 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 12,493,475 ============= See Notes to Financial Statements. 8 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 99,709 $ 206,202 Net realized gain (loss) on investment and foreign currency transactions 1,228,799 (5,043,784) Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 11,164,967 3,360,272 ------------- ------------- Net increase (decrease) in net assets from operations 12,493,475 (1,477,310) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (314,453) (588,448) Class B (50,361) (45,450) CAPITAL STOCK TRANSACTIONS Net decrease (1,195,358) (5,646,881) ------------- ------------- Total increase (decrease) 10,933,303 (7,758,089) NET ASSETS Beginning of period 30,745,086 38,503,175 ------------- ------------- End of period (including undistributed net investment income of $85,457 and $348,292, respectively) $ 41,678,389 $ 30,745,086 ============= ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Worldwide Privatization Portfolio (the "Portfolio"), formerly Alliance Worldwide Privatization Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek long-term capital appreciation. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and reimburse additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. 11 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003, amounted to $74,728, none of which was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. The Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 14,095,833 $ 16,810,432 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows: Cost $ 32,572,256 ------------- Gross unrealized appreciation $ 10,201,561 Gross unrealized depreciation (598,885) ------------- Net unrealized appreciation $ 9,602,676 ============= 12 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 selling or buying a security or currency at a price different from the current market value. NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had loaned securities with a value of $408,500 and received cash collateral of $424,960, which was invested in a money market fund as included in the accompanying portfolio of investments. For the year ended December 31, 2003, the Portfolio earned fee income of $11,528 which is included in interest income in the accompanying statement of operations. 13 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE F: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 248,320 790,248 $ 3,364,408 $ 9,494,636 Shares issued in reinvestment of dividends 24,741 46,702 314,453 588,448 Shares redeemed (528,562) (1,544,281) (6,616,864) (18,479,919) ----------- ----------- ------------ ------------- Net decrease (255,501) (707,331) $ (2,938,003) $ (8,396,835) =========== =========== ============ ============= CLASS B Shares sold 1,379,770 620,207 $ 16,268,671 $ 7,300,125 Shares issued in reinvestment of dividends 3,965 3,613 50,361 45,450 Shares redeemed (1,244,071) (398,989) (14,576,387) (4,595,621) ----------- ----------- ------------ ------------- Net increase 139,664 224,831 $ 1,742,645 $ 2,749,954 =========== =========== ============ ============= NOTE G: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 364,814 $ 633,898 ------------- ------------- Total taxable distributions 364,814 633,898 ------------- ------------- Total distributions paid $ 364,814 $ 633,898 ============= ============= 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 85,457 Accumulated capital and other losses (8,240,295)(a) Unrealized appreciation/(depreciation) 9,534,490(b) ------------- Total accumulated earnings/(deficit) $ 1,379,652 ============= (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $8,240,295 of which $934,059 expires in the year 2009 and $7,306,236 expires in the year 2010. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the fiscal year, the fund utilized capital loss carryforwards of $1,208,600. (b) The difference between book-basis and tax-basis unrealized appreciation/ (depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses, resulted in a net increase in undistributed net investment income and an increase in accumulated net realized loss on investment and foreign currency transactions. This reclassification had no effect on net assets. NOTE J: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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. 15 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ On October 2, 2003, a putative class action complaint entitled Hindo et al. V. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 WORLDWIDE PRIVATIZATION PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $11.48 $12.18 $15.64 $21.74 $14.81 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .04 .07(b) .20(b) .05(b) 0.15(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 4.91 (.56) (2.82) (4.81) 8.00 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.95 (.49) (2.62) (4.76) 8.15 ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.15) (.21) (.03) (.12) (.31) Distributions from net realized gain on investment transactions -0- -0- (.81) (1.22) (.91) ------ ------ ------ ------ ------ Total dividends and distributions (.15) (.21) (.84) (1.34) (1.22) ------ ------ ------ ------ ------ Net asset value, end of period $16.28 $11.48 $12.18 $15.64 $21.74 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (c) 43.46% (4.19)% (17.29)% (23.00)% 58.83% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $34,302 $27,136 $37,411 $56,181 $64,059 Ratio to average net assets of: Expenses, net of waivers and reimbursements 2.17% 1.54% .95% .95% .95% Expenses, before waivers and reimbursements 2.17% 1.98% 1.65% 1.43% 1.46% Net investment income .34% .61%(b) 1.50%(b) .29%(b) .93%(b) Portfolio turnover rate 44% 46% 35% 65% 54%
- -------------------------------------------------------------------------------- See footnote summary on page 18. 17 WORLDWIDE PRIVATIZATION PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B ---------------------------------------------------- JULY 5, 2000 (d) YEAR ENDED DECEMBER 31, TO ------------------------------------ DECEMBER 31, 2003 2002 2001 2000 ----------- ----------- ----------- ----------- Net asset value, beginning of period $11.47 $12.17 $15.62 $19.09 ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) .02 .03(b) .10(b) (.04)(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 4.88 (.53) (2.71) (3.43) ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.90 (.50) (2.61) (3.47) ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.13) (.20) (.03) -0- Distributions from net realized gain on investment transactions -0- -0- (.81) -0- ------ ------ ------ ------ Total distributions (.13) (.20) (.84) -0- ------ ------ ------ ------ Net asset value, end of period $16.24 $11.47 $12.17 $15.62 ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (c) 43.07% (4.26)% (17.28)% (18.43)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $7,376 $3,609 $1,092 $238 Ratio to average net assets of: Expenses, net of waivers and reimbursements 2.41% 1.79% 1.19% 1.20%(e) Expenses, before waivers and reimbursements 2.41% 2.23% 1.93% 1.80%(e) Net investment income (loss) .13% .28%(b) .80%(b) (.26)%(b)(e) Portfolio turnover rate 44% 46% 35% 65%
- -------------------------------------------------------------------------------- (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) Commencement of distributions. (e) Annualized. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Worldwide Privatization Portfolio (the "Portfolio"), formerly Alliance Worldwide Privatization Portfolio (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc.), formerly Alliance Variable Products Series Fund, Inc. as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Worldwide Privatization Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4 , 2004 TAX INFORMATION (unaudited) For corporate shareholders, 2% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2003 qualifies for the corporate dividends received deduction. 19 WORLDWIDE PRIVATIZATION PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR., (1) CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 20 WORLDWIDE PRIVATIZATION PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Suite 100 Manager of Barrett Associates, Inc., Greenwich, CT 06830 a registered investment adviser, with (14) which he had been associated since Chairman of the Board prior to 1999. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Associ- ation of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Spring Lake, NJ 07762 Alliance Capital Management Corporation (14) ("ACMC") responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953.
21 WORLDWIDE PRIVATIZATION PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) John H. Dobkin,+, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) from Annandale, NY 12504 2001-2002, Senior Advisor from June 1999 - (12) June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988 -1992, Director and Chairman of the Audit Committee of ACMC. Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior WESTON, VT 05161 to 1999. Formerly a Senior Partner and (8) a member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 22 WORLDWIDE PRIVATIZATION PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - -------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Edward D. Baker III, 53(1) Vice President Senior Vice President and Chief Investment Officer - Emerging Markets of ACMC**, with which he has been associated since prior to 1999. Russell Brody, 37 Vice President Vice President of ACMC**, with which he has been associated since prior to 1999. Michael Levy(1) Vice President Assistant Vice President of ACMC**, with which he has been associated since prior to 1999. Jean Van de Walle, 44 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer And Chief Senior Vice President of Alliance Global Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Messrs. Baker and Levy are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 10, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Small Cap Value Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks long-term growth of capital. The Portfolio invests primarily in a diversified portfolio of equity securities of companies with relatively small market capitalizations. Under normal circumstances, the Portfolio will invest at least 80% of its total assets in these types of securities. The Portfolio's investment policies emphasize investment in companies that are determined by Alliance Capital Management L.P. ("Alliance"), the Portfolio's investment manager, to be undervalued. In selecting securities for the Portfolio, fundamental research is used to identify companies whose long-term earnings power is not reflected in the current market price of their securities. The Portfolio may also invest up to 15% of its total assets in foreign securities. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS --------------------------- SINCE 1 YEAR INCEPTION* ------------ ------------ ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO CLASS A 41.26% 15.89% RUSSELL 2500 INDEX 45.51% 7.35% * The Portfolio's inception date is 5/2/01. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. During the reporting period, the Advisor waived a portion of its advisory fee or reimbursed the Portfolio for a portion of its expenses to the extent necessary to limit the Portfolio's expenses to 1.20% for Class A and 1.45% for Class B. This waiver extends through the Portfolio's current fiscal year and may be extended by the Advisor for additional one-year terms. Without the waiver, the Portfolio's expenses would have been higher and its performance would have been lower than that shown above. The unmanaged Russell 2500 Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a capitalization-weighted index that includes 2,500 small- and mid-cap U.S. Stocks. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Small Cap Value Portfolio. For the 12-month period ended December 31, 2003, the Portfolio delivered strong absolute returns, but underperformed its benchmark, the Russell 2500 Index, due to both sector and stock selection. Although the Portfolio benefited from overweight positions in the producer durables, oil and technology sectors, and from an underweight position in financial stocks, it suffered from underweighted positions in health care and technology. Stock selection was strong in some sectors, especially autos and transportation, materials and processing, and producer durables, but weak stock selection concentrated in the health care and technology sectors offset these strengths. In the case of technology, the Portfolio's holdings in telecommunications component companies did not perform as well as other technology companies due to the extended downturn in telecommunications capital spending. In health care, richly valued biotechnology firms dominated index returns. The Portfolio's particular investment style tends to avoid such firms that trade at a premium to the market. By and large, poor relative stock selection traces to disproportionately large returns from the smallest of companies, which are outside the typical purchase range of the Portfolio. MARKET REVIEW AND INVESTMENT STRATEGY The Portfolio's absolute performance benefited from a return of investor enthusiasm for stocks. With robust economic growth, and a simultaneous rebound in corporate profits, stocks of all capitalization ranges performed well in 2003. But smaller capitalization companies tended to outperform larger ones as investors sought the greatest leverage to a recovery in profits. 1 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ This trend materially affected the Portfolio's relative returns in that the best performing companies tended to be the smallest. Companies with market capitalizations under $1 billion materially outperformed larger companies. The Portfolio typically limits its investment universe to companies with market values at purchase between $1 and $5 billion, while its benchmark, the Russell 2500 Index, contains members with market values as low as $10 million. 2 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 5/2/01*-12/31/03 AllianceBernstein Small Cap Value Portfolio Class A: $14,814 Russell 2500 Index: $12,076 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein Small Cap Russell Value Portfolio Class A 2500 Index - ------------------------------------------------------------------------------- 5/2/01* $ 10,000 $ 10,000 12/31/01 $ 11,180 $ 10,097 12/31/02 $ 10,487 $ 8,299 12/31/03 $ 14,814 $ 12,076 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Small Cap Value Portfolio Class A shares (from 5/2/01* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares.The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 2500 Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a capitalization-weighted index that includes 2,500 small- and mid-cap U.S. stocks. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Small Cap Value Portfolio. * Portfolio and benchmark data is from the Portfolio's inception date of 5/2/01. 3 SMALL CAP VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Fidelity National Financial, Inc. $ 3,199,350 1.8% - ------------------------------------------------------------------------------- Terex Corp. 3,104,320 1.8 - ------------------------------------------------------------------------------- Universal Health Services, Inc. Cl.B 3,008,320 1.7 - ------------------------------------------------------------------------------- ArvinMeritor, Inc. 2,894,400 1.7 - ------------------------------------------------------------------------------- Harsco Corp. 2,892,120 1.7 - ------------------------------------------------------------------------------- Cytec Industries, Inc. 2,860,055 1.7 - ------------------------------------------------------------------------------- Vishay Intertechnology, Inc. 2,853,340 1.6 - ------------------------------------------------------------------------------- Universal Corp. 2,835,714 1.6 - ------------------------------------------------------------------------------- Reliance Steel & Aluminum Co. 2,696,652 1.6 - ------------------------------------------------------------------------------- Deluxe Corp. 2,665,785 1.5 ------------- ---- - ------------------------------------------------------------------------------- $ 29,010,056 16.7% - ------------------------------------------------------------------------------- 4 SMALL CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS-92.2% FINANCIAL-17.7% MAJOR REGIONAL BANKS-5.8% Banknorth Group, Inc. 59,000 $ 1,919,270 Hibernia Corp. Cl.A 86,300 2,028,913 Popular, Inc. 46,000 2,067,240 UnionBanCal Corp. 36,900 2,123,226 Whitney Holding Corp. 48,000 1,967,520 ------------- 10,106,169 ------------- MULTI-LINE INSURANCE-1.9% Health Net, Inc. (a) 33,000 1,079,100 PacifiCare Health Systems, Inc. (a) 32,800 2,217,280 ------------- 3,296,380 ------------- PROPERTY - CASUALTY INSURANCE-2.6% Fidelity National Financial, Inc. 82,500 3,199,350 PartnerRe, Ltd. 24,000 1,393,200 ------------- 4,592,550 ------------- REAL ESTATE INVESTMENT TRUST-2.6% Avalonbay Communities, Inc. 16,400 783,920 FelCor Lodging Trust, Inc. (a) 70,000 775,600 Mack-Cali Realty Corp. 20,000 832,400 Post Properties, Inc. 74,100 2,068,872 ------------- 4,460,792 ------------- SAVINGS AND LOAN-4.8% Astoria Financial Corp. 66,100 2,458,920 Commercial Federal Corp. 70,700 1,888,397 Sovereign Bancorp, Inc. 85,000 2,018,750 Washington Federal, Inc. 70,095 1,990,698 ------------- 8,356,765 ------------- 30,812,656 ------------- CONSUMER CYCLICALS-14.5% AUTOS & AUTO PARTS-2.5% American Axle & Manufacturing Holdings, Inc. (a) 52,000 2,101,840 Dana Corp. 57,600 1,056,960 Genuine Parts Co. 35,830 1,189,556 ------------- 4,348,356 ------------- HOTEL - MOTEL-0.9% Park Place Entertainment Corp. (a) 140,000 1,516,200 ------------- RETAILERS-7.5% AutoNation, Inc. (a) 114,000 2,094,180 Federated Department Stores, Inc. 38,000 1,790,940 Foot Locker, Inc. 110,000 2,579,500 Group 1 Automotive, Inc. (a) 51,000 1,845,690 Office Depot, Inc. (a) 130,000 2,172,300 Zale Corp. (A) 47,900 2,548,280 ------------- 13,030,890 ------------- TEXTILES/SHOES - APPAREL MFG.-2.4% Jones Apparel Group, Inc. 63,700 2,244,151 V. F. Corp. 44,500 1,924,180 ------------- 4,168,331 ------------- MISCELLANEOUS CONSUMER CYCLICALS-1.2% Brunswick Corp. 67,000 2,132,610 ------------- 25,196,387 ------------- CAPITAL EQUIPMENT-13.7% AUTO TRUCKS - PARTS-4.8% ArvinMeritor, Inc. 120,000 2,894,400 BorgWarner, Inc. 21,000 1,786,470 Modine Manufacturing Co. 64,500 1,740,210 PACCAR, Inc. 23,000 1,957,760 ------------- 8,378,840 ------------- ELECTRICAL EQUIPMENT-1.4% Cooper Industries, Ltd. Cl.A 42,200 2,444,646 ------------- MACHINERY-4.8% Flowserve Corp. (a) 94,850 1,980,468 Kennametal, Inc. 30,600 1,216,350 Lincoln Electric Holdings, Inc. 78,000 1,929,720 Terex Corp. (a) 109,000 3,104,320 ------------- 8,230,858 ------------- MISCELLANEOUS CAPITAL GOODS-2.7% Parker-Hannifin Corp. 36,000 2,142,000 Textron, Inc. 45,500 2,596,230 ------------- 4,738,230 ------------- 23,792,574 ------------- TECHNOLOGY-10.7% COMMUNICATION - EQUIP. MFRS.-4.3% ADC Telecommunications, Inc. (a) 636,000 1,888,920 Andrew Corp. (a) 163,500 1,881,885 Nortel Networks Corp. (a) 545,100 2,305,773 Tellabs, Inc. (a) 157,000 1,323,510 ------------- 7,400,088 ------------- 5 SMALL CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMPUTERS-1.0% Western Digital Corp. (a) 155,000 $ 1,827,450 ------------- COMPUTER/INSTRUMENTATION-1.2% Adaptec, Inc. (a) 228,100 2,014,123 ------------- MISCELLANEOUS INDUSTRIAL TECHNOLOGY-2.2% Arrow Electronics, Inc. (a) 21,000 485,940 Avnet, Inc. (a) 22,000 476,520 Solectron Corp. (a) 107,400 634,734 Tech Data Corp. (a) 57,500 2,282,175 ------------- 3,879,369 ------------- SEMICONDUCTORS-2.0% KEMET Corp. (a) 49,700 680,393 Vishay Intertechnology, Inc. (a) 124,600 2,853,340 ------------- 3,533,733 ------------- 18,654,763 ------------- COMMODITIES-8.9% CHEMICALS-4.2% Crompton Corp. 276,200 1,980,354 Cytec Industries, Inc. (a) 74,500 2,860,055 FMC Corp. (a) 70,400 2,402,752 ------------- 7,243,161 ------------- CONTAINERS - METAL/GLASS/PAPER-1.1% Ball Corp. 32,000 1,906,240 ------------- MISCELLANEOUS METALS-2.6% Mueller Industries, Inc. (a) 55,000 1,889,800 Reliance Steel & Aluminum Co. 81,200 2,696,652 ------------- 4,586,452 ------------- PAPER-1.0% MeadWestvaco Corp. 60,660 1,804,635 Temple-Inland, Inc. 700 43,869 ------------- 1,848,504 ------------- 15,584,357 ------------- UTILITIES-6.4% ELECTRIC COMPANIES-6.4% Constellation Energy Group, Inc. 41,000 1,605,560 Northeast Utilities 94,200 1,900,014 OGE Energy Corp. 60,100 1,453,819 PNM Resources, Inc. 64,200 1,804,020 Puget Energy, Inc. 80,800 1,920,616 WPS Resources Corp. 51,500 2,380,845 ------------- 11,064,874 ------------- NON-FINANCIAL-6.0% BUILDING MATERIALS-CEMENT-1.5% Texas Industries, Inc. 72,000 2,664,000 ------------- BUILDING MATERIAL - HEAT/PLUMBING/ AIR-1.3% Hughes Supply, Inc. 47,000 2,332,140 ------------- HOME BUILDING-1.5% Pulte Homes, Inc. 27,100 2,537,102 ------------- MISCELLANEOUS BUILDING-1.7% Harsco Corp. 66,000 2,892,120 ------------- 10,425,362 ------------- CONSUMER GROWTH-5.8% DRUGS-0.3% Nu Skin Enterprises, Inc. Cl.A 32,000 546,880 ------------- HOSPITAL MANAGEMENT-1.7% Universal Health Services, Inc. Cl.B 56,000 3,008,320 ------------- HOSPITAL SUPPLIES-1.1% Apogent Technologies, Inc. (a) 79,600 1,833,984 ------------- PUBLISHING-2.7% Deluxe Corp. 64,500 2,665,785 The Readers Digest Association, Inc. 139,500 2,045,070 ------------- 4,710,855 ------------- 10,100,039 ------------- ENERGY-3.9% COAL-1.2% Peabody Energy Corp. 48,000 2,002,080 ------------- OILS - INTEGRATED DOMESTIC-2.7% Amerada Hess Corp. 16,400 871,988 Kerr-McGee Corp. 38,300 1,780,567 Valero Energy Corp. 45,000 2,085,300 ------------- 4,737,855 ------------- 6,739,935 ------------- CONSUMER STAPLES-3.5% FOODS-3.0% Corn Products International, Inc. 52,000 1,791,400 Smithfield Foods, Inc. (a) 27,800 575,460 Universal Corp. 64,200 2,835,714 ------------- 5,202,574 ------------- 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- RETAIL STORES-FOOD-0.5% SUPERVALU, Inc. 30,000 $ 857,700 ------------- 6,060,274 ------------- SERVICES-1.1% MISCELLANEOUS INDUSTRIAL TRANSPORTATION-1.1% SEACOR SMIT, Inc. (a) 45,100 1,895,553 ------------- Total Common Stocks (cost $132,955,233) 160,326,774 ------------- PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-7.8% TIME DEPOSIT-7.8% State Street Euro Dollar 0.50%, 1/02/04 (cost $13,570,000) $13,570 $ 13,570,000 ------------- TOTAL INVESTMENTS-100.0% (cost $146,525,233) 173,896,774 Other assets less liabilities-0.0% 6,330 ------------- NET ASSETS-100% $ 173,903,104 ============= (a) Non-income producing security. See Notes to Financial Statements. 7 SMALL CAP VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $146,525,233) $ 173,896,774 Cash 69 Receivable for capital stock sold 383,766 Dividends and interest receivable 229,203 ------------- Total assets 174,509,812 ------------- LIABILITIES Payable for capital stock redeemed 371,840 Advisory fee payable 149,030 Distribution fee payable 16,414 Accrued expenses 69,424 ------------- Total liabilities 606,708 ------------- NET ASSETS $ 173,903,104 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 12,014 Additional paid-in capital 141,595,381 Undistributed net investment income 236,370 Accumulated net realized gain on investment transactions 4,687,798 Net unrealized appreciation of investments 27,371,541 ------------- $ 173,903,104 ============= CLASS A SHARES Net assets $ 90,948,912 ============= Shares of capital stock outstanding 6,277,641 ============= Net asset value per share $ 14.49 ============= CLASS B SHARES Net assets $ 82,954,192 ============= Shares of capital stock outstanding 5,735,944 ============= Net asset value per share $ 14.46 ============= See Notes to Financial Statements. 8 SMALL CAP VALUE PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $3,816) $ 1,629,672 Interest 36,467 ------------- Total investment income 1,666,139 ------------- EXPENSES Advisory fee 1,091,916 Distribution fee -- Class B 107,903 Custodian 110,508 Administrative 75,000 Audit and legal 68,558 Printing 35,027 Transfer agency 947 Directors' fees and expenses 694 MISCELLANEOUS 24,216 ------------- Total expenses 1,514,769 Less: expenses waived and reimbursed (see Note B) (96,567) ------------- Net expenses 1,418,202 ------------- Net investment income 247,937 ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 4,696,947 Net change in unrealized appreciation/depreciation of investments 36,071,777 ------------- Net gain on investment transactions 40,768,724 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 41,016,661 ============= See Notes to Financial Statements. 9 SMALL CAP VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 247,937 $ 569,082 Net realized gain on investment transactions 4,696,947 1,432,612 Net change in unrealized appreciation/ depreciation of investments 36,071,777 (10,019,480) ------------- ------------- Net increase (decrease) in net assets from operations 41,016,661 (8,017,786) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (375,698) (104,339) Class B (199,672) (10,387) Net realized gain on investment transactions Class A (896,307) (49,686) Class B (529,290) (5,193) CAPITAL STOCK TRANSACTIONS Net increase 56,463,493 65,189,261 ------------- ------------- Total increase 95,479,187 57,001,870 NET ASSETS Beginning of period 78,423,917 21,422,047 ------------- ------------- End of period (including undistributed net investment income of $236,370 and $561,242, respectively) $ 173,903,104 $ 78,423,917 ============= ============= See Notes to Financial Statements. 10 SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Small Cap Value Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek long-term growth of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 11 SMALL 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. Effective May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the average daily net assets for Class A and Class B shares, respectively. Any expense waivers or reimbursements are accrued daily and paid monthly. For the year ended December 31, 2003, the Adviser waived fees in the amount of $21,567. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billlion and .60% in excess of $5 billion, of the average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 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. Because of the Adviser's agreement to limit total operating expenses as described above, the Adviser waived reimbursement for such services in the amount of $75,000 for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003, amounted to $201,066, of which $114,816 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 67,884,903 $ 22,302,643 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $ 146,528,612 ============= Gross unrealized appreciation $ 31,321,190 Gross unrealized depreciation (3,953,028) ------------- Net unrealized appreciation $ 27,368,162 ============= 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 13 SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 selling or buying a security or currency at a price different from the current market value. NOTE E: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 1,773,991 5,079,981 $ 21,676,008 $ 58,777,847 Shares issued in reinvestment of dividends and distributions 105,912 12,954 1,272,005 154,025 Shares redeemed (916,018) (1,664,834) (10,323,748) (17,337,964) ----------- ----------- ------------ ------------- Net increase 963,885 3,428,101 $ 12,624,265 $ 41,593,908 =========== =========== ============ ============= 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS B Shares sold 4,982,506 2,687,037 $ 60,285,362 $ 29,520,479 Shares issued in reinvestment of dividends and distributions 60,747 1,307 728,963 15,580 Shares redeemed (1,489,294) (537,232) (17,175,097) (5,940,706) ----------- ----------- ------------ ------------- Net increase 3,553,959 2,151,112 $ 43,839,228 $ 23,595,353 =========== =========== ============ ============= NOTE F: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE G: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE H: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 1,591,215 $ 164,117 Net long-term capital gains 409,752 5,488 ------------- ------------- Total taxable distributions 2,000,967 169,605 ------------- ------------- Total distributions paid $ 2,000,967 $ 169,605 ============= ============= As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 1,369,462 Accumulated long-term capital gains 3,558,085 Unrealized appreciation/(depreciation) 27,368,162(a) ------------- Total accumulated earnings/(deficit) $ 32,295,709 ============= (a) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to the tax character of distributions resulted in a net increase in undistributed net investment income and a decrease in accumulated net realized gain on investment transactions. This reclassification had no effect on net assets. NOTE I: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 15 SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ within the industry and have requested that Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 SMALL CAP VALUE PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS A ------------------------------------- YEAR ENDED MAY 2, 2001(a) DECEMBER 31, TO ------------------------ DECEMBER 31, 2003 2002 2001 ----------- ----------- ----------- Net asset value, beginning of period $10.46 $11.18 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .04 .12 .14 Net realized and unrealized gain (loss) on investment transactions 4.23 (.81) 1.04 Net increase (decrease) in net asset value from operations 4.27 (.69) 1.18 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.07) (.02) -0- Distributions from net realized gain on investment transactions (.17) (.01) -0- Total dividends and distributions (.24) (.03) -0- Net asset value, end of period $14.49 $10.46 $11.18 TOTAL RETURN Total investment return based on net asset value (d) 41.26% (6.20)% 11.80% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $90,949 $55,592 $21,076 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.20% 1.13% .95%(e) Expenses, before waivers and reimbursements 1.28% 1.41% 2.65%(e) Net investment income (c) .34% 1.04% 1.99%(e) Portfolio turnover rate 21% 28% 12% See footnote summary on page 18. 17 SMALL CAP VALUE PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD CLASS B ------------------------------------- YEAR ENDED MAY 1, 2001(f) DECEMBER 31, TO ------------------------ DECEMBER 31, 2003 2002 2001 ----------- ----------- ----------- Net asset value, beginning of period $10.46 $11.20 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .01 .08 .11 Net realized and unrealized gain (loss) on investment transactions 4.22 (.79) 1.09 Net increase (decrease) in net asset value from operations 4.23 (.71) 1.20 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.06) (.02) -0- Distributions from net realized gain on investment transactions (.17) (.01) -0- Total dividends and distributions (.23) (.03) -0- Net asset value, end of period $14.46 $10.46 $11.20 TOTAL RETURN Total investment return based on net asset value (d) 40.89% (6.37)% 12.00% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $82,954 $22,832 $346 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.45% 1.43% 1.20%(e) Expenses, before waivers and reimbursements 1.53% 1.70% 3.17%(e) Net investment income (c) .05% .74% 2.17%(e) Portfolio turnover rate 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) Commencement of operations. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Small Cap Value Portfolio (the"Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Small Cap Value Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 TAX INFORMATION (unaudited) For corporate shareholders, 56% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2003 qualifies for the corporate dividends received deduction. 19 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR., CHAIRMAN (1) RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 (1) Member of the Audit Committee. 20 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Suite 100 Manager of Barrett Associates, Inc., a Greenwich, CT 06830 registered investment adviser, with which (14) he had been associated since prior to 1999. Chairman of the Board He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Invest- ment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Spring Lake, NJ 07762 Alliance Capital Management Corporation (14) ("ACMC") responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from June (12) 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
21 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
* THERE IS NO STATED TERM OF OFFICE FOR THE FUND'S DIRECTORS. # Member of the Audit Committee and the Nominating Committee. 22 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ----------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Joseph G. Paul, 43(1) Vice President Senior Vice President of ACMC** and Chief Investment Officer - Small Cap Value Equities since 2002. He is also Chief Investment Officer of Advanced Value at ACMC** since October 2000 and held the same position at Sanford C. Bernstein & Co., Inc. since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
(1) Mr. Paul is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS, and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ------------------------------------ VARIABLE PRODUCTS ------------------------------------ SERIES FUND ------------------------------------ ALLIANCEBERNSTEIN ------------------------------------ AMERICAS ------------------------------------ GOVERNMENT INCOME ------------------------------------ PORTFOLIO ------------------------------------ ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered ============================ > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed ============================ This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 4, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Americas Government Income Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks the highest level of current income, consistent with what Alliance considers to be prudent investment risk, that is available from a portfolio of debt securities issued or guaranteed by the governments of the United States, Canada and Mexico, their political subdivisions (including Canadian Provinces but excluding the States of the United States), agencies, instrumentalities or authorities. The Portfolio invests in government securities denominated in local currency and U.S. dollars. Normally, the Portfolio expects to maintain at least 25% of its assets in securities denominated in the U.S. dollar. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns Since 1 Year 5 Years Inception* --------- -------- --------- AllianceBernstein Americas Government Income Portfolio Class A 7.35% 8.60% 8.53% Lehman Brothers Aggregate Bond Index 4.10% 6.62% 7.62% Lehman Brothers Intermediate-Term Government Bond Index 2.29% 6.18% 6.84% * The Portfolio's Class A share inception date is 5/3/94. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Lehman Brothers (LB) Aggregate Bond Index and the unmanaged LB Intermediate-Term Government Bond Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The LB Aggregate Bond Index is composed of the LB Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the LB Government/Credit Bond Index. The LB Intermediate-Term Government Bond Index measures performance of bonds in the one- to 10- year maturity range. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Americas Government Income Portfolio. During the 12-month period ended December 31, 2003, the Portfolio outperformed both of its benchmarks, the LB Aggregate Bond Index and the LB Intermediate-Term Government Bond Index. The Portfolio took advantage of the further weakening of the U.S. dollar with advantageous trades versus the Canadian dollar. The Canadian dollar was one of the top performing currencies in 2003, appreciating 22% from the beginning of 2003 from 1.57 C$/US$ to 1.31 C$/U$ at year-end. The Portfolio's holdings of Mexican peso denominated debt also helped performance. For the annual period, Mexican bonds gained 6.74% in unhedged dollar terms versus 9.83% in hedged U.S. dollar terms. Thus, our decision to hedge most of the foreign currency for most of the year proved beneficial. While the Portfolio's longer duration U.S. government holdings added to relative performance in the first half of the year, a brightening economic outlook dampened government holdings in the second half. For the year, Treasuries posted the weakest returns at 2.24%, with mortgage-backed securities slightly higher at 3.07%, as measured by the LB Aggregate Bond Index. MARKET REVIEW AND INVESTMENT STRATEGY During the annual period, we increased the Portfolio's position in Canadian government securities. The Bank of Canada hiked rates 50 basis points in the first half of the year only to cut them by 50 basis points in the second half, which was due to disappointing third quarter gross domestic product growth, declining exports and a strengthening Canadian dollar. In addition, the Canadian economy has struggled to accommodate the 22% appreciation in the Canadian dollar for the year. While the appreciation was expected, the rate at which 1 AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ the Canadian dollar advanced greatly exceeded forecasts. The currency appreciation has weakened key pillars that supported the strong economic performance of the preceding two years: productivity and the price of labor. We maintained the Portfolio's diversification in U.S. government securities with positions in Federal National Mortgage Association 30-year mortgage securities and Treasury Inflation Protected Securities (TIPS). We took advantage of coupon and attractive carry of U.S. mortgage securities, while the Portfolio's position in TIPS protected against market volatility. We decreased the Portfolio's holdings in Mexico as a result of stalled growth due to poor external demand, which was mainly from the U.S., and loss of competitiveness in Mexico's manufacturing sector. 2 AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN AMERICAS GOVERNMENT INCOME PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 5/3/94* - 12/31/03 AllianceBernstein Americas Government Income Portfolio Class A: $22,063 Lehman Brothers Aggregate Bond Index: $20,331 Lehman Brothers Intermediate-Term Government Bond Index: $18,943 [TABLE BELOW REPRESENTS MOUNTAIN CHART IN PRINTED MATERIAL.]
AllianceBernstein Lehman Brothers Americas Government Lehman Brothers Intermediate-Term Income Portfolio Class A Aggregate Bond Index Government Bond Index - -------------------------------------------------------------------------------- 5/3/94* $10,000 $10,000 $10,000 12/31/94 $ 8,790 $10,083 $10,087 12/31/95 $10,786 $11,946 $11,540 12/31/96 $12,803 $12,379 $12,009 12/31/97 $14,035 $13,575 $12,937 12/31/98 $14,605 $14,754 $14,034 12/31/99 $15,905 $14,633 $14,103 12/31/00 $17,876 $16,334 $15,580 12/31/01 $18,517 $17,713 $16,891 12/31/02 $20,552 $19,530 $18,519 12/31/03 $22,063 $20,331 $18,943
This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Americas Government Portfolio Class A shares (from 5/3/94* to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Lehman Brothers (LB) Aggregate Bond Index and the unmanaged LB Intermediate-Term Government Bond Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The LB Aggregate Bond Index is composed of the LB Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the LB Government/Credit Bond Index. The LB Intermediate-Term Government Bond Index measures performance of bonds in the one- to 10- year maturity range. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Americas Government Income Portfolio. - -------------------------------------------------------------------------------- * Portfolio and benchmark data are from the Portfolio's inception date of 5/3/94. 3 AMERICAS GOVERNMENT INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ---------------------------------------------------- LONG-TERM INVESTMENTS-97.6% CANADA-11.9% GOVERNMENT/AGENCY OBLIGATIONS-11.9% Government of Canada 6.00%, 6/01/11 (a)... CAD 1,460 $ 1,240,472 8.00%, 6/01/27 (a)... 2,675 2,850,649 8.75%, 12/01/05 (a).. 1,414 1,213,129 10.25%, 3/15/14 (a).. 2,090 2,343,643 Province of Ontario 6.10%, 12/02/11 (a).. 300 253,139 ------------- Total Canadian Securities (cost $6,162,953).... 7,901,032 ------------- CHILE-4.2% GOVERNMENT/AGENCY OBLIGATIONS-4.2% Chile BCP 8.00%, 9/01/07 (a)... CLP 1,070,000 2,020,279 8.00%, 7/01/08 (a)... 380,000 730,436 ------------- Total Chile Securities (cost $2,183,568).... 2,750,715 ------------- MEXICO-21.8% GOVERNMENT/AGENCY OBLIGATIONS-21.8% Mexican Government Bonds 9.00%, 12/24/09 (a).. MXP 23,662 2,169,699 9.00%, 12/20/12 (a).. 82,297 7,459,278 9.50%, 3/08/07 (a)... 9,600 919,969 10.50%, 7/14/11 (a).. 39,365 3,896,959 ------------- Total Mexican Securities (cost $14,859,118)... 14,445,905 ------------- UNITED STATES-59.7% GOVERNMENT/AGENCY OBLIGATIONS-17.6% Federal Home Loan Mortgage Corp. 3.625%, 9/15/08 (a).................. US$ 5,800 5,844,648 Federal National Mortgage Association 5.375%, 11/15/11 (a). 5,000 5,334,395 7.00%, 3/01/32 (a)... 414 438,130 Government National Mortgage Association 9.00%, 9/15/24 (a)... 17 18,440 ------------- 11,635,613 ------------- U.S. TREASURY SECURITIES-42.1% U.S. Treasury Bonds 3.375%, 4/15/32 (TIPS) (a) 3,127 3,865,227 6.125%, 8/15/29 (a).. 1,400 1,586,923 8.125%, 8/15/19 (a)(b) 2,000 2,702,188 U.S. Treasury Notes 1.875%, 7/15/13 (TIPS) (a) 724 719,278 2.00%, 5/15/06 (a)... 2,000 2,001,016 4.25%, 1/15/10 (TIPS) (a) 3,233 3,759,490 4.25%, 8/15/13 (a)(c) 3,070 3,074,798 4.875%, 2/15/12 (a).. 850 900,470 U.S. Treasury Strips 0.00%, 5/15/13 (a)... 3,500 2,306,398 0.00%, 2/15/16 (a)... 2,500 1,386,933 0.00%, 11/15/21 (a).. 14,700 5,613,121 ------------- 27,915,842 ------------- Total United States Securities (cost $37,519,894)... 39,551,455 ------------- TOTAL INVESTMENTS-97.6% (cost $60,725,533)... 64,649,107 Other assets less liabilities-2.4%..... 1,599,487 ------------- NET ASSETS-100%......... $ 66,248,594 ============= FORWARD EXCHANGE CURRENCY CONTRACTS (see Note D)
U.S. $ Contract Value on U.S. $ Unrealized Amount Origination Current Appreciation/ (000) Date Value (Depreciation) ---------------- ---------------- ---------------- ---------------- Buy Contract - ------------ Mexican Peso, settling 3/16/04 36,846 $3,289,864 $3,244,864 $(45,000) Sale Contracts - -------------- Canadian Dollar, settling 1/28/04 6,529 4,880,085 5,045,615 (165,530) Chilean Peso, settling 2/23/04 1,522,660 2,536,077 2,569,891 (33,814) Mexican Peso, settling 1/23/04 15,135 1,340,804 1,342,546 (1,742) Mexican Peso, settling 3/16/04 115,413 10,190,078 10,163,779 26,299
4 AllianceBernstein Variable Products Series Fund ================================================================================ FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at Number of Expiration Original December 31, Unrealized Type Contracts Month Value 2003 Depreciation - ----------------------- ---------------- --------------- ---------------- --------------- --------------- U.S. Treasury Note 10 Year Futures 15 Mar 2004 $1,675,078 $1,683,984 $ (8,906) REVERSE REPURCHASE AGREEMENT (see Note D) Broker Interest Rate Maturity Amount - ----------------------- ---------------- --------------- ---------------- Greenwich Capital Markets, Inc. .85% 01/05/04 $ 2,337,430
- -------------------------------------------------------------------------------- (a) Positions, or portion thereof, with an aggregate market value of $62,037,551 have been segregated to collateralize forward exchange currency contracts. (b) Position, with a market value of $270,219 has been segregated to collateralize margin requirements for open futures contracts. (c) Position, with a market value of $2,341,337 has been segregated to collateralize the reverse repurchase agreement. Currency Abbreviations: CAD - Canadian Dollar CLP -Chilean Peso MXP - Mexican Peso US$ -United States Dollar Glossary: TIPS - Treasury Inflation Protected Security See Notes to Financial Statements. 5 AMERICAS GOVERNMENT INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
ASSETS Investments in securities, at value (cost $60,725,533)................................... $ 64,649,107 Cash..................................................................................... 1,504,069 Dividends and interest receivable........................................................ 1,120,817 Receivable for capital stock sold........................................................ 291,432 Receivable for forward exchange currency contract........................................ 1,333,691 Unrealized appreciation of forward exchange currency contracts........................... 26,299 -------------- Total assets............................................................................. 68,925,415 -------------- LIABILITIES Payable for reverse repurchase agreement................................................. 2,337,430 Unrealized depreciation of forward exchange currency contracts........................... 246,086 Advisory fee payable..................................................................... 36,620 Administrative fee payable............................................................... 18,776 Payable for variation margin on futures contracts........................................ 2,344 Distribution fee payable................................................................. 1,127 Accrued expenses......................................................................... 34,438 -------------- Total liabilities........................................................................ 2,676,821 -------------- NET ASSETS.................................................................................. $ 66,248,594 ============== COMPOSITION OF NET ASSETS Capital stock, at par.................................................................... $ 5,092 Additional paid-in capital............................................................... 60,644,242 Undistributed net investment income...................................................... 3,005,815 Accumulated net realized loss on investment and foreign currency transactions............ (1,093,946) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities........................................................................ 3,687,391 -------------- $ 66,248,594 ============== Class A Shares Net assets............................................................................... $ 60,550,323 ============== Shares of capital stock outstanding...................................................... 4,654,400 ============== Net asset value per share.. ....................................................... $ 13.01 ============== Class B Shares Net assets............................................................................... $ 5,698,271 ============== Shares of capital stock outstanding...................................................... 438,007 ============== Net asset value per share................................................................ $ 13.01 ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 AMERICAS GOVERNMENT INCOME PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Interest................................................................................. $ 4,229,213 -------------- EXPENSES Advisory fee............................................................................. 477,054 Distribution fee--Class B................................................................ 8,041 Custodian................................................................................ 128,655 Administrative........................................................................... 75,000 Audit.................................................................................... 35,240 Printing................................................................................. 22,321 Legal.................................................................................... 8,937 Directors' fees and expenses............................................................. 1,132 Transfer agency.......................................................................... 947 Miscellaneous............................................................................ 12,588 -------------- Total expenses before interest........................................................... 769,915 Interest expense......................................................................... 865 -------------- Total expenses........................................................................... 770,780 -------------- Net investment income.................................................................... 3,458,433 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions................................................................ 2,368,783 Written options........................................................................ 127,419 Futures .............................................................................. 82,992 Foreign currency transactions.......................................................... (1,315,623) Net change in unrealized appreciation/depreciation of: Investments............................................................................ 671,490 Written options........................................................................ 2,303 Futures................................................................................ (8,906) Foreign currency denominated assets and liabilities.................................... (241,989) -------------- Net gain on investment and foreign currency transactions................................. 1,686,469 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................. $ 5,144,902 ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 AMERICAS GOVERNMENT INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 3,458,433 $ 3,233,169 Net realized gain on investment and foreign currency transactions.... 1,263,571 472,139 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities................ 422,898 2,504,526 -------------- -------------- Net increase in net assets from operations........................... 5,144,902 6,209,834 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (3,245,231) (3,128,359) Class B ........................................................... (143,433) -0- Net realized gain on investment transactions Class A............................................................ -0- (293,014) Class B............................................................ -0- -0- CAPITAL STOCK TRANSACTIONS Net increase (decrease).............................................. (8,050,736) 18,609,079 -------------- -------------- Total increase (decrease)............................................ (6,294,498) 21,397,540 NET ASSETS Beginning of period.................................................. 72,543,092 51,145,552 -------------- -------------- End of period (including undistributed net investment income of $3,005,815 and $3,247,656, respectively)........................... $ 66,248,594 $ 72,543,092 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein Americas Government Income Portfolio (the "Portfolio"), formerly Alliance Americas Government Income Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc., (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek the highest level of current income, consistent with what Alliance Capital Management L.P., 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 Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management, L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 9 AMERICAS GOVERNMENT INCOME 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, 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 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 investment advisory fee at an annual rate of .65 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and reimburse additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% of the average daily net assets for Class A shares. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. 10 AllianceBernstein Variable Products Series Fund ================================================================================ Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $ 19,925,621 $ 19,782,661 U.S. government securities.............................................. 30,653,932 34,266,558 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding written options, futures and foreign currency transactions) are as follows: Cost........................................................................................ $ 60,725,533 ============== Gross unrealized appreciation............................................................... $ 4,721,197 Gross unrealized depreciation............................................................... (797,623) -------------- Net unrealized appreciation................................................................. $ 3,923,574 ==============
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 AMERICAS GOVERNMENT INCOME 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 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 selling or buying a security or currency at a price different from the current market value. Transactions in options written for the year ended December 31, 2003 were as follows:
Number of Premiums Contracts Received ---------------- ---------------- Options oustanding at beginning of the period........................... 12,850,000 $ 30,772 Options written......................................................... 126,963,200 136,670 Options expired......................................................... (101,652,500) (110,793) Options terminated in closing purchase transactions..................... (38,160,700) (56,649) -------------- -------------- Options outstanding at December 31, 2003................................ -0- $ -0- ============== ==============
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. On December 31, 2003, the Portfolio had entered into a reverse repurchase agreement in the amount of $2,337,375 with an interest rate of .85%. 12 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $6,473,which is included in interest income in the accompanying statement of operations. NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
========================================================================= Shares Amount ========================================================================= Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 948,584 2,480,537 $ 12,158,631 $ 30,440,728 Shares issued in reinvestment of dividends and distributions. 242,725 292,175 3,245,231 3,421,374 Shares redeemed................... (2,252,158) (1,261,323) (28,915,805) (15,485,422) -------------- -------------- -------------- -------------- Net increase (decrease)........... (1,060,849) 1,511,389 $ (13,511,943) $ 18,376,680 ============== ============== ============== ============== Year Ended July 22, 2002* Year Ended July 22, 2002* December 31, to December 31, December 31, to December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class B Shares sold....................... 557,837 22,560 $ 7,212,518 $ 281,846 Shares issued in reinvestment of dividends and distributions. 10,720 -0- 143,433 -0- Shares redeemed................... (149,149) (3,961) (1,894,744) (49,447) -------------- -------------- -------------- -------------- Net increase...................... 419,408 18,599 $ 5,461,207 $ 232,399 ============== ============== ============== ==============
NOTE G: Risks Involved in Investing in the Portfolio Interest Rate Risk and Credit Risk-- Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit 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. - -------------------------------------------------------------------------------- * Commencement of distribution. 13 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Concentration of Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: ================================================================================ 2003 2002 ---------------- ---------------- Distributions paid from: Ordinary income................ $ 3,388,664 $ 3,178,792 Net long-term capital gains.... -0- 242,581 --------------- --------------- Total taxable distributions....... 3,388,664 3,421,373 --------------- --------------- Total distributions paid.......... $ 3,388,664 $ 3,421,373 =============== =============== As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income........................... $ 3,057,376 Accumulated capital and other losses.................... (1,102,852)(a) Unrealized appreciation/(depreciation).................. 3,882,270 --------------- Total accumulated earnings/(deficit).................... $ 5,836,794 --------------- (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $1,102,852, all of which expires in the year 2010. 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 $1,560,864. During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses, the tax character of paydown losses, and the difference between book and tax amortization methods for premiums, resulted in a net decrease in undistributed net investment income and a decrease in accumulated net realized loss on investment and foreign currency transactions. This reclassification had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. 14 AllianceBernstein Variable Products Series Fund ================================================================================ On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 15 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 ============================================================ Year Ended December 31, ------------------------------------------------------------ 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $12.65 $12.17 $12.72 $12.42 $12.55 ------ ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (b)...................... .61 .67(c) .92(c) 1.08(c) 1.22(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions................................ .34 .61 (.43) .37 (.16) ------ ------ ------ ----- ------ Net increase in net asset value from operations .95 1.28 .49 1.45 1.06 ------ ------ ------ ------ ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income........... (.59) (.73) (.91) (.96) (1.05) Distributions from net realized gain on investment transactions................................... -0- (.07) (.13) (.19) (.14) ------ ------ ------ ----- ------ Total dividends and distributions.............. (.59) (.80) (1.04) (1.15) (1.19) ------ ------ ------ ----- ------ Net asset value, end of period................. $13.01 $12.65 $12.17 $12.72 $12.42 ====== ====== ====== ===== ====== Total Return - ------------ Total investment return based on net asset value (d).................................. 7.35% 10.99% 3.59% 12.39% 8.90% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)...... $60,550 $72,307 $51,146 $33,154 $29,411 Ratio to average net assets of: Expenses, net of waivers and reimbursements. 1.04% .93% .95% .95% .95% Expenses, before waivers and reimbursements. 1.04% 1.05% 1.15% 1.24% 1.20% Net investment income....................... 4.75% 5.45%(c) 7.35%(c) 8.68%(c) 9.91%(c) Portfolio turnover rate........................ 73% 60% 57% 0% 6%
- -------------------------------------------------------------------------------- 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 ================================ July 22, 2002 (e) Year Ended to December 31, December 31, 2003 2002 ----------- -------------- Net asset value, beginning of period.............................................. $12.67 $12.04 ------ ------ Income From Investment Operations - --------------------------------- Net investment income (b)......................................................... .57 .42(c) Net realized and unrealized gain on investment and foreign currency transactions.. .36 .21 ----- ------ Net increase in net asset value from operations................................... .93 .63 ----- ------ Less: Dividends - --------------- Dividends from net investment income.............................................. (.59) -0- ------ ------ Net asset value, end of period.................................................... $13.01 $12.67 ====== ====== Total Return - ------------ Total investment return based on net asset value (d).............................. 7.18% 5.23% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)......................................... $5,698 $236 Ratio to average net assets of: Expenses, net of waivers and reimbursements.................................... 1.30% 1.36%(f) Expenses, before waivers and reimbursements.................................... 1.30% 1.48%(f) Net investment income.......................................................... 4.42% 4.72%(c)(f) Portfolio turnover rate........................................................... 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%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (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) Commencement of distribution. (f) Annualized. 17 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Americas Government Income Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Americas Government Income Portfolio, formerly the Americas Government Income Portfolio, (the "Portfolio"), (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Product Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Americas Government Income Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young - ----------------- New York, New York February 4, 2004 18 AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 19 AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered invest- Greenwich, CT 06830 ment adviser, with which he had been associ- (14) ated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Associ- ation of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Spring Lake, NJ 07762 Alliance Capital Management Corporation (14) ("ACMC") responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. 20 AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS (continued) John H. Dobkin,+, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001 - 2002, Senior Advisor from June (12) 1999 - June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989 - May 1999. Previously, Director of the National Academy of Design and during 1988 - 1992, Director and Chairman of the Audit Committee of ACMC. Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (invest- ments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- --------------------------------------------------------------------------- ** There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 21 AMERICAS GOVERNMENT INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ----------------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Kathleen A. Corbet, 44 Senior Vice President Executive Vice President of ACMC**, with which she has been associated since prior to 1999. Paul J. DeNoon, 41(1) Vice President Senior Vice President of ACMC** with which he has been associated since prior to 1999. Michael Mon, 34(1) Vice President Vice President of ACMC, with which he has been associated since June 1999. Prior thereto he was a Portfolio Manager at Brundage, Story and Rose since prior to 1999. Douglas J. Peebles, 38(1) Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Jeffrey L. Phlegar, 37 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Services, Inc. Financial Officer ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999. - ------------------------------------------------------------------------------------------------------------------------------------
(1) Messrs. DeNoon, Mon and Peebles are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 22 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 2, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Global Dollar Government Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks a high level of current income. As a secondary objective, the Portfolio seeks capital appreciation. The Portfolio invests primarily in sovereign debt obligations of developing countries, and may invest up to 35% of its total assets in U.S. and non-U.S. corporate fixed income securities. Substantially all of the Portfolio's assets will be invested in high yield, high risk securities that are low-rated (I.E., below investment grade), or of comparable quality and unrated, and that are considered to be predominantly speculative with regards to the issuer's capacity to pay interest and repay principal. The Portfolio's investments will be U.S. dollar denominated. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS --------------------------------------- SINCE 1 YEAR 5 YEARS INCEPTION* ----------- ----------- ----------- ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO CLASS A 33.41% 19.50% 13.02% J.P. MORGAN EMERGING MARKETS BOND INDEX PLUS 28.82% 16.30% 15.30% * The Portfolio's Class A share inception date is 5/2/94. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged J.P. Morgan Emerging Markets Bond Index Plus (JPM EMBI+) does not reflect fees and expenses associated with the active management of a mutual fund Portfolio. The Index is composed of dollar-denominated restructured sovereign bonds; a large percentage of the index is made up of Brady bonds. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Global Dollar Government Portfolio. The Portfolio outperformed its benchmark, the JPM EMBI+ for the 12-month period ended December 31, 2003. The Portfolio benefited versus the benchmark from both its country and security selection. For the annual reporting period, the Portfolio's allocation to Brazil was the primary contributor to absolute and relative performance. Brazil was the second best performer within the JPM EMBI+, returning 68.96% for the period. The Portfolio's underweighted country exposure to Mexico also contributed positively to performance. In addition, the positioning in Uruguayan and Venezuelan debt helped the Portfolio to outperform the Index. Both Uruguay and Venezuela conducted debt exchanges during this period that significantly improved the maturity structure of their external debt. In addition, Venezuelan bonds have been supported by strong oil prices. Uruguay is not part of the JPM EMBI+. MARKET REVIEW AND INVESTMENT STRATEGY The emerging debt market benefited as a result of a very favorable world financial environment in which the average central-bank policy rate declined 100 basis points to just 2.65%. Additionally, supply was very limited while investor demand remained strong and global liquidity levels remained supportive. The emerging market debt class, as represented by JPM EMBI+, returned a strong 28.82% for the annual period ended December 31, 2003. Latin countries outperformed non-Latin countries, posting returns of 35.38% and 20.28%, respectively. All countries represented within the Index posted positive returns. Top performing countries included Ecuador at 101.48%, Brazil at 68.96%, Nigeria at 40.88%, Venezuela at 38.16% and Turkey at 30.44%, while Peru at 26.92%, Russia at 22.38% and Colombia at 19.65% lagged the Index. We increased the Portfolio's exposure to Brazil early in the reporting period as President Lula exceeded his expectations in his ability to push forward crucial tax and social security reforms. We decreased the Portfolio's holdings in Mexico as a result of stalled growth due to poor external demand--mainly from the U.S. and loss of competitiveness in Mexico's manufacturing sector. With the support of the International Monetary Fund (IMF), Uruguay announced an aggressive plan to swap its out- 1 GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ standing debt for longer maturity securities early in the second quarter. After this announcement, we increased the Portfolio's Uruguayan holdings, a tactic that proved beneficial to the Portfolio. Russia, which is approximately 20% of the JPM EMBI+, was granted investment grade status in October by Moody's Investors Service, raising the country's ratings two notches to Baa3. We maintained a large position in Russian sovereign debt as credit statistics continued to improve. We increased the Portfolio's holdings in Peru as this country's economy continues to expand at a strong rate and inflation remains low and trending downward, resulting in above budget real revenue increases. Late in the reporting period, Standard & Poor's raised Turkey's rating from B to B+, attributing this upgrade to the excellent monetary policy of the Central Bank since 2001, the government's efforts to comply with targets set by the IMF and its resolve to implement reforms. We also added to the Portfolio's position in Turkey. 2 GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 5/2/94* - 12/31/03 AllianceBernstein Global Dollar Government Portfolio Class A: $32,654 J.P. Morgan Emerging Markets Bond Index Plus: $39,576 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein J.P. Morgan Global Dollar Emerging Markets Government Portfolio Bond Index Plus - ------------------------------------------------------------------------------- 5/2/94 $ 10,000 $ 10,000 12/31/94 $ 9,840 $ 10,882 12/31/95 $ 12,101 $ 13,796 12/31/96 $ 15,115 $ 19,218 12/31/97 $ 17,115 $ 21,720 12/31/98 $ 13,400 $ 18,603 12/31/99 $ 16,894 $ 23,435 12/31/00 $ 19,269 $ 27,106 12/31/01 $ 21,075 $ 26,892 12/31/02 $ 24,476 $ 30,721 12/31/03 $ 32,654 $ 39,576 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Global Dollar Government Portfolio Class A shares (from 5/2/94* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged J.P. Morgan Emerging Markets Bond Index Plus (JPM EMBI+) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is composed of dollar-denominated restructured sovereign bonds; a large percentage of the index is made up of Brady bonds. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Global Dollar Government Portfolio. * Portfolio and benchmark data are from the Portfolio's inception date of 5/2/94. 3 GLOBAL DOLLAR GOVERNMENT PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE - ------------------------------------------------------------------------------- SOVEREIGN DEBT OBLIGATIONS-80.8% COLLATERALIZED BRADY BONDS-0.6% BRAZIL-0.5% Republic of Brazil 2.063%, 4/15/12 (a) $ 150 $ 136,125 ------------- PERU-0.1% Republic of Peru 4.50%, 3/07/17 (a) 50 44,750 ------------- Total Collateralized Brady Bonds (cost $156,760) 180,875 ------------- NON-COLLATERALIZED BRADY BONDS-9.5% BRAZIL-9.5% Republic of Brazil 2.063%, 4/15/12 (a) 700 633,500 8.00%, 4/15/14 2,204 2,168,516 ------------- 2,802,016 ------------- Total Non-Collateralized Brady Bonds (cost $2,313,404) 2,802,016 ------------- SOVEREIGN DEBT SECURITIES-70.7% ARGENTINA-1.3% REPUBLIC OF ARGENTINA 1.162%, 8/03/12 (a) 641 397,420 ------------- BELIZE-0.4% Belize Government 9.50%, 8/15/12 120 120,456 ------------- BRAZIL-11.0% Republic of Brazil 10.125%, 5/15/27 425 449,437 11.00%, 8/17/40 1,235 1,355,412 11.25%, 7/26/07 225 260,438 12.25%, 3/06/30 150 185,850 12.75%, 1/15/20 600 762,900 14.50%, 10/15/09 175 230,125 ------------- 3,244,162 ------------- BULGARIA-1.4% Republic of Bulgaria 8.25%, 1/15/15 (b) 25 29,438 8.25%, 1/15/15 325 382,362 ------------- 411,800 ------------- COLOMBIA-3.4% Republic of Colombia 10.50%, 7/09/10 25 28,000 10.75%, 1/15/13 450 511,425 11.75%, 2/25/20 400 481,000 ------------- 1,020,425 ------------- ECUADOR-2.3% Republic of Ecuador 7.00%, 8/15/30 (b) 895 689,150 ------------- EL SALVADOR-0.7% Republic of El Salvador 7.75%, 1/24/23 (b) 100 105,250 8.50%, 7/25/11 (b) 100 107,400 ------------- 212,650 ------------- MEXICO-12.3% United Mexican States-Global Bonds 6.625%, 3/03/15 1,025 1,063,437 11.375%, 9/15/16 1,805 2,563,100 ------------- 3,626,537 ------------- PANAMA-2.0% Republic of Panama 9.375%, 7/23/12 150 170,700 9.375%, 4/01/29 100 112,000 10.75%, 5/15/20 250 299,375 ------------- 582,075 ------------- PERU-4.0% Republic of Peru 8.75%, 11/21/33 175 173,687 9.125%, 2/21/12 425 476,000 9.875%, 2/06/15 450 522,675 ------------- 1,172,362 ------------- PHILIPPINES-3.7% Republic of Philippines 8.25%, 1/15/14 150 148,875 9.00%, 2/15/13 675 713,813 9.875%, 1/15/19 75 78,375 10.625%, 3/16/25 150 164,850 ------------- 1,105,913 ------------- RUSSIA-16.1% Russia Ministry of Finance 3.00%, 5/14/06 220 212,300 3.00%, 5/14/08 100 89,500 3.00%, 5/14/11 220 173,236 Russian Federation 5.00%, 3/31/30 (b) 2,775 2,674,407 11.00%, 7/24/18 (b) 1,200 1,617,000 ------------- 4,766,443 ------------- SOUTH AFRICA-1.0% Republic of South Africa 7.375%, 4/25/12 275 310,063 ------------- TURKEY-3.7% Republic of Turkey 9.875%, 3/19/08 100 114,500 11.00%, 1/14/13 175 219,450 11.75%, 6/15/10 100 126,500 11.875%, 1/15/30 240 324,600 12.375%, 6/15/09 235 299,978 ------------- 1,085,028 ------------- 4 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE - ------------------------------------------------------------------------------- UKRAINE-2.1% Government of Ukraine 7.65%, 6/11/13 (b) $ 275 $ 287,375 11.00%, 3/15/07 (b) 291 324,171 ------------- 611,546 ------------- URUGUAY-0.6% Republic of Uruguay 7.875%, 1/15/33 265 184,175 ------------- VENEZUELA-4.7% Republic of Venezuela 5.375%, 8/07/10 (b) 150 123,000 9.25%, 9/15/27 990 897,435 10.75%, 9/19/13 (b) 350 373,375 ------------- 1,393,810 ------------- Total Sovereign Debt Securities (cost $18,155,712) 20,934,015 ------------- Total Sovereign Debt Obligations (cost $20,625,876) 23,916,906 ------------- CORPORATE DEBT OBLIGATIONS-11.7% BANKING-1.1% Banco Nac De Desen Econo 6.50%, 6/15/06 (b) 50 51,875 Chohung Bank 11.875%, 4/01/10 (b) 100 111,024 Kazkommerts International BV 8.50%, 4/16/13 (b) 100 105,125 Unibanco Uniao de Bancos 9.375%, 4/30/12 50 53,197 Woori Bank 12.75%, 3/01/10 20 22,300 ------------- 343,521 ------------- COMMUNICATIONS-FIXED-0.4% Mobifon Holdings BV 12.50%, 7/31/10 100 116,000 ------------- COMMUNICATIONS-MOBILE-1.1% Mobile Telesystems Finance, SA 9.75%, 1/30/08 (b) 150 163,125 10.95%, 12/21/04 (b) 155 165,656 ------------- 328,781 ------------- ENERGY-0.8% CITGO Petroleum Corp. 11.375%, 2/01/11 150 174,750 Monterrey Power, SA 9.625%, 11/15/09 (b) 45 53,462 ------------- 228,212 ------------- METALS / MINING-0.6% Freeport-McMoRan Copper & Gold, Inc. 10.125%, 2/01/10 150 173,625 ------------- PETROLEUM PRODUCTS-7.3% Gazprom 9.625%, 3/01/13 (b) 500 553,750 Pemex Project Funding Master Trust 8.00%, 11/15/11 250 280,625 Petrobras International Finance Co. 9.875%, 5/09/08 (b) 200 235,000 Petroleos Mexicanos 9.25%, 3/30/18 (b) 400 466,000 PF Export Receivables Master Trust 6.436%, 6/01/15 (b) 142 145,223 Tyumen Oil Co. 11.00%, 11/06/07 250 286,705 11.00%, 11/06/07 (b) 175 201,469 ------------- 2,168,772 ------------- PUBLIC UTILITIES-TELEPHONE-0.4% PTC International Finance II, SA 11.25%, 12/01/09 100 110,500 ------------- Total Corporate Debt Obligations (cost $3,121,391) 3,469,411 ------------- U.S. GOVERNMENT AGENCY-0.9% FEDERAL AGENCY OBLIGATIONS-0.9% Central American Bank for Economic Integration 6.75%, 4/15/13 (b) (cost $248,993) 250 269,988 ------------- SHORT-TERM INVESTMENT-3.4% TIME DEPOSIT-3.4% State Street Bank & Trust Co. 0.50%, 1/02/04 (cost $987,000) 987 987,000 ------------- TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL-96.8% (cost $24,983,260) 28,643,305 ------------- 5 GLOBAL DOLLAR GOVERNMENT PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED*-0.5% SHORT-TERM INVESTMENT-0.5% UBS Private Money Market Fund, LLC, 1.01% (cost $146,644) 146,644 $ 146,644 ------------- TOTAL INVESTMENTS-97.3% (cost $25,129,904) $ 28,789,949 Other assets less liabilities-2.7% 804,831 ------------- NET ASSETS-100% $ 29,594,780 ============= CREDIT DEFAULT SWAP CONTRACTS (SEE NOTE D) SWAP COUNTERPARTY NOTIONAL UNREALIZED & REFERENCED AMOUNT INTEREST TERMINATION APPRECIATION/ OBLIGATION (000) RATE DATE (DEPRECIATION) ======================= =========== =========== =========== ================ BUY CONTRACTS: Citigroup Republic of Hungary 4.50%, 2/6/13 75 0.50% 11/26/13 $ (143) Deutsche Bank Republic of Peru 9.875%, 2/6/15 150 3.90% 09/20/08 (6,405) J.P. Morgan Chase Bank Republic of Venezuela 2.125%, 12/18/07 250 5.00% 09/20/04 (7,575) SALE CONTRACTS: Citigroup Republic of Turkey 11.875%, 1/15/30 400 7.30% 08/13/08 81,484 Citigroup Republic of Turkey 11.875%, 1/15/30 200 6.45% 09/05/08 32,252 Citigroup Federative Republic of Brazil 12.25%, 3/6/30 400 6.35% 08/20/05 30,200 J.P. Morgan Chase Bank Federative Republic of Brazil 8.00%, 4/15/14 200 8.60% 09/20/08 43,320 J.P. Morgan Chase Bank Federative Republic of Brazil 8.00%, 4/15/14 200 9.05% 09/20/13 63,080 J.P. Morgan Chase Bank Republic of Venezuela 2.125%, 12/18/07 250 7.70% 09/20/06 23,700 J.P. Morgan Chase Bank Russian Federation 5.00%, 3/31/30 100 3.20% 06/25/13 4,660 J.P. Morgan Chase Bank Russian Federation 5.00%, 3/31/30 100 3.20% 06/26/13 4,660 * See Note E for securities lending information. (a) Floating rate security. Stated interest rate was in effect at December 31, 2003. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the aggregate market value of these securities amounted to $8,905,460 or 30.1% of net assets. See Notes to Financial Statements. 6 GLOBAL DOLLAR GOVERNMENT PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $25,129,904-including investment of cash collateral for securities loaned of $146,644) $ 28,789,949(a) Cash 691 Interest receivable 720,428 Receivable for investment securities sold 339,917 Unrealized appreciation of swap contracts 283,356 Receivable for capital stock sold 25,335 ------------- Total assets 30,159,676 ------------- LIABILITIES Payable for investment securities purchased 269,368 Payable for collateral on securities loaned 146,644 Payable for capital stock redeemed 50,315 Advisory fee payable 18,412 Unrealized depreciation of swap contracts 14,123 Distribution fee payable 622 Accrued expenses 65,412 ------------- Total liabilities 564,896 ------------- NET ASSETS $ 29,594,780 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 2,037 Additional paid-in capital 24,686,181 Undistributed net investment income 1,940,706 Accumulated net realized loss on investment transactions (963,422) Net unrealized appreciation of investments 3,929,278 ------------- $ 29,594,780 ============= CLASS A SHARES Net assets $ 26,433,168 ============= Shares of capital stock outstanding 1,819,159 ============= Net asset value per share $ 14.53 ============= CLASS B SHARES Net assets $ 3,161,612 ============= Shares of capital stock outstanding 217,892 ============= Net asset value per share $ 14.51 ============= (a) Includes securities on loan with a value of $133,988 (see Note E). See Notes to Financial Statements. 7 GLOBAL DOLLAR GOVERNMENT PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $ 2,462,371 Dividends 3,463 ------------- Total investment income 2,465,834 ------------- EXPENSES Advisory fee 203,386 Distribution fee -- Class B 3,628 Custodian 128,096 Administrative 75,000 Audit 40,796 Printing 35,152 Legal 15,435 Directors' fees and expenses 1,006 Transfer agency 947 Miscellaneous 10,970 ------------- Total expenses before interest 514,416 Interest expense 5,568 ------------- Total expenses 519,984 ------------- Net investment income 1,945,850 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized gain on: Investment transactions 3,915,531 Written options 55,469 Net change in unrealized appreciation/depreciation of: Investments 1,365,890 Written options (2,450) Swaps contracts 269,233 ------------- Net gain on investment transactions 5,603,673 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 7,549,523 ============= See Notes to Financial Statements. 8 GLOBAL DOLLAR GOVERNMENT PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 1,945,850 $ 1,429,355 Net realized gain (loss) on investment transactions 3,971,000 (25,911) Net change in unrealized appreciation/ depreciation of investments 1,632,673 1,201,250 ------------- ------------- Net increase in net assets from operations 7,549,523 2,604,694 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (1,368,257) (1,130,687) Class B (63,134) -0- CAPITAL STOCK TRANSACTIONS Net increase 1,053,177 9,700,933 ------------- ------------- Total increase 7,171,309 11,174,940 NET ASSETS Beginning of period 22,423,471 11,248,531 ------------- ------------- End of period (including undistributed net investment income of $1,940,706 and $1,426,247, respectively) $ 29,594,780 $ 22,423,471 ============= ============= See Notes to Financial Statements. 9 GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Global Dollar Government Portfolio (the "Portfolio"), formerly Alliance Global Dollar Government Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek a high level of current income and, secondarily, capital appreciation. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Portfolio'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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 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 investment advisory fee at an annual rate of .75 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. 11 GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. The Portfolio compensates Alliance Global Investor Services, Inc. (AGIS), 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 39,851,576 $ 37,963,726 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding swap contracts) are as follows: Cost $ 25,259,704 ============= Gross unrealized appreciation $ 3,569,826 Gross unrealized depreciation (39,581) ------------- Net unrealized appreciation $ 3,530,245 ============= 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. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 selling or buying a security or currency at a price different from the current market value. Transactions in options written for the year ended December 31, 2003 were as follows: NUMBER PREMIUMS OF CONTRACTS RECEIVED ============= ============= Options outstanding at beginning of period 350,000 $ 6,650 Options written 2,838,846 52,320 Options terminated in closing purchase transactions (2,688,846) (51,170) Options expired (500,000) (7,800) ------------- ------------- Options outstanding at December 31, 2003 -0- $ -0- ------------- ------------- 2. SWAP AGREEMENTS The Portfolio may enter into swaps on sovereign debt obligations 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 underlying value of the securities. The Portfolio records a net receivable or payable on a daily basis for the net interest income or expense expected to be received or paid in the interest period. Net interest received or paid on these contracts is recorded as interest income (or as an offset to interest income). Fluctuations in the value of swap contracts are recorded for financial statement purposes as a component of net change in unrealized appreciation/depreciation of investments. Realized gains and/or losses from terminated swap contracts are included in net realized gain or loss on investment transactions. The Portfolio may enter into credit default swaps. A sell/(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 par and take/(deliver) the principal amount (the "Notional Amount") of the referenced obligation. During the term of the swap agreement, the Portfolio receives/(pays) semi-annual fixed interest payments from/(to) the respective counterparty, calculated at the agreed upon interest rate applied to the Notional Amount. 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 and credit risk. If the Portfolio is a buyer and no credit event occurs, it will lose its investment. In addition, the value of the referenced obligation received by the Portfolio as a seller if a credit event occurs, coupled with the periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Portfolio. 13 GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had loaned securities with a value of $133,988 and received cash collateral of $146,644 which was invested in a money market fund as included in the accompanying portfolio of investments. For the year ended December 31, 2003, the Portfolio earned fee income of $629 which is included in interest income in the accompanying statement of operations. NOTE F: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes designated Class A and Class B. Each class consist of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 676,545 1,299,609 $ 8,656,711 $ 13,815,463 Shares issued in reinvestment of dividends 99,946 107,582 1,368,257 1,130,687 Shares redeemed (900,148) (522,799) (11,632,275) (5,460,835) ----------- ----------- ------------ ------------- Net increase (decrease) (123,657) 884,392 $ (1,607,307) $ 9,485,315 =========== =========== ============ ============= YEAR ENDED JULY 22, 2002* YEAR ENDED JULY 22, 2002* DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS B Shares sold 226,684 22,168 $ 3,029,568 $ 241,931 Shares issued in reinvestment of dividends 4,615 -0- 63,133 -0- Shares redeemed (33,182) (2,393) (432,217) (26,313) ----------- ----------- ------------ ------------- Net increase 198,117 19,775 $ 2,660,484 $ 215,618 =========== =========== ============ ============= NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Interest Rate Risk and Credit Risk -- Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit 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. * COMMENCEMENT OF DISTRIBUTION. 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Concentration of Risk -- Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 1,431,391 $ 1,130,687 ------------- ------------- Total taxable distributions 1,431,391 1,130,687 ------------- ------------- Total distributions paid $ 1,431,391 $ 1,130,687 ============= ============= As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 1,940,706 Accumulated capital and other losses (833,622)(a) Unrealized appreciation/(depreciation) 3,799,478(b) ------------- Total accumulated earnings/(deficit) $ 4,906,562 ============= (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $833,622 of which $41,898 will expire in the year 2007, $680,833 will expire in the year 2009 and $110,891 will expire in the year 2010. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the current fiscal year, $3,697,541 of the capital loss carryforward was utilized. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, there were no permanent differences. NOTE J: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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; 15 GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ (ii) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 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 --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $11.43 $10.63 $10.76 $10.79 $10.18 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .95 .94(c) 1.11(c) 1.27(c) 1.21(c) Net realized and unrealized gain (loss) on investment transactions 2.83 .70 (.10) .14 1.08 Net increase in net asset value from operations 3.78 1.64 1.01 1.41 2.29 LESS: DIVIDENDS Dividends from net investment income (.68) (.84) (1.14) (1.44) (1.68) Net asset value, end of period $14.53 $11.43 $10.63 $10.76 $10.79 TOTAL RETURN Total investment return based on net asset value (d) 33.41% 16.14% 9.37% 14.06% 26.08% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $26,433 $22,198 $11,249 $9,423 $10,139 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.90% 1.40% .95% .95% .95% Expenses, before waivers and reimbursements 1.90% 2.00% 2.37% 2.42% 2.29% Expenses, before waivers and reimbursements excluding interest expense 1.88% 2.00% 2.37% 2.42% 2.29% Net investment income 7.20% 8.83%(c) 10.63%(c) 11.71%(c) 12.42%(c) Portfolio turnover rate 150% 142% 176% 148% 117%
See footnote summary on page 18. 17 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 --------------------------- JULY 22, YEAR ENDED 2002 (e) TO DECEMBER 31, DECEMBER 31, 2003 2002 ------------- ------------ Net asset value, beginning of period $11.42 $10.20 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .88 .35(c) Net realized and unrealized gain on investment Transactions 2.89 .87 Net increase in net asset value from operations 3.77 1.22 LESS: DIVIDENDS Dividends from net investment income (.68) -0- Net asset value, end of period $14.51 $11.42 TOTAL RETURN Total investment return based on net asset value (d) 33.34% 11.96% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $3,162 $226 Ratio to average net assets of: Expenses, net of waivers and reimbursements 2.14% 1.63%(f) Expenses, before waivers and reimbursements 2.14% 1.99%(f) Expenses, before waivers and reimbursements excluding interest expense 2.12% 1.99%(f) Net investment income 6.67% 9.12%(c)(f) Portfolio turnover rate 150% 142% (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 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%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (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) Commencement of distribution. (f) Annualized. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Global Dollar Government Portfolio (the "Portfolio") formerly Alliance Global Dollar Government Portfolio (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Global Dollar Government Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 19 GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 FRANKLIN STREET Boston, MA 02110 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 (1) Member of the Audit Committee. 20 GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was Chairman of the Board formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Associ- ation of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC"), (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin, #, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from June (12) 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chair- man of the Audit Committee of ACMC.
21 GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 and Gladstone, NJ 07934 a partner of that firm for more than twenty- (12) five years prior thereto. He is President and Chief Executive Officer of Wenonah Develop- ment Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 22 GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ------------------------------------------------------------------------------------------------------------------ Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Kathleen A. Corbet, 44 Senior Vice President Executive Vice President of ACMC**, with which she has been associated since prior to 1999. Paul J. DeNoon, 41(1) Vice President Senior Vice President of ACMC** with which he has been associated since prior to 1999. Jeffrey L. Phlegar, 37 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
(1) Mr. DeNoon is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ----------------------------------- VARIABLE PRODUCTS ----------------------------------- SERIES FUND ----------------------------------- ALLIANCEBERNSTEIN ----------------------------------- HIGH YIELD PORTFOLIO ----------------------------------- ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. HIGH YIELD PORTFOLIO ================================================================================ LETTER TO INVESTORS February 4, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein High Yield Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks the highest level of current income available without assuming undue risk by investing principally in high-yielding fixed income securities. As a secondary objective, the Portfolio seeks capital appreciation. The Portfolio invests a substantial portion of its assets in higher-yielding, higher-risk, fixed income securities (commonly known as "junk bonds") that are rated below investment grade and are considered to have predominantly speculative characteristics. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns Since 1 Year 5 Years Inception* --------- -------- --------- AllianceBernstein High Yield Portfolio Class A 22.44% 2.48% 1.92% Credit Suisse First Boston High Yield Index 27.94% 6.44% 5.57% * The since inception return for the Portfolio is from the Portfolio's actual inception date of 10/27/97. The since inception return for the Index is as of 10/29/97, the date closest to the Portfolio's inception date for which data was available. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Credit Suisse First Boston High Yield (CSFBHY) Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a trader-priced portfolio constructed to mirror the high yield debt market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein High Yield Portfolio. The Portfolio posted strong returns for the 12-month period ended December 31, 2003; however, it underperformed relative to its benchmark, the CSFBHY Index. Lower triple C-rated securities, which pulled index averages higher during the year, significantly outperformed the other quality sectors. The Portfolio underperformed the Index primarily due to the fact that the Portfolio underweighted this sector as a result of the substantially higher default risk and volatility inherent in lower rated triple C securities. The triple C-rated quality sector returned a robust 52.52% for the year. Index returns in the quality range of the Portfolio, which average from single-B to double-B, were much more representative of the performance within the Portfolio. Double B-rated high yield securities returned 19.60% for the year, while single B-rated securities returned 25.55%. The Portfolio has historically underweighted the lowest quality tier as a result of a substantially higher default risk and volatility. By industry, the Portfolio benefited from its cable and wireless holdings where price levels greatly appreciated in value from previously oversold levels. In addition, the Portfolio's modest holdings in the energy sector added to relative performance, as this sector languished due to relatively overvalued levels versus the overall market during the period under review. Specific high yield security selection also had a meaningful role in the Portfolio's performance, as holdings in some of our top positions performed extremely well. Equally important, we avoided the troubled credits in this reporting period. MARKET REVIEW AND INVESTMENT STRATEGY The high yield market delivered exceptionally strong returns in 2003. Positive results were fueled by prospects for a U.S. economic recovery, attractive valuations, investor willingness to take on additional risk, improve- 1 HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ ment in balance sheets and access to capital. Yield-seeking investors in a low-rate environment helped to drive high yield prices higher, despite near-record issuance. The more than 500 new issues priced in 2003 generated $149 billion in proceeds--just shy of 1998's record $150 billion. Spreads over Treasuries have narrowed by 450 basis points since the end of 2002, reflecting the improvement in market fundamentals. As of December 31, 2003, the high yield market, as measured by the CSFBHY Index, was yielding 7.78%--a record low--for a spread of 486 basis points over Treasuries. According to J.P. Morgan, demand for high yield was strong throughout the year bringing a record $30.2 billion of new inflows into high yield mutual funds, compared with $14.5 billion in 2002 and the previous high of $22 billion in 1997. The default rate also declined significantly during the year from its highs of early 2002. Moody's Investors Service's global high-yield default rate, which is measured on a percentage-of-issuers basis, ended December at 5.2%, down from 8.3% at year-end 2002 and nearly half its peak level of January 2002. All industry sectors posted positive returns for the year, with even the bottom performing industry returning 12%. Among individual industries, the wireless telecommunications, utility and cable sectors ranked as the best performers during the year, all rebounding from negative returns in 2002. The lowest returns were generated by the consumer non-durables, paper and packaging, supermarkets and gaming industries. During the annual period under review, the Portfolio benefited from its exposure to certain higher risk/volatility issuers in the cable and wireless telecommunications sectors. We maintained a sector overweighting based on our belief that these sectors were oversold and that certain better quality issuers had been punished along with the entire sector. This proved to be correct as investors recognized the historically high spreads in a number of these sectors. 2 HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN HIGH YIELD PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 10/27/97*-12/31/03 Credit Suisse First Boston High Yield Index: $13,953 AllianceBernstein High Yield Portfolio Class A: $11,246 [TABLE BELOW REPRESENTS MOUNTAIN CHART IN PRINTED MATERIAL.] AllianceBernstein High Yield Credit Suisse First Boston Portfolio Class A High Yield Index - -------------------------------------------------------------------------------- 10/27/97* $10,000 $10,000 12/31/97 $10,330 $10,153 12/31/98 $ 9,949 $10,212 12/31/99 $ 9,692 $10,547 12/31/00 $ 9,193 $ 9,998 12/31/01 $ 9,472 $10,578 12/31/02 $ 9,185 $10,906 12/31/03 $11,246 $13,953 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein High Yield Portfolio Class A shares (from 10/27/97* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Credit Suisse First Boston High Yield (CSFBHY) Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index is a trader-priced portfolio constructed to mirror the high yield debt market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein High Yield Portfolio. - ----------------------------------------------------------------------------- * Portfolio data is from the Portfolio's inception date of 10/27/97. Data for the CSFBHY Index is as of 10/29/97, the date closest to the Portfolio's inception date for which data was available. 3 HIGH YIELD PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ---------------------------------------------------- CORPORATE DEBT OBLIGATIONS-90.0% AEROSPACE/DEFENSE-0.7% DRS Technologies, Inc. 6.875%, 11/01/13 (a).... $ 180 $ 185,850 K & F Industries, Inc. 9.625%, 12/15/10........ 130 146,413 Sequa Corp. 9.00%, 8/01/09.......... 70 77,525 ------------ 409,788 ------------ AUTOMOTIVE-3.1% Dana Corp. 10.125%, 3/15/10........ 220 257,400 Dura Operating Corp. 9.00%, 5/01/09.......... 185 185,925 HLI Operating Co., Inc. 10.50%, 6/15/10......... 230 265,937 Keystone Automotive Operations, Inc. 9.75%, 11/01/13 (a)..... 175 189,000 Sonic Automotive, Inc. 8.625%, 8/15/13 (a)..... 200 212,000 Tenneco Automotive, Inc. 10.25%, 7/15/13......... 205 234,213 TRW Automotive 9.375%, 2/15/13......... 110 126,225 11.00%, 2/15/13......... 110 130,075 United Auto Group, Inc. 9.625%, 3/15/12......... 120 135,000 ------------ 1,735,775 ------------ BROADCASTING/ MEDIA-3.7% Allbritton Communications Co. 7.75%, 12/15/12......... 180 187,650 Corus Entertainment, Inc. (Canada) 8.75%, 3/01/12 (a)...... 120 132,600 Emmis Communications Corp. 12.50%, 3/15/11 (b)..... 165 153,656 Paxson Communications Corp. 10.75%, 7/15/08......... 150 164,437 12.25%, 1/15/09 (b)..... 145 127,963 PRIMEDIA, Inc. 8.00%, 5/15/13 (a)...... 70 71,750 8.875%, 5/15/11......... 145 153,700 Radio One, Inc. 8.875%, 7/01/11......... 105 116,288 Sinclair Broadcast Group, Inc. 8.00%, 3/15/12 (a)...... 150 162,750 8.75%, 12/15/11 (a)..... 95 105,925 Time Warner Telecom, Inc. 10.125%, 2/01/11........ 560 599,200 Young Broadcasting, Inc. 8.50%, 12/15/08......... 90 97,200 ------------ 2,073,119 ------------ BUILDING/ REAL ESTATE-3.0% D.R. Horton, Inc. 6.875%, 5/01/13......... $ 190 $ 203,300 KB HOME 7.75%, 2/01/10.......... 200 213,000 LNR Property Corp. 7.25%, 10/15/13 (a)..... 270 276,075 7.625%, 7/15/13......... 125 132,187 Meritage Corp. 9.75%, 6/01/11.......... 205 230,113 Nortek Holdings, Inc. 10.00%, 5/15/11 (a)(b).. 380 276,450 Schuler Homes, Inc. 10.50%, 7/15/11......... 165 192,225 Williams Lyon Homes, Inc. 10.75%, 4/01/13......... 130 148,525 ------------ 1,671,875 ------------ CABLE-4.6% Charter Communications Holdings LLC 11.75%, 5/15/11 (b)..... 1,325 894,375 CSC Holdings, Inc. 7.625%, 7/15/18......... 195 205,725 DirecTV Holdings LLC 8.375%, 3/15/13......... 135 157,275 EchoStar DBS Corp. 6.375%, 10/01/11 (a).... 380 391,400 9.375%, 2/01/09......... 300 315,375 Innova S. de R.L. (Mexico) 9.375%, 9/19/13 (a)..... 135 139,219 12.875%, 4/01/07........ 48 49,069 Insight Communications Co., Inc. 12.25%, 2/15/11......... 265 227,900 Insight Midwest LP 9.75%, 10/01/09......... 200 212,500 ------------ 2,592,838 ------------ CHEMICALS-1.9% Equistar Chemicals LP 10.125%, 9/01/08........ 245 269,500 10.625%, 5/01/11........ 130 144,300 Huntsman ICI Chemicals LLC 10.125%, 7/01/09........ 220 227,700 Quality Distribution LLC 9.00%, 11/15/10 (a)..... 165 173,456 Resolution Performance Products LLC 9.50%, 4/15/10.......... 25 25,500 Westlake Chemical Corp. 8.75%, 7/15/11 (a)...... 230 253,000 ------------ 1,093,456 ------------ COMMUNICATIONS-1.2% Mobifon Holdings BV (Netherlands) 12.50%, 7/31/10......... 345 400,200 4 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ---------------------------------------------------- WorldCom, Inc.- WorldCom Group 7.50%, 5/15/11 (c)(f)... $760 $ 256,500 ------------ 656,700 ------------ COMMUNICATIONS - FIXED-2.0% FairPoint Communications, Inc. 11.875%, 3/01/10........ 80 93,600 12.50%, 5/01/10......... 65 71,175 Qwest Corp. 8.875%, 3/15/12 (a)..... 200 230,500 Qwest Services Corp. 13.50%, 12/15/10 (a).... 603 735,660 ------------ 1,130,935 ------------ COMMUNICATIONS - MOBILE-6.6% ACC Escrow Corp. 10.00%, 8/01/11 (a)..... 240 268,800 Dobson Communications Corp. 8.875%, 10/01/13 (a).... 440 447,700 Iridium Capital Corp. LLC 14.00%, 7/15/05 (c)(f).. 550 52,250 Mobile Telesystems Finance, SA (Luxembourg) 8.375%, 10/14/10 (a).... 250 256,250 Nextel Communications, Inc. 6.875%, 10/31/13........ 280 297,500 7.375%, 8/01/15......... 250 270,000 9.375%, 11/15/09........ 65 71,175 Nextel Partners, Inc. 8.125%, 7/01/11......... 155 165,850 11.00%, 3/15/10......... 100 111,000 12.50%, 11/15/09 (a).... 72 83,880 PTC International Finance II, SA (Luxembourg) 11.25%, 12/01/09........ 200 221,000 Rural Cellular Corp. 9.75%, 1/15/10 (a)...... 410 402,825 9.875%, 2/01/10......... 140 149,800 Triton PCS, Inc. 8.75%, 11/15/11......... 205 202,950 9.375%, 2/01/11......... 125 128,125 Western Wireless Corp. 9.25%, 7/15/13.......... 530 561,800 ------------ 3,690,905 ------------ CONSUMER MANUFACTURING-3.1% Broder Brothers 11.25%, 10/15/10 (a).... 270 267,300 Central Garden & Pet Co. 9.125%, 2/01/13......... 85 94,775 Collins & Aikman Floor Cover 9.75%, 2/15/10.......... 110 118,250 Hines Nurseries, Inc. 10.25%, 10/01/11 (a).... 130 142,350 Salton, Inc. 12.25%, 4/15/08......... $250 $ 267,500 Simmons Co. 7.875%, 1/15/14 (a)..... 220 222,200 St. John Knits International, Inc. 12.50%, 7/01/09......... 90 96,750 TD Funding Corp. 8.375%, 7/15/11 (a)..... 485 518,344 ------------ 1,727,469 ------------ CONTAINERS-0.7% Crown Euro Holdings, SA (France) 9.50%, 3/01/11.......... 215 244,562 Greif Bros. Corp. 8.875%, 8/01/12......... 150 165,750 ------------ 410,312 ------------ ELECTRONICS-0.3% Fimep, SA (France) 10.50%, 2/15/13......... 125 148,125 ------------ ENERGY-4.4% Chesapeake Energy Corp. 7.75%, 1/15/15.......... 255 277,950 CITGO Petroleum Corp. 11.375%, 2/01/11........ 385 448,525 Frontier Oil Corp. 11.75%, 11/15/09........ 115 130,525 Grant Prideco, Inc. 9.00%, 12/15/09......... 125 138,438 Grey Wolf, Inc. 8.875%, 7/01/07......... 20 20,700 Hilcorp Energy 10.50%, 9/01/10 (a)..... 585 643,500 North American Energy Partners, Inc. 8.75%, 12/01/11 (a)..... 153 161,415 Parker & Parsley Petroleum Co. 8.875%, 4/15/05......... 150 160,586 Premcor Refining Group, Inc. 9.50%, 2/01/13.......... 120 137,400 Pride International, Inc. 9.375%, 5/01/07......... 86 88,795 Universal Compression, Inc. 7.25%, 5/15/10.......... 80 83,600 Westport Resources Corp. 8.25%, 11/01/11......... 55 60,775 8.25%, 11/01/11 (a)..... 100 110,500 ------------ 2,462,709 ------------ ENTERTAINMENT & LEISURE-3.1% Gaylord Entertainment Co. 8.00%, 11/15/13 (a) .... 185 196,100 Royal Caribbean Cruises, Ltd. (Liberia) 8.00%, 5/15/10.......... 85 93,075 8.75%, 2/02/11.......... 240 272,400 5 HIGH YIELD PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ---------------------------------------------------- Six Flags, Inc. 9.50%, 2/01/09 (a)...... $515 $ 542,038 9.625%, 6/01/14 (a)..... 175 183,750 9.75%, 6/15/07.......... 175 183,531 9.75%, 4/15/13.......... 20 21,150 Universal City Development 11.75%, 4/01/10......... 210 246,750 ------------ 1,738,794 ------------ FINANCIAL-4.0% Crum & Forster 10.375%, 6/15/13 (a).... 110 122,788 Eircom Funding (Ireland) 8.25%, 8/15/13.......... 135 150,187 Fairfax Financial Holdings, Ltd. (Canada) 8.25%, 10/01/15......... 30 29,475 Finova Group, Inc. 7.50%, 11/15/09......... 375 226,875 iStar Financial, Inc. 6.00%, 12/15/10......... 125 128,125 7.00%, 3/15/08.......... 200 217,000 8.75%, 8/15/08.......... 25 29,000 Markel Capital Trust I 8.71%, 1/01/46(g)....... 310 313,875 PXRE Capital Trust I 8.85%, 2/01/27.......... 205 190,650 Royal & Sun Alliance, Inc. (United Kingdom) 8.95%, 10/15/29......... 240 233,945 Western Financial Bank 9.625%, 5/15/12......... 270 302,400 Williams Scotsman, Inc. 9.875%, 6/01/07......... 280 284,900 ------------ 2,229,220 ------------ FOOD/BEVERAGE-1.7% Del Monte Foods Co. 8.625%, 12/15/12........ 115 126,500 9.25%, 5/15/11.......... 110 122,100 DIMON, Inc. 7.75%, 6/01/13 (a)...... 70 72,450 9.625%, 10/15/11........ 75 84,000 Dole Food Co., Inc. 8.625%, 5/01/09 (d)..... 110 121,275 8.875%, 3/15/11......... 65 71,662 Merisant Co. 9.50%, 7/15/13 (a)...... 160 171,200 Swift & Co. 10.125%, 10/01/09....... 180 191,700 ------------ 960,887 ------------ GAMING-4.6% Ameristar Casinos, Inc. 10.75%, 2/15/09......... 100 115,500 Argosy Gaming Co. 9.00%, 9/01/11.......... 105 116,813 Boyd Gaming Corp. 7.75%, 12/15/12......... 110 118,250 Harrahs Operating Co., Inc. 7.875%, 12/15/05........ $105 $ 114,450 Horseshoe Gaming Holding Corp. 8.625%, 5/15/09......... 85 90,206 Mandalay Resort Group 10.25%, 8/01/07......... 250 290,000 MGM Mirage, Inc. 8.375%, 2/01/11......... 260 295,750 Mohegan Tribal Gaming Authority 6.375%, 7/15/09......... 60 62,250 8.375%, 7/01/11 (a)..... 95 104,025 Park Place Entertainment Corp. 7.00%, 4/15/13.......... 100 107,250 7.875%, 3/15/10......... 90 100,125 9.375%, 2/15/07......... 120 136,200 Riviera Holdings Corp. 11.00%, 6/15/10......... 165 172,012 Station Casinos, Inc. 8.375%, 2/15/08......... 100 107,625 Sun International Hotels, Ltd. 8.875%, 8/15/11 (a)..... 105 115,238 Trump Holdings & Funding 11.625%, 3/15/10........ 135 129,262 Turning Stone Casino Resort Enterprises 9.125%, 12/15/10 (a).... 150 163,875 Venetian Casino Resort LLC 11.00%, 6/15/10......... 210 244,650 ------------ 2,583,481 ------------ HEALTHCARE-5.2% Alliance Imaging, Inc. 10.375%, 4/15/11........ 185 197,025 Concentra Operating Corp. 9.50%, 8/15/10.......... 145 157,325 13.00%, 8/15/09......... 191 213,920 Extendicare Health Services, Inc. 9.50%, 7/01/10.......... 155 172,825 Genesis HealthCare Corp. 8.00%, 10/15/13 (a)..... 180 188,550 Hanger Orthopedic Group, Inc. 10.375%, 2/15/09........ 185 210,900 Iasis Healthcare Corp. 13.00%, 10/15/09........ 165 186,450 PacifiCare Health Systems, Inc. 10.75%, 6/01/09......... 182 215,670 Select Medical Corp. 7.50%, 8/01/13.......... 215 228,975 Triad Hospitals, Inc. 7.00%, 11/15/13 (a)..... 320 324,000 8.75%, 5/01/09.......... 205 223,194 Universal Hospital Services, Inc. 10.125%, 11/01/11 (a)... 255 269,025 Vanguard Health Systems, Inc. 9.75%, 8/01/11.......... 290 316,100 ------------ 2,903,959 ------------ 6 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ---------------------------------------------------- HOME FURNISHINGS-0.4% Sealy Mattress Co. 9.875%, 12/15/07........ $200 $ 208,000 ------------ HOTEL/LODGING-3.9% Corrections Corp. of America 7.50%, 5/01/11.......... 45 47,475 9.875%, 5/01/09......... 165 185,006 Extended Stay America, Inc. 9.875%, 6/15/06......... 240 270,000 Felcor Lodging LP 9.00%, 6/01/11.......... 25 27,250 10.00%, 9/15/08......... 185 200,725 Host Marriott LP 9.25%, 10/01/07......... 170 190,825 9.50%, 1/15/07.......... 135 150,862 Intrawest Corp. (Canada) 7.50%, 10/15/13 (a)..... 105 109,725 10.50%, 2/01/10......... 180 199,800 La Quinta Properties, Inc. 8.875%, 3/15/11......... 195 216,694 MeriStar Hospitality Corp. 9.125%, 1/15/11......... 40 42,600 10.50%, 6/15/09......... 110 119,900 Starwood Hotels & Resorts Worlwide, Inc. 7.875%, 5/01/12......... 240 271,200 Vail Resorts, Inc. 8.75%, 5/15/09.......... 140 148,400 ------------ 2,180,462 ------------ INDUSTRIAL-5.1% AMSTED Industries, Inc. 10.25%, 10/15/11 (a).... 255 283,050 Amtrol, Inc. 10.625%, 12/31/06....... 145 100,050 Case New Holland, Inc. 9.25%, 8/01/11 (a)...... 370 416,250 Dayton Superior Corp. 10.75%, 9/15/08......... 115 118,450 FastenTech, Inc. 11.50%, 5/01/11......... 180 195,525 Flowserve Corp. 12.25%, 8/15/10......... 160 186,400 H & E Equipment Services, Inc. 11.125%, 6/15/12........ 110 111,100 Motors and Gears, Inc. 10.75%, 11/15/06........ 100 85,500 NMHG Holdings Co. 10.00%, 5/15/09......... 105 116,550 Resolution Performance Products LLC 13.50%, 11/15/10........ 295 258,125 Russell-Stanley Holdings, Inc. 9.00%, 11/30/08 (a)(e)(g) 80 36,768 Sensus Metering Systems, Inc. 8.625%, 12/15/13 (a).... 220 226,875 Service Corp. International 6.00%, 12/15/05......... $ 40 $ 41,000 6.50%, 3/15/08.......... 55 56,788 SPX Corp. 7.50%, 1/01/13.......... 105 114,712 Terex Corp. 10.375%, 4/01/11........ 210 236,250 TriMas Corp. 9.875%, 6/15/12......... 260 272,350 ------------ 2,855,743 ------------ MINING & METALS-1.5% Alaska Steel Corp. 7.875%, 2/15/09......... 475 419,187 Freeport-McMoRan Copper & Gold, Inc. Cl.B 10.125%, 2/01/10........ 145 167,838 Peabody Energy Corp. 6.875%, 3/15/13......... 235 249,100 ------------ 836,125 ------------ PAPER/PACKAGING-6.2% Anchor Glass Container Corp. 11.00%, 2/15/13......... 245 285,425 Berry Plastics Corp. 10.75%, 7/15/12......... 185 213,906 Doman Industries, Ltd. (Canada) 12.00%, 7/01/04 (c)..... 95 100,225 Georgia-Pacific Corp. 9.375%, 2/01/13......... 305 352,275 Graham Packaging Co. 8.75%, 1/15/08 (a)...... 120 123,300 Graphic Packaging International Corp. 9.50%, 8/15/13 (a)...... 365 405,150 Huntsman Advanced Materials LLC 11.00%, 7/15/10......... 150 166,500 Huntsman International Holdings LLC zero coupon, 12/31/09... 500 243,750 JSG Funding Plc (Ireland) 9.625%, 10/01/12........ 205 230,625 Norske Skog Canada, Ltd. (Canada) 8.625%, 6/15/11......... 175 184,625 Owens-Brockway Glass Container 8.875%, 2/15/09......... 420 462,525 Plastipak Holdings, Inc. 10.75%, 9/01/11 (a)..... 145 162,038 Pliant Corp. 11.125%, 9/01/09........ 60 65,100 13.00%, 6/01/10......... 175 161,000 Smurfit-Stone Container Corp. 8.25%, 10/01/12......... 140 152,600 7 HIGH YIELD PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund Principal Amount (000) U.S. $ Value - ---------------------------------------------------- Stone Container Corp. 9.25%, 2/01/08.......... $ 25 $ 27,750 9.75%, 2/01/11.......... 125 138,750 ------------ 3,475,544 ------------ PUBLIC UTILITIES - ELECTRIC & GAS-5.5% AES Corp. 8.75%, 5/15/13 (a)...... 55 61,738 9.00%, 5/15/15 (a)...... 100 113,500 10.00%, 7/12/05 (a)..... 112 114,710 Allegheny Energy, Inc. 7.75%, 8/01/05.......... 260 263,575 Calpine Corp. 8.50%, 7/15/10 (a)...... 880 862,400 Northwest Pipelines Corp. 8.125%, 3/01/10......... 110 122,650 NRG Energy, Inc. 8.00%, 12/15/13 (a)..... 280 295,750 PG&E Corp. 6.875%, 7/15/08......... 55 59,812 SEMCO Energy, Inc. 7.125%, 5/15/08 (a)..... 65 68,006 7.75%, 5/15/13.......... 120 126,750 Southern Natural Gas Co. 7.35%, 2/15/31.......... 160 158,800 8.875%, 3/15/10......... 130 146,900 Williams Cos., Inc. 8.625%, 6/01/10......... 590 665,225 ------------ 3,059,816 ------------ PUBLISHING-3.4% American Media Operations, Inc. 8.875%, 1/15/11......... 100 109,000 10.25%, 5/01/09......... 165 176,756 Dex Media East LLC 9.875%, 11/15/09........ 50 57,500 12.125%, 11/15/12....... 145 179,075 Dex Media West LLC 8.50%, 8/15/10 (a)...... 80 89,500 9.875%, 8/15/13 (a)..... 340 396,950 Dex Media, Inc. 8.00%, 11/15/13 (a)..... 265 279,575 Hollinger International Publishing, Inc. 9.00%, 12/15/10......... 175 186,812 Houghton Mifflin Co. 8.25%, 2/01/11.......... 125 134,375 9.875%, 2/01/13......... 45 49,725 PEI Holdings, Inc. 11.00%, 3/15/10......... 95 110,675 R.H. Donnelley Corp. 10.875%, 12/15/12 (a)... 110 131,038 ------------ 1,900,981 ------------ RESTAURANTS-0.3% Domino's, Inc. 8.25%, 7/01/11.......... 185 199,106 ------------ RETAIL-1.4% J.C. Penney Corp., Inc. 8.00%, 3/01/10.......... $125 $ 143,906 Jostens, Inc. 12.75%, 5/01/10......... 335 382,319 Payless ShoeSource, Inc. 8.25%, 8/01/13.......... 270 261,225 ------------ 787,450 ------------ SERVICES-3.0% Allied Waste North America, Inc. 8.50%, 12/01/08......... 225 251,437 8.875%, 4/01/08......... 135 151,875 10.00%, 8/01/09......... 360 390,600 Coinmach Corp. 9.00%, 2/01/10.......... 120 130,800 Iron Mountain, Inc. 7.75%, 1/15/15.......... 80 84,200 8.625%, 4/01/13......... 150 162,750 National Waterworks, Inc. 10.50%, 12/01/12........ 115 129,088 Service Corp. 7.70%, 4/15/09.......... 160 171,600 United Rentals NA, Inc. 10.75%, 4/15/08......... 180 203,400 ------------ 1,675,750 ------------ SUPERMARKET/ DRUG-2.0% Couche-Tard US/Finance Corp. 7.50%, 12/15/13 (a)..... 169 177,872 Pathmark Stores, Inc. 8.75%, 2/01/12.......... 290 304,500 8.75%, 2/01/12 (a)...... 75 78,375 Rite Aid Corp. 9.25%, 6/01/13.......... 40 44,100 9.50%, 2/15/11.......... 150 169,875 11.25%, 7/01/08......... 140 156,800 Roundy's, Inc. 8.875%, 6/15/12......... 115 123,338 Stater Bros. Holdings, Inc. 10.75%, 8/15/06......... 65 68,819 ------------ 1,123,679 ------------ TECHNOLOGY-2.9% Activant Solutions, Inc. 10.50%, 6/15/11......... 155 167,594 Fairchild Semiconductor Corp. 10.50%, 2/01/09......... 225 252,000 Filtronic Plc (United Kingdom) 10.00%, 12/01/05........ 303 311,333 Flextronics International, Ltd. (Singapore) 6.50%, 5/15/13.......... 255 265,200 ON Semiconductor Corp. zero coupon, 8/04/11 (a) 70 78,400 13.00%, 5/15/08......... 365 426,137 8 AllianceBernstein Variable Products Series Fund ================================================================================ Shares or Principal Amount (000) U.S. $ Value SCG Holding Corp. 12.00%, 8/01/09......... $ 115 $ 124,200 ------------ 1,624,864 ------------ TRANSPORTATION-0.5% Continental Airlines, Inc. 7.875%, 7/02/18......... 270 270,000 ------------ Total Corporate Debt Obligations (cost $47,208,217)...... 50,417,867 ------------ SOVEREIGN DEBT OBLIGATIONS-1.0% Republic of Brazil 8.00%, 4/15/14.......... 166 163,547 Republic of Panama 10.75%, 5/15/20......... 30 35,925 Republic of Peru 9.125%, 2/21/12......... 30 33,600 Republic of Ukraine 11.00%, 3/15/07......... 23 25,497 Russian Federation 5.00%, 3/31/30 (a)...... 55 53,006 5.00%, 3/31/30 (a)...... 250 240,937 ------------ Total Sovereign Debt Obligations (cost $379,990)......... 552,512 ------------ INDEX-1.4% Trac-X North America High Yield 8.00%, 3/25/09 (a) (cost $750,000)......... 750 786,562 ------------ PREFERRED STOCKS-2.2% BROADCASTING/ MEDIA-0.2% Paxson Communications Corp. 14.25%, 11/15/06........ 12 110,400 ------------ CABLE-1.1% CSC Holdings, Inc. 11.125%, 4/01/08........ 4,258 448,155 CSC Holdings, Inc. 11.75%, 10/01/07........ 1,800 187,650 ------------ 635,805 ------------ FINANCIAL-0.9% Sovereign Real Estate Investor Trust 12.00%, 8/29/49 (a)..... 335,000 $ 501,662 ------------ Total Preferred Stocks (cost $966,620)......... 1,247,867 COMMON STOCKS & WARRANTS-0.0%(f) Pliant Corp. warrants, expiring 6/01/10 (a) (g) 50 1 Russell-Stanley Holdings, Inc. (g) ..... 10,000 0 ------------ Total Common Stocks & Warrants (cost $1,820).. 1 ------------ SHORT-TERM INVESTMENT-3.5% TIME DEPOSIT-3.5% State Street Euro Dollar 0.50%, 1/02/04 (cost $1,976,000)....... $ 1,976 1,976,000 ------------ TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL-98.1% (cost $51,282,647)...... 54,980,809 ------------ INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED*-5.2% SHORT-TERM INVESTMENT-5.2% UBS Private Money Market Fund, LLC, 1.01% (cost $2,898,745)....... 2,898,745 2,898,745 ------------ TOTAL INVESTMENTS-103.3% (cost $54,181,392)...... 57,879,554 Other assets less liabilities-(3.3%)...... (1,841,826) ------------ NET ASSETS-100%............ $ 56,037,728 ============ - -------------------------------------------------------------------------------- * See Note E for securities lending information. (a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the aggregate market value of these securities amounted to $15,606,875 or 27.9% of net assets. (b) 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. (c) Security is in default. (d) Variable rate coupon, rate shown is as of December 31, 2003. (e) PIK (Paid-in-kind) preferred quarterly stock payments. (f) Non-income producing security. (g) Illiquid security, valued at fair value (see Note A). See Notes to Financial Statements. 9 HIGH YIELD PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund - -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $54,181,392-including investment of cash collateral for securities loaned of $2,898,745)................. $ 57,879,554(a) Cash.................................................... 7,632 Dividends and interest receivable....................... 1,188,866 Receivable for capital stock sold....................... 80,041 -------------- Total assets............................................ 59,156,093 -------------- LIABILITIES Payable for collateral on securities loaned............. 2,898,745 Payable for capital stock redeemed...................... 111,698 Advisory fee payable.................................... 35,055 Distribution fee payable................................ 1,588 Accrued expenses........................................ 71,279 -------------- Total liabilities....................................... 3,118,365 -------------- NET ASSETS................................................. $ 56,037,728 ============== COMPOSITION OF NET ASSETS Capital stock, at par................................... $ 7,087 Additional paid-in capital.............................. 64,990,821 Undistributed net investment income..................... 3,456,018 Accumulated net realized loss on investment transactions.......................................... (16,114,360) Net unrealized appreciation of investments.............. 3,698,162 -------------- $ 56,037,728 ============== Class A Shares Net assets.............................................. $ 48,075,812 ============== Shares of capital stock outstanding..................... 6,079,553 ============== Net asset value per share............................... $ 7.91 ============== Class B Shares Net assets.............................................. $ 7,961,916 ============== Shares of capital stock outstanding..................... 1,007,200 ============== Net asset value per share............................... $ 7.91 ============== - -------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $2,760,743 (see Note E). See Notes to Financial Statements. 10 HIGH YIELD PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ INVESTMENT INCOME Interest..................................................... $ 4,145,213 Dividends.................................................... 10,826 -------------- Total investment income...................................... 4,156,039 -------------- EXPENSES Advisory fee................................................. 348,733 Distribution fee--Class B.................................... 8,212 Custodian.................................................... 161,095 Administrative............................................... 75,000 Audit........................................................ 41,373 Legal........................................................ 20,989 Printing..................................................... 19,036 Directors' fees and expenses................................. 1,133 Transfer agency.............................................. 947 Miscellaneous................................................ 11,153 -------------- Total expenses............................................... 687,671 -------------- Net investment income........................................ 3,468,368 -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions................. 964,757 Net change in unrealized appreciation/depreciation of investments............................................. 4,679,646 -------------- Net gain on investment transactions.......................... 5,644,403 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS...................... $ 9,112,771 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 HIGH YIELD PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 3,468,368 $ 2,583,502 Net realized gain (loss) on investment transactions.................. 964,757 (4,355,071) Net change in unrealized appreciation/depreciation of investments.... 4,679,646 739,335 -------------- -------------- Net increase (decrease) in net assets from operations................ 9,112,771 (1,032,234) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (2,439,115) (2,125,869) Class B............................................................ (149,865) -0- CAPITAL STOCK TRANSACTIONS Net increase......................................................... 14,382,819 7,005,841 -------------- -------------- Total increase....................................................... 20,906,610 3,847,738 NET ASSETS Beginning of period.................................................. 35,131,118 31,283,380 -------------- -------------- End of period (including undistributed net investment income of $3,456,018 and $2,576,630, respectively)........................... $ 56,037,728 $ 35,131,118 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 HIGH YIELD PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein High Yield Portfolio (the "Portfolio"), formerly Alliance High Yield Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. 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 Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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, liqudating 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 13 HIGH YIELD 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio, with multi-class shares outstanding, 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser, an investment advisory fee at an annual rate of .75 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% of the average daily net assets for Class A shares. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 14 AllianceBernstein Variable Products Series Fund ================================================================================ Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Investment Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: Purchases Sales ------------- ------------ Investment securities (excluding U.S. government securities)...... $ 60,213,384 $ 45,956,284 U.S. government securities..................... -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost........................................................ $ 54,215,497 ============== Gross unrealized appreciation............................... $ 4,731,052 Gross unrealized depreciation............................... (1,066,995) -------------- Net unrealized appreciation................................. $ 3,664,057 ============== 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. 15 HIGH YIELD 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss in the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The lending agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had loaned securities with a value of $2,760,743 and received cash collateral of $2,898,745 which was invested in a money market fund as included in the accompanying portfolio of investments. For the year ended December 31, 2003, the Portfolio earned fee income of $5,200 which is included in interest income in the accompanying statement of operations. 16 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
==================================== =================================== Shares Amount ==================================== =================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 2,095,774 1,640,577 $ 15,413,642 $ 11,549,210 Shares issued in reinvestment of dividends................... 334,126 309,442 2,439,115 2,125,868 Shares redeemed................... (1,437,649) (1,030,895) (10,591,185) (7,032,050) -------------- -------------- -------------- -------------- Net increase...................... 992,251 919,124 $ 7,261,572 $ 6,643,028 ============== ============== ============== ============== Year Ended July 22, 2002(a) Year Ended July 22, 2002(a) December 31, to December 31, December 31, to December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class B Shares sold....................... 2,209,656 103,564 $ 16,338,500 $ 704,198 Shares issued in reinvestment of dividends................... 20,501 -0- 149,866 -0- Shares redeemed................... (1,276,488) (50,033) (9,367,119) (341,385) -------------- -------------- -------------- -------------- Net increase...................... 953,669 53,531 $ 7,121,247 $ 362,813 ============== ============== ============== ==============
NOTE G: Risks Involved in Investing in the Portfolio Interest Rate Risk and Credit Risk-- Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit 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 United States companies or of the United States government. NOTE H:Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. - -------------------------------------------------------------------------------- (a) Commencement of distribution. 17 HIGH YIELD PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 -------------- --------------- Distributions paid from: Ordinary income....................... $ 2,588,980 $ 2,125,869 -------------- --------------- Total taxable distributions.............. 2,588,980 2,125,869 -------------- --------------- Total distributions paid................. $ 2,588,980 $ 2,125,869 ============== =============== As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income.............................. $ 3,456,018 Accumulated capital and other losses............ .......... (16,080,255)(a) Unrealized appreciation/(depreciation)..................... 3,664,057(b) --------------- Total accumulated earnings/(deficit)....................... (8,960,180) --------------- (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $16,080,255 of which $3,206,642 expires in the year 2007, $5,774,960 expires in the year 2008, $2,890,265 expires in the year 2009 and $4,208,388 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 High Income Portfolio, may apply. During the current fiscal year, the Portfolio utilized capital loss carryforwards of $790,788. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, there were no permanent differences. NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and 18 AllianceBernstein Variable Products Series Fund ================================================================================ (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 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 ============================================================ Year Ended December 31, ------------------------------------------------------------ 2003 2002 2001 (a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $ 6.83 $ 7.51 $ 7.91 $9.14 $ 9.94 ------ ------ ------ ----- ------ Income From Investment Operations - --------------------------------- Net investment income (b)...................... .55 .54(c) .63(c) .74(c) .91(c) Net realized and unrealized gain (loss) on investment transactions..................... .95 (.76) (.38) (1.18) (1.16) ------ ------ ------ ----- ------ Net increase (decrease) in net asset value from operations.................................. 1.50 (.22) .25 (.44) (.25) ------ ------ ------ ----- ------ Less: Dividends - --------------- Dividends from net investment income........... (.42) (.46) (.65) (.79) (.55) ------ ------ ------ ----- ------ Net asset value, end of period................. $ 7.91 $ 6.83 $ 7.51 $7.91 $ 9.14 ====== ====== ====== ===== ====== Total Return - ------------ Total investment return based on net asset value (d)................................... 22.44% (3.03)% 3.04 % (5.15)% (2.58)% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)...... $48,076 $34,765 $31,283 $22,333 $24,567 Ratio to average net assets of: Expenses, net of waivers and reimbursements........................... 1.46% 1.18% .95% .95% .95% Expenses, before waivers and reimbursements........................... 1.46% 1.45% 1.51% 1.42% 1.40% Net investment income....................... 7.48% 7.78%(c) 8.08%(c) 8.68%(c) 9.72%(c) Portfolio turnover rate........................ 105% 83% 95% 175% 198%
- -------------------------------------------------------------------------------- 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 ============================= July 22, Year Ended 2002(e) to December 31, December 31, 2003 2002 ----------- ----------- Net asset value, beginning of period............... $6.84 $ 6.45 ----- ------ Income From Investment Operations - --------------------------------- Net investment income (b).......................... .52 .15(c) Net realized and unrealized gain on investment transactions.................................... .97 .24 ----- ------ Net increase in net asset value from operations.... 1.49 .39 ----- ------ Less: Dividends - --------------- Dividends from net investment income............... (.42) -0- ----- ------ Net asset value, end of period..................... $7.91 $ 6.84 ===== ====== Total Return - ------------ Total investment return based on net asset value (d)....................................... 22.24% 6.05% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted).......... $7,962 $366 Ratio to average net assets of: Expenses, net of waivers and reimbursements..... 1.70% 1.42%(f) Expenses, before waivers and reimbursements..... 1.70% 1.63%(f) Net investment income........................... 7.19% 8.39%(c)(f) Portfolio turnover rate............................ 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, 2002, 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%. Per share ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (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 annulaized. (e) Commencement of distribution. (f) Annualized. 21 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein High Yield Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein High Yield Portfolio, formerly Alliance High Yield Portfolio, (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein High Yield Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP - --------------------- New York, New York February 4, 2004 22 HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 23 HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and Chief 96 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 1994, 100 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible (14) for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001-2002, Annandale, NY 12504 Senior Advisor from June 1999-June 2000 and (12) President of Historic Hudson Valley (historic preservation) from December 1989-May 1999). Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
24
HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 25 HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ----------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Kathleen A. Corbet, 44 Senior Vice President Executive Vice President of ACMC**, with which she has been associated since prior to 1999. James E. Kennedy, 43(1) Vice President Senior Vice President of ACMC, with which he has been associated since prior to 1999. Michael A. Snyder, 41(1) Vice President Senior Vice President of ACMC since May, 2001. Previously, he was a Managing Director in the high yield asset management group at Donaldson, Lufkin & Jenrette Corporation since 1999. Jeffrey L. Phlegar, 37 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Messrs. Kennedy and Snyder are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800)227-4618 for a free prospectus or SAI. 26 ALLIANCEBERNSTEIN -------------------------- VARIABLE PRODUCTS -------------------------- SERIES FUND -------------------------- ALLIANCEBERNSTEIN -------------------------- GLOBAL BOND PORTFOLIO -------------------------- ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 4, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Global Bond Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks a high level of return from a combination of current income and capital appreciation by investing in a globally diversified portfolio of high-quality debt securities denominated in the U.S. dollar and a range of foreign securities. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS --------------------------------------- 1 YEAR 5 YEARS 10 YEARS ----------- ----------- ----------- ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO CLASS A 13.26% 4.64% 6.12% CITIGROUP WORLD GOVERNMENT BOND INDEX (UNHEDGED) 14.91% 5.74% 6.79% Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The Citigroup World Government Bond Index (unhedged) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index represents performance of government bond markets in 14 countries. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Global Bond Portfolio. The Portfolio underperformed its benchmark, the Citigroup World Government Bond Index, for the 12-month period ended December 31, 2003. Although the positioning of the Portfolio's country allocation relative to the benchmark was favorable, the primary detractor from performance was its currency exposure to the U.S. dollar. During the year, the U.S. dollar weakened significantly relative to other major currencies, which was primarily due to the burgeoning federal and current account deficits as well as loose monetary policy. For the annual period under review, the U.S. dollar lost 20% against the euro, 34% against the Australian dollar, 21% against the Canadian dollar and 11% against both the British pound and the Japanese yen. Additionally, the Portfolio's underweighted duration exposure in the first half of 2003 also detracted from performance when government returns were strongest. We expected that accelerating global growth would begin to negatively impact global government bonds; however, the effect was relatively muted until the second half of the year. Contributing positively to performance was the Portfolio's overall country allocation. The Portfolio's underweight position in the U.K. and Japan added to performance as both countries posted the weakest returns. Contrarily, the Portfolio's overweight position in Europe, which performed well during the year due to relatively sluggish growth in that region, contributed positively to performance. MARKET REVIEW AND INVESTMENT STRATEGY The U.S. economy grew faster than expected in 2003, supported by strong consumer and government spending as well as an increase in exports. Business fixed investment contributed strongly to growth with most of the gains coming in the second half of 2003. Accommodative monetary policy also played a key role by keeping the federal funds rate steady at 1%, triggering the biggest household and corporate refinancing in history, which freed up record amounts of cash flow. After stagnating in the first half of 2003, the Euro area economy also benefited from a surge in export demand during the second half of the year. In spite of the strong euro, the European Central Bank cut official interest rates by 50 basis points in 2003, lowering short-term rates throughout the Euro area to their lowest levels since the 1960s. Japan significantly contributed to, if not led, the global economic upturn in 2003. Real growth substantially surprised the market on the upside in the second half of the year. The Bank of Japan maintained its firm policy commitment to its zero rate policy throughout 2003. The first half of 2003 was dominated by geopolitical risk, uncertainty over the conflict in Iraq and economic weakness in Europe, all of which helped buoy government securities. Global bond yields troughed in June at histori- 1 GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ cally low levels. The 10-year Treasury reached a low of 3.11% in mid-June prior to the release of positive economic data and a subsequent Treasury sell-off. Government securities continued to lose their appeal in the second half of 2003 as economic recovery sentiment gained significant traction. 10-year European bond yields ended the year at 4.3%, just 10 basis points higher than at the end of 2002. While European yields ended 2003 nearly where they began, this disguised a broad trading range during the year, with the 10-year yield fluctuating between a low around 3.50% and a high around 4.50%. U.S. Treasury yields ended 2003 at 4.25%, up from 3.82% at the beginning of the year. For the year, European countries and Dollar Bloc countries ex-U.S. (Canada, Australia and New Zealand) outperformed government bonds in the U.S., U.K. and Japan. Stronger growth prospects in the second half of the year in the U.S. and Japan dampened demand for government securities in those countries. During the year, the Portfolio was overweighted in European government bonds, due to the slower economy in that region. Alternately, the Portfolio was underweighted in government bonds in the U.S. and U.K., due to their stronger economies. The Portfolio was also underweighted in Japanese government bonds based on valuations, unexpected growth in the second half of the year and the lack of economic reforms. 2 GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/93 - 12/31/03 AllianceBernstein Global Bond Portfolio Class A: $18,106 Citigroup World Government Bond Index (Unhedged): $19,285 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein Global Citigroup World Government Bond Portfolio Bond Index (Unhedged) - ------------------------------------------------------------------------------- 12/31/93 $ 10,000 $ 10,000 12/31/94 $ 9,484 $ 10,235 12/31/95 $ 11,830 $ 12,183 12/31/96 $ 12,564 $ 12,624 12/31/97 $ 12,649 $ 12,654 12/31/98 $ 14,434 $ 14,590 12/31/99 $ 13,552 $ 13,967 12/31/00 $ 13,711 $ 14,185 12/31/01 $ 13,673 $ 14,045 12/31/02 $ 15,986 $ 16,783 12/31/03 $ 18,106 $ 19,285 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Global Bond Portfolio Class Ashares (from 12/31/93 to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The Citigroup World Government Bond Index (unhedged) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index represents performance of government bond markets in 14 countries. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Global Bond Portfolio. 3 GLOBAL BOND PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE - ------------------------------------------------------------------------------- LONG-TERM INVESTMENTS-91.2% AUSTRALIA-0.1% BANKING-0.1% National Australia Bank, Ltd. 1.795%, 5/19/10 (a)(c) USD 113 $ 113,592 ------------- BELGIUM-3.9% GOVERNMENT OBLIGATION-3.9% Kingdom of Belgium 7.00%, 5/15/06 (a) EUR 2,000 2,756,956 ------------- CANADA-3.5% SOVEREIGN-3.5% Canada Housing Trust 4.10%, 12/15/08 (a) CAD 3,145 2,438,321 ------------- DENMARK-6.8% GOVERNMENT OBLIGATIONS-6.8% Kingdom of Denmark 6.00%, 11/15/09 (a) DKK 13,590 2,547,310 7.00%, 11/15/07 (a) 11,650 2,224,990 ------------- 4,772,300 ------------- FINLAND-8.5% GOVERNMENT OBLIGATION-8.5% Government of Finland 5.375%, 7/04/13 (a) EUR 4,350 5,941,351 ------------- FRANCE-4.9% GOVERNMENT OBLIGATION-4.9% Government of France 4.00%, 4/25/09 (a) 2,675 3,432,551 ------------- GERMANY-2.6% BANKING-0.2% Deutsche Ausgleichsbank 7.00%, 6/23/05 (a) 150 160,628 ------------- GOVERNMENT OBLIGATION-2.4% Federal Republic of Germany 4.75%, 7/04/34 (a) 68 83,139 5.50%, 1/04/31 (a) 1,165 1,592,353 ------------- 1,675,492 ------------- 1,836,120 ------------- IRELAND-5.0% GOVERNMENT OBLIGATION-5.0% Republic of Ireland 4.25%, 10/18/07 (a) 2,685 3,499,145 ------------- ITALY-7.0% GOVERNMENT OBLIGATION-7.0% Republic of Italy 6.75%, 2/01/07 (a) EUR 3,513 4,903,298 ------------- JAPAN-16.7% GOVERNMENT OBLIGATIONS-16.7% Government of Japan 1.10%, 9/20/12 (a) JPY 60,800 561,400 1.40%, 12/20/11 (a) 30,650 291,703 1.70%, 9/20/10 (a) 466,200 4,576,362 1.80%, 9/20/10 (a) 633,500 6,260,986 ------------- 11,690,451 ------------- NETHERLANDS-4.6% GOVERNMENT OBLIGATION-4.6% Kingdom of the Netherlands 3.75%, 7/15/09 (a) EUR 2,550 3,223,020 ------------- SPAIN-3.7% GOVERNMENT OBLIGATION-3.7% Government of Spain 6.00%, 1/31/29 (a) 1,780 2,593,914 ------------- SWEDEN-0.9% GOVERNMENT OBLIGATIONS-0.9% Kingdom of Sweden 6.50%, 5/05/08 (a) SEK 3,910 597,152 ------------- UNITED KINGDOM-0.2% BANKING-0.2% Scotland International Finance II BV 4.25%, 5/23/13 (a)(b) 160 152,211 ------------- UNITED STATES-22.8% FINANCIAL-3.5% GE Financial Assurance Holdings 1.60%, 6/20/11 (a) JPY 200,000 1,796,205 The Goldman Sachs Group, Inc. 6.125%, 2/15/33 (a) USD 675 682,065 ------------- 2,478,270 ------------- INDUSTRIAL-0.5% General Electric Co. 5.00%, 2/01/13 (a) 330 334,345 ------------- RETAIL-1.1% Wal Mart Stores, Inc. 4.55%, 5/01/13 (a) 750 742,193 ------------- 4 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE - ------------------------------------------------------------------------------- GOVERNMENT AND AGENCY OBLIGATIONS-17.7% U.S. TREASURY BOND 5.375%, 2/15/31 (a) USD 1,895 $ 1,976,798 U.S. Treasury Notes 1.875%, 7/15/13 (TIPS) (a) 1,313 1,303,503 2.625%, 11/15/06 (a) 1,480 1,493,528 3.375%, 1/15/07 (TIPS) (a) 175 189,798 4.25%, 8/15/13 (a) 300 300,469 7.25%, 5/15/04 (a) 7,000 7,161,882 ------------- 12,425,978 ------------- 15,980,786 ------------- Total Long-Term Investments (cost $55,925,678) 63,931,168 ------------- SHORT-TERM INVESTMENT-6.6% UNITED STATES-6.6% TIME DEPOSIT-6.6% Societe Generale Cayman 0.9375%, 1/02/04 (cost $4,600,000) USD 4,600 4,600,000 ------------- TOTAL INVESTMENTS-97.8% (cost $60,525,678) 68,531,168 Other assets less liabilities-2.2% 1,525,188 ------------- NET ASSETS-100% $ 70,056,356 ============= 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 1/20/04 1,237 $ 912,689 $ 929,026 $ 16,337 British Pound, settling 2/9/04 2,222 3,849,217 3,954,419 105,202 Euro, settling 1/23/04 5,627 6,704,378 7,084,873 380,495 Japanese Yen, settling 1/16/04 372,872 3,451,598 3,482,126 30,528 SALE CONTRACTS - -------------- Canadian Dollar, settling 1/28/04 1,187 887,058 917,147 (30,089) Danish Krone, settling 2/25/04 23,310 3,877,198 3,937,643 (60,445) Euro, settling 1/23/04 5,029 6,003,459 6,332,395 (328,936) Swedish Krona, settling 2/25/04 462 62,897 64,031 (1,134) - -------------------------------------------------------------------------------- (a) Positions, or portions thereof, with an aggregate market value of $63,931,168 have been segregated to collateralize forward exchange currency contracts. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the aggregate market value of this security amounted to $152,211 or 0.2% of net assets. (c) Floating rate security. Stated interest rate was in effect at December 31, 2003. Currency Abbreviations: CAD - Canadian Dollar DKK - Danish Krona EUR - Euros JPY - Japanese Yen SEK - Swedish Krona USD - United States Dollar Glossary: TIPS - Treasury Inflation Protected Security See Notes to Financial Statements. 5 GLOBAL BOND PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $60,525,678) $ 68,531,168 Cash 484,483 Interest receivable 1,040,624 Unrealized appreciation of forward exchange currency contracts 532,562 Receivable for capital stock sold 77,381 ------------- Total assets 70,666,218 ------------- LIABILITIES Unrealized depreciation of forward exchange currency contracts 420,604 Advisory fee payable 37,943 Payable for capital stock redeemed 27,851 Distribution fee payable 5,914 Accrued expenses 117,550 ------------- Total liabilities 609,862 ------------- NET ASSETS $ 70,056,356 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 5,195 Additional paid-in capital 60,491,679 Undistributed net investment income 1,605,827 Accumulated net realized loss on investment and foreign currency transactions (235,184) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 8,188,839 ------------- $ 70,056,356 ============= CLASS A SHARES Net assets $ 58,657,614 ============= Shares of capital stock outstanding 4,344,592 ============= Net asset value per share $ 13.50 ============= CLASS B SHARES Net assets $ 11,398,742 ============= Shares of capital stock outstanding 850,632 ============= Net asset value per share $ 13.40 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 GLOBAL BOND PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $ 2,093,221 ------------- EXPENSES Advisory fee 442,328 Distribution fee -- Class B 24,031 Custodian 164,611 Administrative 75,000 Audit 38,240 Printing 29,733 Legal 22,996 Directors' fees and expenses 1,141 Transfer agency 947 Miscellaneous 4,739 ------------- Total expenses 803,766 ------------- Net investment income 1,289,455 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on: Investment transactions 1,639,684 Foreign currency transactions 2,432,090 Net change in unrealized appreciation/depreciation of: Investments 3,316,344 Foreign currency denominated assets and liabilities. (212,693) ------------- Net gain on investment and foreign currency transactions. 7,175,425 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,464,880 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 GLOBAL BOND PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE IN NET ASSETS FROM OPERATIONS Net investment income $ 1,289,455 $ 1,234,603 Net realized gain on investment and foreign currency transactions 4,071,774 2,006,845 Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 3,103,651 5,680,736 ------------- ------------- Net increase in net assets from operations 8,464,880 8,922,184 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (3,476,111) (547,877) Class B (610,949) (66,713) CAPITAL STOCK TRANSACTIONS Net increase 1,034,328 965,120 ------------- ------------- Total increase 5,412,148 9,272,714 NET ASSETS Beginning of period 64,644,208 55,371,494 ------------- ------------- End of period (including undistributed net investment income of $1,605,827 and $2,011,830, respectively) $ 70,056,356 $ 64,644,208 ============= ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Global Bond Portfolio (the "Portfolio"), formerly Alliance Global Bond Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. 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 Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to the Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 9 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the Portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 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 investment advisory fee at an annual rate of .65 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management,Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 88,348,087 $ 85,052,327 U.S. government securities 38,235,566 38,890,519 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows: Cost $ 60,588,832 ============= Gross unrealized appreciation $ 7,958,573 Gross unrealized depreciation (16,237) ------------- Net unrealized appreciation $ 7,942,336 ============= 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. 11 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) 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 selling or buying a security or currency at a price different from the current market value. NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss in the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $1,218 which is included in interest income in the accompanying statement of operations. NOTE F: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: --------------------------- ------------------------------ SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 680,667 1,191,552 $ 8,767,973 $ 14,053,131 Shares issued in reinvestment of dividends 264,343 48,485 3,476,111 547,877 Shares redeemed (1,044,491) (1,207,960) (13,455,988) (13,929,727) ----------- ----------- ------------ ------------- Net increase (decrease) (99,481) 32,077 $ (1,211,904) $ 671,281 =========== =========== ============ ============= 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ --------------------------- ------------------------------ SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS B Shares sold 1,557,003 291,377 $ 19,931,078 $ 3,503,266 Shares issued in reinvestment of dividends 46,745 5,940 610,949 66,714 Shares redeemed (1,431,327) (277,540) (18,295,795) (3,276,141) ----------- ----------- ------------ ------------- Net increase 172,421 19,777 $ 2,246,232 $ 293,839 =========== =========== ============ ============= NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit 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 United States companies or of the United States government. NOTE H: JOINT CREDITF ACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 4,087,060 $ 614,590 ------------- ------------- Total distributions paid $ 4,087,060 $ 614,590 ============= ============= As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 4,566,986 Undistributed long term capital gains 640,356 Accumulated capital and other losses (1,518,523)(a) Unrealized appreciation/(depreciation) 7,953,282(b) ------------- Total accumulated earnings/(deficit) $ 11,642,101 ============= (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $1,518,523 of which $66,089 expires in the year 2007, and $1,452,434 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 Portfolio's merger with Brinson Series Trust Strategic Income Portfolio, may apply. During the current fiscal year, the Portfolio utilized capital loss carryforwards of $396,833. (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 of unrealized gains and losses on certain forward exchange currency contracts. 13 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses, resulted in a net increase in undistributed net investment income and an increase in accumulated net realized loss on investment and foreign currency transactions. This reclassification had no effect on net assets. NOTE J: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 15 GLOBAL BOND PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
--------------------------------------------------------------- CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $12.63 $10.93 $10.96 $11.25 $12.42 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .25 .25 .35 .45(c) .48(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions 1.40 1.58 (.38) (.32) (1.24) ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 1.65 1.83 (.03) .13 (.76) ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.78) (.13) -0- (.42) (.37) Distributions from net realized gain on investment transactions -0- -0- -0- -0- (.04) ------ ------ ------ ------ ------ Total dividends and distributions (.78) (.13) -0- (.42) (.41) ------ ------ ------ ------ ------ Net asset value, end of period $13.50 $12.63 $10.93 $10.96 $11.25 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (d) 13.26% 16.91% (.27)% 1.17% (6.11)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $58,658 $56,137 $48,221 $50,325 $50,569 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.15% 1.17% 1.07% 1.02% .90% Expenses, before waivers and reimbursements 1.15% 1.17% 1.07% 1.06% 1.04% Net investment income 1.93% 2.18% 3.28% 4.13%(c) 4.16%(c) Portfolio turnover rate 197% 220% 101% 372% 183%
- -------------------------------------------------------------------------------- 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 --------------------------------------------------------------- JULY 16, YEAR ENDED DECEMBER 31, 1999(e) TO -------------------------------------------------- DECEMBER 31, 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $12.54 $10.86 $10.92 $11.23 $10.98 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .21 .22 .32 .41(c) .21(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions 1.41 1.57 (.38) (.31) .04 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 1.62 1.79 (.06) .10 .25 ------ ------ ------ ------ ------ LESS: DIVIDENDS Dividends from net investment income (.76) (.11) -0- (.41) -0- ------ ------ ------ ------ ------ Net asset value, end of period $13.40 $12.54 $10.86 $10.92 $11.23 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (d) 13.08% 16.59% (.55)% .98% 2.18% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $11,399 $8,507 $7,150 $6,145 $1,770 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.40% 1.42% 1.32% 1.31% 1.20%(f) Expenses, before waivers and reimbursements 1.40% 1.42% 1.32% 1.35% 1.34%(f) Net investment income 1.66% 1.92% 3.00% 3.82%(c) 3.96%(c)(f) Portfolio turnover rate 197% 220% 101% 372% 183%
- -------------------------------------------------------------------------------- (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. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (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) Commencement of distribution. (f) Annualized. 17 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Global Bond Portfolio, formerly Alliance Global Bond Portfolio, (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Global Bond Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 18 GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 19 GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and Chief 96 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 1994, 100 None P.O. Box 167 he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC"), (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001- Annandale, NY 12504 2002, Senior Advisor from June 1999-June (12) 2000 and President of Historic Hudson Valley (historic preservation) from December 1989- May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
20 GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, 15 St. Bernard's Road Gordon & Reindel since February 2001 and a Inc. Gladstone, NJ 07934 partner of that firm for more than twenty-five (12) years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 21 GLOBAL BOND PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ---------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Kathleen A. Corbet, 44 Senior Vice President Executive Vice President of ACMC**, with which she has been associated since prior to 1999. Douglas J. Peebles, 38(1) Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Jeffrey L. Phlegar, 37 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Mr. Peebles is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 22 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ----------------------------------------------------- VARIABLE PRODUCTS ----------------------------------------------------- SERIES FUND ----------------------------------------------------- ALLIANCEBERNSTEIN ----------------------------------------------------- QUASAR PORTFOLIO ----------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered ============================= > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed ============================= This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 9, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Quasar Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks growth of capital by pursuing aggressive investment policies. While it currently emphasizes the equity securities of small-capitalization companies, it may invest in any type of security issued by any company in any industry with the potential for capital appreciation. The Portfolio may also pursue investment opportunities outside of the United States. Current income is incidental to the Portfolio's objective. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns Since 1 Year 5 Years Inception* ------- ------- --------- AllianceBernstein Quasar Portfolio Class A 48.90% -0.51% 2.20% Russell 2000 Growth Index 48.54% 0.86% 3.64% * The Portfolio's inception date is 8/5/96. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Russell 2000 Growth Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Index is a capitalization-weighted index that includes 2000 of the smallest stocks representing approximately 10% of the equity market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Quasar Portfolio. For the 12-month period ended December 31, 2003, both the Portfolio and its benchmark, the Russell 2000 Growth Index, posted strong returns. During this time frame, the Portfolio's Class A shares marginally outperformed the benchmark, gaining 48.90% versus 48.54% for the Index. Stock selection and sector allocations both contributed favorably to the Portfolio's outperformance. Despite very strong absolute returns for the Portfolio, exceptionally strong performance of the smaller, more speculative names within the Russell 2000 Growth Index made for a particularly challenging relative return environment. Stock selection in the aggregate was modestly positive, with outperformance in the consumer/commercial services and financial services sectors of the Portfolio largely offset by underperformance within the technology, energy, and health care sectors. With help from an underweight position in financial services, sector allocations were marginally positive for the 12-month period. Although cash balances were kept at a relatively low level (below 3% throughout the year), they did negatively impact relative returns given the benchmark's exceptionally strong absolute gains. During the most recent six-month period ended December 31, 2003, favorable stock selection was the primary driver of the Portfolio's performance, and more than offset continued strength in the under-owned, more speculative names within the Russell 2000 Growth Index. Stock selection was strongest in the consumer/commercial services and health care sectors of the Portfolio and most disappointing in the technology sector. Sector allocations were largely neutral to relative returns during the six-month period. MARKET REVIEW AND INVESTMENT STRATEGY Small-cap stocks were market leaders over the 12-month period, posting a gain of 48.54%, as measured by the Russell 2000 Growth Index. Technology stocks and smaller, more speculative stocks were by far the strongest performers. Absolute returns for all major economic sectors exceeded 30% for the 12-month period under review. Small-cap growth stocks, as measured by the Russell 2000 Growth Index, gained 24.48% for the six-month period ending December 31, 2003, significantly outperforming many of the more widely followed market indices. In comparison to other major style classifications, small-cap growth stocks significantly outperformed large-cap growth stocks, and performed roughly in-line with small-cap value stocks. Within the Russell 2000 Growth Index, smaller, more-speculative stocks signifi- 1 QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ cantly outperformed larger, more established companies. Technology was again the strongest performing sector for the six-month period, gaining more than 32%. Technology was in fact one of only two major economic sectors, the other being industrials, to outperform the overall Russell 2000 Growth Index during this timeframe. Underscoring the breadth of strength witnessed during the six-month period, even the two worst performing sectors, energy and consumer/commercial services, turned in gains of 16% and 19%, respectively. During the six-month period ended December 31, 2003, we increased the Portfolio's exposure to stocks within the consumer/commercial services and technology sectors, while decreasing its exposure to financial services and health care. Other sector exposures were largely unchanged. As of December 31, 2003, the Portfolio was overweight in the consumer/commercial services, energy, technology, and industrials sectors, and underweight in the financial services and health care sectors. Cash represented 3.6% and 3.1% of Portfolio assets at the start and finish of the six-month period ended December 31, 2003, respectively. 2 QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN QUASAR PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 8/5/96*-12/31/03 Russell 2000 Growth Index: $13,032 AllianceBernstein Quasar Portfolio Class A: $11,747 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Quasar Portfolio Class A shares (from 8/5/96* to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 2000 Growth Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Index is a capitalization-weighted index that includes 2000 of the smallest stocks representing approximately 10% of the equity market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Quasar Portfolio. - -------------------------------------------------------------------------------- * Portfolio and benchmark data is from the Portfolio's inception date of 8/5/96. 3 QUASAR PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ================================================================================ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ================================================================================ Cumulus Media, Inc. Cl.A $ 1,269,004 1.6% ================================================================================ Insight Enterprises, Inc. 1,210,720 1.6 ================================================================================ TTM Technologies, Inc. 1,147,840 1.5 ================================================================================ Dycom Industries, Inc. 1,145,214 1.5 ================================================================================ Amphenol Corp. Cl.A 1,125,168 1.5 ================================================================================ Aspect Communications Corp. 1,089,016 1.4 ================================================================================ Actuant Corp. Cl.A 1,031,700 1.3 ================================================================================ Georgia Gulf Corp. 1,013,688 1.3 ================================================================================ SERENA Software, Inc. 992,735 1.3 ================================================================================ Kirby Corp. 990,592 1.3 ----------- ---- $ 11,015,677 14.3% ================================================================================ 4 QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- COMMON STOCKS-97.6% TECHNOLOGY-29.8% COMMUNICATION EQUIPMENT-3.2% Amphenol Corp. Cl.A (a).... 17,600 $ 1,125,168 Inet Technologies, Inc. (a) 56,100 673,200 REMEC, Inc. (a)............ 82,500 693,825 ------------ 2,492,193 ------------ COMPUTER HARDWARE/ STORAGE-3.3% Avocent Corp. (a).......... 21,100 770,572 Power-One, Inc. (a)........ 59,200 641,136 TTM Technologies, Inc. (a). 68,000 1,147,840 ------------ 2,559,548 ------------ COMPUTER PERIPHERALS-0.5% Pericom Semiconductor Corp. (a)............... 39,700 423,202 ------------ COMPUTER SERVICES-2.2% Alliance Data Systems Corp. (a)............... 27,000 747,360 Cognizant Technology Solutions Corp. (a)..... 19,900 908,236 ------------ 1,655,596 ------------ INTERNET INFRASTRUCTURE-0.9% SupportSoft, Inc. (a)...... 50,400 662,760 ------------ SEMI-CONDUCTOR CAPITAL EQUIPMENT-2.9% FormFactor, Inc. (a)....... 36,400 720,720 MKS Instruments, Inc. (a).. 21,800 632,200 Varian Semiconductor Equipment Associates, Inc. (a)................ 19,400 847,586 ------------ 2,200,506 ------------ SEMI-CONDUCTOR COMPONENTS-7.6% 02Micro International, Ltd. (a) ............... 42,100 943,040 Exar Corp. (a)............. 53,000 905,240 Integrated Circuit Systems, Inc. (a)................ 27,900 794,871 Micrel, Inc. (a)........... 55,400 863,132 Microsemi Corp. (a)........ 38,900 956,162 ON Semiconductor Corp. (a). 135,100 871,395 Sigmatel, Inc. (a)......... 21,500 530,620 ------------ 5,864,460 ------------ SOFTWARE-9.2% Artesyn Technologies, Inc. (a) ............... 88,200 $ 751,464 Aspect Communications Corp. (a)............... 69,100 1,089,016 Cognos, Inc. (Canada) (a).. 20,900 639,958 Hyperion Solutions Corp. (a) .............. 17,300 521,422 Informatica Corp. (a)...... 72,800 749,840 Kronos, Inc. (a)........... 18,500 732,785 Macrovision Corp. (a)...... 33,600 759,024 MICROS Systems, Inc. (a)... 4,800 208,128 SERENA Software, Inc. (a).. 54,100 992,735 SINA Corp. (a)............. 18,600 627,750 ------------ 7,072,122 ------------ 22,930,387 CONSUMER SERVICES-22.5% ADVERTISING-1.2% Getty Images, Inc. (a)..... 18,400 922,392 ------------ BROADCASTING & CABLE-4.5% Cumulus Media, Inc. Cl.A (a) ............... 57,682 1,269,004 Entravision Communications Corp. Cl.A (a).......... 78,800 874,680 ValueVision Media, Inc. Cl.A (a)................ 33,500 559,450 XM Satellite Radio Holdings, Inc. CI.A (a)........... 29,200 769,712 ------------ 3,472,846 ------------ ENTERTAINMENT & LEISURE-1.2% Activision, Inc. (a)....... 31,100 566,020 WMS Industries, Inc. (a)... 14,510 380,162 ------------ 946,182 ------------ GAMING-1.0% Station Casinos, Inc. (a).. 25,400 778,002 ------------ RESTAURANTS & LODGING-0.5% RARE Hospitality International, Inc. (a). 14,000 342,160 ------------ RETAIL - GENERAL MERCHANDISE-3.5% AnnTaylor Stores Corp. (a). 19,800 772,200 Cost Plus, Inc. (a)........ 15,900 651,900 Dick's Sporting Goods, Inc. (a)................ 15,300 744,498 Tuesday Morning Corp. (a).. 17,900 541,475 ------------ 2,710,073 ------------ 5 QUASAR PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- MISCELLANEOUS-10.6% Bright Horizons Family Solutions, Inc. (a)..... 17,700 $ 743,400 Charles River Associates, Inc. (a)................ 20,600 658,994 Dycom Industries, Inc. (a). 42,700 1,145,214 Insight Enterprises, Inc. (a) 64,400 1,210,720 MSC Industrial Direct Co., Inc. Cl.A............... 32,400 891,000 Resources Connection, Inc. (a) 35,000 955,850 ScanSource, Inc. (a)....... 21,140 964,407 Strayer Education, Inc..... 6,500 707,395 Sylvan Learning Systems, Inc. (a)................ 29,400 846,426 ------------ 8,123,406 ------------ 17,295,061 HEALTH CARE-17.0% BIOTECHNOLOGY-5.9% Abgenix, Inc. (a).......... 37,300 464,758 AtheroGenics, Inc. (a)..... 5,900 88,205 Geron Corp. (a)............ 12,900 128,613 Indevus Pharmaceuticals, Inc. (a)................ 96,100 566,029 MGI Pharma, Inc. (a)....... 17,800 732,470 Nabi Biopharmaceuticals (a) 25,000 317,750 Protein Design Labs, Inc. (a) 34,600 619,340 Techne Corp. (a)........... 6,330 239,147 Telik, Inc. (a)............ 31,900 734,019 United Therapeutics Corp. (a) 29,000 665,550 ------------ 4,555,881 ------------ DRUGS-3.5% Andrx Corp. (a)............ 38,200 918,328 Martek Biosciences Corp. (a) 10,600 688,682 Neurocrine Biosciences, Inc. (a)................ 5,700 310,878 Pharmaceutical Resources, Inc. (a)................ 12,100 788,315 ------------ 2,706,203 ------------ MEDICAL PRODUCTS-5.4% Abaxis, Inc. (a)........... 35,200 637,824 Angiotech Pharmaceuticals, Inc. (a)................ 14,800 680,800 Conceptus, Inc. (a)........ 34,900 370,638 Gen-Probe, Inc. (a)........ 20,800 758,576 OraSure Technologies, Inc. (a) 61,200 487,152 Varian, Inc. (a)........... 9,300 388,089 VISX, Inc. (a)............. 35,800 828,770 ------------ 4,151,849 ------------ MEDICAL SERVICES-2.2% Centene Corp. (a).......... 25,300 708,653 Stericycle, Inc. (a)....... 19,800 924,660 ------------ 1,633,313 ------------ 13,047,246 CAPITAL GOODS-8.5% ELECTRICAL EQUIPMENT-2.9% EDO Corp. ................. 30,700 $ 756,755 Engineered Support Systems, Inc. ................... 16,325 898,854 United Defense Industries, Inc. (a)................ 19,200 612,096 ------------ 2,267,705 ------------ MACHINERY-3.7% Actuant Corp. Cl.A (a)..... 28,500 1,031,700 Navistar International Corp. (a)............... 10,900 522,001 Oshkosh Truck Corp. ....... 16,900 862,407 Regal-Beloit Corp. ........ 20,300 446,600 ------------ 2,862,708 ------------ MISCELLANEOUS-1.9% IDEX Corp. ................ 20,300 844,277 Simpson Manufacturing Co., Inc. (a)................ 11,900 605,234 ------------ 1,449,511 ------------ 6,579,924 FINANCE-6.8% BANKING - MONEY CENTER-1.9% UCBH Holdings, Inc. ....... 18,300 713,151 Wintrust Financial Corp.... 16,300 735,130 ------------ 1,448,281 ------------ BANKING - REGIONAL-0.7% R&G Financial Corp. Cl.B... 14,300 569,140 ------------ BROKERAGE & MONEY MANAGEMENT-2.0% Affiliated Managers Group, Inc. (a)................ 9,900 688,941 Southwest Bancorporation of Texas, Inc.............. 21,900 850,815 ------------ 1,539,756 ------------ INSURANCE-1.4% StanCorp Financial Group, Inc.............. 6,700 421,296 Triad Guaranty, Inc. (a)... 12,900 649,515 ------------ 1,070,811 ------------ MISCELLANEOUS-0.8% Investors Financial Services Corp. .................. 15,700 603,037 ------------ 5,231,025 ------------ 6 AllianceBernstein Variable Products Series Fund Company (000) U.S. $ Value - ----------------------------------------------------- ENERGY-5.8% OIL SERVICE-4.8% FMC Technologies, Inc. (a). 37,000 $ 862,100 Helmerich & Payne, Inc. ... 31,400 877,002 W-H Energy Services, Inc. (a) 49,900 808,380 Westport Resources Corp. (a) 29,900 892,814 Whiting Petroleum Corp. (a) 14,600 268,640 ------------ 3,708,936 ------------ PIPELINES-1.0% Hydril Co. (a)............. 32,200 770,546 ------------ 4,479,482 ------------ TRANSPORTATION-4.2% AIR FREIGHT-0.8% UTI Worldwide, Inc. (U.S. Virgin Islands)... 16,500 625,845 ------------ SHIPPING-1.3% Kirby Corp. (a)............ 28,400 990,592 ------------ TRUCKING-1.2% Central Freight Lines, Inc. (a) 3,400 60,350 Werner Enterprises, Inc.... 43,175 841,481 ------------ 901,831 ------------ MISCELLANEOUS-0.9% Pacer International, Inc. (a) 35,200 711,744 ------------ 3,230,012 ------------ BASIC INDUSTRY-1.3% CHEMICALS-1.3% Georgia Gulf Corp. ........ 35,100 1,013,688 ------------ CONSUMER STAPLES-0.9% HOUSEHOLD PRODUCTS-0.9% Tempur-Pedic International, Inc. (a)................ 44,900 695,950 ------------ Shares Shares or Principal Company Amount U.S. $ Value - ----------------------------------------------------- CONSUMER MANUFACTURING-0.8% BUILDING & RELATED-0.8% Hughes Supply, Inc......... 12,200 $ 605,364 ------------ Total Common Stocks (cost $55,981,799)...... 75,108,139 SHORT-TERM INVESTMENT-3.7% TIME DEPOSIT-3.7% State Street Euro Dollar 0.50%, 1/02/04 (cost $2,879,000)....... $2,879 2,879,000 ------------ Total Investment Before Security Lending Collateral-101.3% (cost $58,860,799)...... 77,987,139 INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED*-2.0% SHORT-TERM INVESTMENT-2.0% UBS Private Money Market Fund, LLC 1.01% (cost $1,506,400)....... 1,506,400 1,506,400 ------------ TOTAL INVESTMENTS-103.3% (cost $60,367,199)...... 79,493,539 Other assets less liabilities-(3.3%)...... (2,568,088) ------------ NET ASSETS-100%............ $ 76,925,451 ============ - -------------------------------------------------------------------------------- * See Note E for securities lending information. (a) Non-income producing security. See Notes to Financial Statements. 7 QUASAR PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
ASSETS Investments in securities, at value (cost $60,367,199--including investment of cash collateral for securities loaned of $1,506,400)..................................... $ 79,493,539(a) Cash..................................................................................... 772 Receivable for investment securities sold................................................ 348,782 Receivable for capital stock sold........................................................ 23,512 Dividends and interest receivable........................................................ 7,221 -------------- Total assets............................................................................. 79,873,826 -------------- LIABILITIES Payable for collateral on securities loaned.............................................. 1,506,400 Payable for investment securities purchased.............................................. 799,483 Payable for capital stock redeemed....................................................... 435,225 Advisory fee payable..................................................................... 44,845 Distribution fee payable................................................................. 4,231 Accrued expenses......................................................................... 158,191 -------------- Total liabilities........................................................................ 2,948,375 -------------- NET ASSETS.................................................................................. $ 76,925,451 ============== COMPOSITION OF NET ASSETS Capital stock, at par.................................................................... $ 7,578 Additional paid-in capital............................................................... 138,802,425 Accumulated net realized loss on investment transactions................................. (81,010,892) Net unrealized appreciation of investments............................................... 19,126,340 -------------- $ 76,925,451 ============== Class A Shares Net assets............................................................................... $ 61,079,260 ============== Shares of capital stock outstanding...................................................... 6,006,246 ============== Net asset value per share................................................................ $ 10.17 ============== Class B Shares Net assets............................................................................... $ 15,846,191 ============== Shares of capital stock outstanding...................................................... 1,571,524 ============== Net asset value per share................................................................ $ 10.08 ==============
- -------------------------------------------------------------------------------- (a) Includes securities on loan with a value of $1,371,658 (see Note E). See Notes to Financial Statements. 8 QUASAR PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Dividends (net of foreign taxes withheld of $1,154)...................................... $ 205,457 Interest................................................................................. 25,094 -------------- Total investment income.................................................................. 230,551 -------------- EXPENSES Advisory fee............................................................................. 872,356 Distribution fee--Class B................................................................ 22,868 Custodian................................................................................ 148,666 Administrative........................................................................... 75,000 Audit and legal.......................................................................... 49,281 Printing................................................................................. 30,471 Directors' fees and expenses............................................................. 1,203 Transfer agency.......................................................................... 947 Miscellaneous............................................................................ 11,663 -------------- Total expenses........................................................................... 1,212,455 -------------- Net investment loss...................................................................... (981,904) -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions............................................. 17,151,773(a) -------------- Net change in unrealized appreciation/depreciation of investments........................ 17,476,095 -------------- Net gain on investment transactions...................................................... 34,627,868 NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................. $ 33,645,964 ==============
- -------------------------------------------------------------------------------- (a) On November 21, 2003, the Portfolio had a redemption-in-kind with total proceeds in the amount of $30,339,163. The net realized gain of the transactions of $5,563,427 will not be realized for tax purposes. See Notes to Financial Statements. 9 QUASAR PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss.................................................. $ (981,904) $ (1,219,147) Net realized gain (loss) on investment transactions.................. 17,151,773 (48,163,544) Net change in unrealized appreciation/depreciation of investments.... 17,476,095 (8,902,913) -------------- -------------- Net increase (decrease) in net assets from operations................ 33,645,964 (58,285,604) CAPITAL STOCK TRANSACTIONS Net decrease......................................................... (47,914,869) (41,578,495) -------------- -------------- Total decrease....................................................... (14,268,905) (99,864,099) NET ASSETS Beginning of period.................................................. 91,194,356 191,058,455 -------------- -------------- End of period........................................................ $ 76,925,451 $ 91,194,356 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein Quasar Portfolio (the "Portfolio"), formerly Alliance Quasar Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund") formerly Alliance Variable Products Series Fund,Inc. The Portfolio's investment objective is to seek growth of capital by pursuing aggressive investment policies. Current income is incidental to the Portfolio's objective. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P., (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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 11 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and reimburse additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. 12 AllianceBernstein Variable Products Series Fund ================================================================================ Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $433,127, none of which was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows:
Purchases Sales --------- ----- Investment securities (excluding U.S. government securities)............ $ 109,384,289 $ 127,927,479 U.S. government securities.............................................. -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost....................................................................................... $ 62,871,299 ============== Gross unrealized appreciation.............................................................. $ 17,031,833 Gross unrealized depreciation.............................................................. (409,593) -------------- Net unrealized appreciation................................................................ $ 16,622,240 ==============
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. 13 QUASAR 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss in the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had loaned securities with a value of $1,371,658 and received cash collateral of $1,506,400, which was invested in a money market fund as included in the accompanying portfolio of investments. For the year ended December 31, 2003, the Portfolio earned fee income of $13,001 which is included in interest income in the accompanying statement of operations. 14 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
================================== ================================== Shares Amount ================================== ================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Class A Shares sold....................... 1,879,099 2,128,930 $ 16,198,723 $ 18,869,188 Shares redeemed................... (8,487,293) (7,915,310) (71,082,082) (61,264,928) -------------- -------------- -------------- -------------- Net decrease...................... (6,608,194) (5,786,380) $ (54,883,359) $ (42,395,740) ============== ============== ============== ============== Class B Shares sold....................... 1,989,555 511,079 $ 16,775,516 $ 4,259,241 Shares redeemed................... (1,170,025) (444,309) (9,807,026) (3,441,996) -------------- -------------- -------------- -------------- Net increase...................... 819,530 66,770 $ 6,968,490 $ 817,245 ============== ============== ============== ==============
NOTE G: Concentration of Risk Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Components of Accumulated Earnings (Deficit) As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses....................... $ (78,506,792)(a) Unrealized appreciation/(depreciation)..................... 16,622,240(b) --------------- Total accumulated earnings/(deficit)....................... $ (61,884,552) =============== (a) On December 31, 2003, the Portfolio had a net capital loss carrryforward of $78,506,792 of which $259,502 expires in the year 2008, $32,924,052 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 fiscal year, the Portfolio utilized capital loss carryforwards of $2,088,841. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to net operating losses and the tax treatment of in-kind Redemption gains on securities, resulted in a net decrease in accumulated net investment loss, an increase in accumulated net realized loss on investment transactions, and an increase in additional paid-in capital. This reclassification had no effect on net assets. 15 QUASAR PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. 16 AllianceBernstein Variable Products Series Fund ================================================================================ Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 17 QUASAR PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================= Class A ============================================================= Year Ended December 31, ------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $ 6.83 $10.01 $11.84 $13.00 $11.14 ------ ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (loss) (a)............... (.09) (.07)(b) (.07)(b) (.06)(b) .08(b) Net realized and unrealized gain (loss) on investment transactions..................... 3.43 (3.11) (1.41) (.71) 1.82 ------ ------ ------ ----- ------ Net increase (decrease) in net asset value value from operations ...................... 3.34 (3.18) (1.48) (.77) 1.90 ------ ------ ------ ----- ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income........... -0- -0- -0- (.05) (.04) Distributions from net realized gain on investment transactions..................... -0- -0- (.26) (.34) -0- Distributions in excess of net realized gain on investment transactions..................... -0- -0- (.09) -0- -0- ------ ------ ------ ----- ------ Total dividends and distributions.............. -0- -0- (.35) (.39) (.04) ------ ------ ------ ----- ------ Net asset value, end of period................. $10.17 $ 6.83 $10.01 $11.84 $13.00 ====== ====== ====== ===== ====== Total Return - ------------ Total investment return based on net asset value (c) 48.90% (31.77)% (12.75)% (6.09)% 17.08% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)...... $61,079 $86,093 $184,223 $232,239 $169,611 Ratio to average net assets of: Expenses, net of waivers and reimbursements. 1.36% 1.11% .95% .95% .95% Expenses, before waivers and reimbursements. 1.36% 1.25% 1.16% 1.14% 1.19% Net investment income (loss)................ (1.10)% (.86)%(b) (.70)%(b) (.46)%(b) .72%(b) Portfolio turnover rate........................ 129% 111% 113% 178% 110%
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 ================================================= August 11, 2000(d) to Year Ended December 31, December 31, ------------------------------------------------- 2003 2002 2001 2000 ----------- ----------- ----------- ----------- Net asset value, beginning of period..................... $6.78 $ 9.98 $11.82 $13.00 ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment loss (a).................................. (.11 ) (.09)(b) (.09)(b) (.03)(b) Net realized and unrealized gain (loss) on investment transactions............................... 3.41 (3.11) (1.40) (1.15) ------ ------ ----- ------ Net increase (decrease) in net asset value from operations .......................................... 3.30 (3.20) (1.49) (1.18) ------ ------ ----- ------ Less: Distributions - ------------------- Distributions from net realized gain on investment transactions ......................................... -0- -0- (.26) -0- Distributions in excess of net realized gain on investment transactions............................... -0- -0- (.09) -0- ------ ------ ----- ------ Total distributions...................................... -0- -0- (.35) -0- ------ ------ ----- ------ Net asset value, end of period........................... $10.08 $ 6.78 $ 9.98 $11.82 ====== ====== ===== ====== Total Return - ------------ Total investment return based on net asset value (c)..... 48.67 % (32.06)% (12.86)% (8.16)% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)................ $15,846 $5,101 $6,835 $435 Ratio to average net assets of: Expenses, net of waivers and reimbursements........... 1.61 % 1.37% 1.20% 1.20%(e) Expenses, before waivers and reimbursements........... 1.61 % 1.51% 1.43% 1.41%(e) Net investment loss................................... (1.37 )% (1.10)%(b) (.98)%(b) (.69)%(b)(e) Portfolio turnover rate.................................. 129 % 111% 113% 178%
- -------------------------------------------------------------------------------- (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 annulaized. (d) Commencement of distribution. (e) Annualized. 19 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Quasar Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Quasar Portfolio, formerly Alliance Quasar Portfolio (the"Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the period indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Quasar Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young - ----------------- New York, New York February 4, 2004 20 QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr., (1) Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 21 QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS, OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr., +, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, +, 73 Formerly an Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler, +, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Manage- ment since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin, +, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001- Annandale, NY 12504 2002, Senior Advisor from June 1999-June (12) 2000 and President of Historic Hudson Valley (historic preservation) from December 1989 - May 1999. Previously, Director of the National Academy of Design and during 1988-92, Director and Chairman of the Audit Committee of ACMC.
22 QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIPS ADDRESS, OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel, +, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson, #, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 23 QUASAR PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Bruce K. Aronow, 37(1) Vice President Senior Vice President of ACMC**, with which he has been associated since 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Mr. Aronow is the person primarily responsible for the day-to-day management of the investment portfolio. * The adddress for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. ALLIANCEBERNSTEIN ---------------------------------------------------- VARIABLE PRODUCTS ---------------------------------------------------- SERIES FUND ---------------------------------------------------- ALLIANCEBERNSTEIN ---------------------------------------------------- REAL ESTATE INVESTMENT ---------------------------------------------------- PORTFOLIO ---------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered ============================ > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed ============================ This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. REAL ESTATE INVESTMENT PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS January 21, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Real Estate Investment Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks a total return on its assets from long-term growth of capital and income primarily by investing in the equity securities of companies primarily engaged in, or related to, the real estate industry. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns Since 1 Year 5 Years Inception* --------- -------- --------- AllianceBernstein Real Estate Investment Portfolio Class A 39.30% 13.74% 9.64% S&P 500 Stock Index 28.67% -0.57% 6.73% NAREIT Equity Index 37.13% 14.35% 9.88% * The since inception return for the Portfolio and for the S&P 500 Stock Index is from the Portfolio's actual inception date of 1/9/97. The since inception return for the NAREIT Equity Index is from the closest month-end to the Portfolio's inception date, which is 12/31/96. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Standard & Poor's (S&P) 500 Stock Index and the unmanaged National Association of Real Estate Investment Trusts (NAREIT) Equity Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. The NAREIT Equity Index is a market-value-weighted index based upon the last closing price of the month for tax-qualified real estate investment trusts (REITs) listed on the NYSE, AMEX and the NASDAQ. An investor cannot invest directly in an index, and its results are not indicative of any specific investment, including AllianceBernstein Real Estate Investment Portfolio. For the 12-month period ended December 31, 2003, the Portfolio outperformed both indices, the NAREIT Equity Index and the S&P 500 Stock Index. The Portfolio benefited from both strong sector selection and strong selection of securities within sectors. During the period under review, the Portfolio was overweighted towards retail real estate and underweighted in office and residential properties. Retail outperformed the office and residential sectors. In all three sectors, the Portfolio's holdings outperformed. Portfolio gains were somewhat offset by the maintenance of a small cash cushion throughout the year. The Portfolio benefited from strong securities selection throughout the fiscal year. Sector selection, however, was less pronounced in the recent six-month period as health care REITs, a group to which the Portfolio had little exposure, performed quite well. This reduction in outperformance due to sector selection was offset by reducing the Portfolio's cash cushion during the period. As a result, the Portfolio performed well versus its REIT benchmark. MARKET REVIEW AND INVESTMENT STRATEGY Real estate securities continued their strong performance in the recent period under review, in spite of weak underlying real estate dynamics. Demand for office, industrial, hotel and apartment real estate was impacted by the weak overall economy and poor job formations. However, strong consumer spending buoyed retail real estate throughout the year. All real estate sectors were lifted by ongoing investor appetite for the yield and stability provided by property compared to other investment alternatives. We maintained the Portfolio's high exposure to retail real estate throughout the period to benefit from the strong consumer spending. Furthermore, we limited the Portfolio's exposure to office and apartment companies in the face of weak job growth and the continued attractiveness of home ownership. As the year progressed, evidence of an economic rebound mounted. In response to this, we increased the Portfolio's exposure to industrial and hotel property companies because these sectors historically have benefited during the early stages of an economic expansion. We have also been adding to the Portfolio's office exposure in select geographic regions. 1 REAL ESTATE INVESTMENT PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 1/9/97*-12/31/03 Nareit Equity Index: $19,397 AllianceBernstein Real Estate Investment Portfolio Class A: $19,011 S&P 500 Stock Index: $16,490 AllianceBernstein Real Estate Investment Investment Portfolio Class A S&P 500 Stock Index NAREIT Equity Index - -------------------------------------------------------------------------------- 1/9/97* $10,000 $10,000 $10,000 12/31/97 $12,340 $13,194 $12,026 12/31/98 $ 9,987 $16,968 $ 9,921 12/31/99 $ 9,477 $20,536 $ 9,463 12/31/00 $12,006 $18,667 $11,958 12/31/01 $13,302 $16,450 $13,624 12/31/02 $13,648 $12,816 $14,145 12/31/03 $19,011 $16,490 $19,397 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Real Estate Investment Portfolio Class A shares (from 1/9/97* to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Standard & Poor's (S&P) 500 Stock Index and the unmanaged National Association of Real Estate Investment Trusts (NAREIT) Equity Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. The NAREIT Equity Index is a market-value-weighted index based upon the last closing price of the month for the tax qualified real estate investment trusts listed on the NYSE, AMEX and the NASDAQ. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Real Estate Investment Portfolio. - -------------------------------------------------------------------------------- * Portfolio data and the data for the S&P 500 Stock Index are from the Portfolio's inception date of 1/9/97. Data for the NAREIT Equity Index is as of 12/31/96, the date closest to the month-end of the Portfolio's inception date. 2 REAL ESTATE INVESTMENT PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ================================================================================ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ================================================================================ ProLogis Trust $ 7,326,147 6.5% ================================================================================ Simon Property Group, Inc. 7,094,654 6.3 ================================================================================ General Growth Properties, Inc. 6,113,325 5.4 ================================================================================ Developers Diversified Realty Corp. 4,646,088 4.1 ================================================================================ Host Marriott Corp. 4,464,768 4.0 ================================================================================ Vornado Realty Trust 4,385,475 3.9 ================================================================================ Equity Office Properties Trust 4,303,230 3.8 ================================================================================ AMB Property Corp. 4,294,128 3.8 ================================================================================ Rouse Co. 4,272,300 3.8 ================================================================================ Boston Properties, Inc. 3,614,250 3.2 ----------- ----- $ 50,514,365 44.8% ================================================================================ 3 REAL ESTATE INVESTMENT PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- COMMON STOCKS-98.0% REAL ESTATE INVESTMENT TRUSTS-98.0% OFFICE-20.1% Alexandria Real Estate Equities, Inc. ......... 54,600 $ 3,161,340 Boston Properties, Inc. ... 75,000 3,614,250 Corporate Office Properties Trust........ 130,200 2,734,200 Equity Office Properties Trust .................. 150,200 4,303,230 Mack-Cali Realty Corp. .... 67,900 2,825,998 Maguire Properties, Inc. .. 57,000 1,385,100 Prentiss Properties Trust.. 58,300 1,923,317 SL Green Realty Corp. ..... 66,800 2,742,140 ------------ 22,689,575 ------------ REGIONAL MALLS-19.1% General Growth Properties, Inc. ....... 220,300 6,113,325 Macerich Co. .............. 45,300 2,015,850 Mills Corp. ............... 46,000 2,024,000 Rouse Co. ................. 90,900 4,272,300 Simon Property Group, Inc. .................... 153,100 7,094,654 ------------ 21,520,129 ------------ APARTMENTS-13.8% Apartment Investment & Management Co. ......... 66,200 2,283,900 Archstone Communities Trust................... 86,500 2,420,270 Avalon Bay Communities, Inc. ...... 15,700 750,460 Camden Property Trust...... 73,100 3,238,330 Equity Residential Properties Trust................... 100,700 2,971,657 Essex Property Trust, Inc. 23,800 1,528,436 United Dominion Realty Trust, Inc. ............ 124,800 2,396,160 ------------ 15,589,213 ------------ INDUSTRIAL-12.5% AMB Property Corp. ........ 130,600 4,294,128 EastGroup Properties, Inc. ................... 58,300 1,887,754 First Potomac Realty Trust (a)............... 28,000 524,720 ProLogis Trust............. 228,300 7,326,147 ------------ 14,032,749 ------------ Shares or Principal Amount Company (000) U.S. $ Value - ---------------------------------------------------- SHOPPING CENTERS-11.4% Developers Diversified Realty Corp. ........... 138,400 $ 4,646,088 Heritage Property Investment Trust................... 26,300 748,235 Kimco Realty Corp. ........ 41,900 1,875,025 Pan Pacific Retail Properties, Inc. ....... 48,800 2,325,320 Regency Centers Corp. ..... 82,900 3,303,565 ------------ 12,898,233 ------------ DIVERSIFIED-8.5% Cousins Properties, Inc. .. 69,900 2,138,940 iStar Financial, Inc. ..... 77,800 3,026,420 Vornado Realty Trust....... 80,100 4,385,475 ------------ 9,550,835 ------------ HOSPITALITY-6.3% Hersha Hospitality Trust... 44,000 444,400 Host Marriott Corp. (a).... 362,400 4,464,768 Starwood Hotels & Resorts Worldwide, Inc. ........ 62,100 2,233,737 ------------ 7,142,905 ------------ OFFICE - INDUSTRIAL MIX-3.2% Duke-Weeks Realty Corp. ... 115,300 3,574,300 ------------ STORAGE-2.4% Shurgard Storage Centers, Inc. .......... 71,000 2,673,150 ------------ HEALTHCARE-0.7% Windrose Medical Properties Trust........ 60,200 747,082 ------------ Total Common Stocks (cost $83,955,356)...... 110,418,171 ------------ SHORT-TERM INVESTMENT-2.4% TIME DEPOSIT-2.4% State Street Euro Dollar 0.50%, 1/02/04 (cost $2,656,000)....... $2,656 2,656,000 ------------ TOTAL INVESTMENTS-100.4% (cost $86,611,356)...... 113,074,171 Other assets less liabilities-(0.4%)...... (438,496) ------------ NET ASSETS-100%............ $112,635,675 ============ - -------------------------------------------------------------------------------- (a) Non-income producing security. See Notes toFinancial Statements. 4 REAL ESTATE INVESTMENT PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $86,611,356).... $ 113,074,171 Cash...................................................... 429 Dividends and interest receivable......................... 528,223 Receivable for investment securities sold................. 148,671 Receivable for capital stock sold......................... 25,684 -------------- Total assets.............................................. 113,777,178 -------------- LIABILITIES Payable for investment securities purchased............... 901,342 Advisory fee payable...................................... 103,912 Payable for capital stock redeemed........................ 63,829 Distribution fee payable.................................. 8,936 Accrued expenses.......................................... 63,484 -------------- Total liabilities......................................... 1,141,503 -------------- NET ASSETS................................................... $ 112,635,675 ============== COMPOSITION OF NET ASSETS Capital stock, at par..................................... $ 7,222 Additional paid-in capital................................ 84,404,610 Undistributed net investment income....................... 2,868,387 Accumulated net realized loss on investment transactions............................................ (1,107,359) Net unrealized appreciation of investments................ 26,462,815 -------------- $ 112,635,675 ============== Class A Shares Net assets................................................ $ 68,716,338 ============== Shares of capital stock outstanding....................... 4,398,036 ============== Net asset value per share................................. $ 15.62 ============== Class B Shares Net assets................................................ $ 43,919,337 ============== Shares of capital stock outstanding....................... 2,824,386 ============== Net asset value per share................................. $ 15.55 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 5
REAL ESTATE INVESTMENT PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ INVESTMENT INCOME Dividends................................................................................ $ 3,988,084 Interest................................................................................. 20,784 -------------- Total investment income.................................................................. 4,008,868 -------------- EXPENSES Advisory fee............................................................................. 762,421 Distribution fee--Class B................................................................ 70,357 Custodian................................................................................ 110,181 Administrative........................................................................... 75,000 Audit.................................................................................... 40,558 Printing................................................................................. 26,948 Legal.................................................................................... 16,874 Directors' fees and expenses............................................................. 970 Transfer agency.......................................................................... 947 Miscellaneous............................................................................ 16,521 -------------- Total expenses........................................................................... 1,120,777 -------------- Net investment income.................................................................... 2,888,091 -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions............................................. 1,406,199 Net change in unrealized appreciation/depreciation of investments........................ 24,701,512 -------------- Net gain on investment transactions...................................................... 26,107,711 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................. $ 28,995,802 ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 REAL ESTATE INVESTMENT PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 2,888,091 $ 2,154,823 Net realized gain on investment transactions......................... 1,406,199 476,004 Net change in unrealized appreciation/depreciation of investments.... 24,701,512 (2,254,224) -------------- -------------- Net increase in net assets from operations........................... 28,995,802 376,603 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (1,491,301) (1,214,672) Class B............................................................ (676,451) (261,464) CAPITAL STOCK TRANSACTIONS Net increase......................................................... 19,119,814 22,767,853 -------------- -------------- Total increase....................................................... 45,947,864 21,668,320 NET ASSETS Beginning of period.................................................. 66,687,811 45,019,491 -------------- -------------- End of period (including undistributed net investment income of $2,868,387 and $2,148,048, respectively)........................... $ 112,635,675 $ 66,687,811 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 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"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is 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 Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P., (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 8 AllianceBernstein Variable Products Series Fund ================================================================================ 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .90 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2002, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2002. Any expense waivers or reimbursements were accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. 9 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $101,093, none of which was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Investment Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows:
Purchases Sales --------- ----- Investment securities (excluding U. S. government securities)........... $ 41,034,768 $ 19,257,385 U.S. government securities.............................................. -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost........................................................................................ $ 87,058,667 -------------- Gross unrealized appreciation............................................................... 26,379,671 Gross unrealized depreciation............................................................... (364,167) -------------- Net unrealized appreciation................................................................. $ 26,015,504 ==============
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. 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) 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $2,771 which is included in interest income in the accompanying statement of operations. 11 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
==================================== =================================== Shares Amount ==================================== =================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 929,384 1,922,848 $ 12,364,972 $ 23,123,145 Shares issued in reinvestment of dividends................... 115,158 98,117 1,491,301 1,214,672 Shares redeemed................... (991,714) (1,102,589) (12,805,746) (12,832,176) -------------- -------------- -------------- -------------- Net increase...................... 52,828 918,376 $ 1,050,527 $ 11,505,641 ============== ============== ============== ============== Class B Shares sold....................... 1,417,075 968,508 $ 18,602,093 $ 11,339,429 Shares issued in reinvestment of dividends................... 52,439 21,171 676,451 261,464 Shares redeemed .................. (92,900) (29,692) (1,209,257) (338,681) -------------- -------------- -------------- -------------- Net increase...................... 1,376,614 959,987 $ 18,069,287 $ 11,262,212 ============== ============== ============== ==============
NOTE G: 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. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows:
2003 2002 ---------------- ----------------- Distributions paid from: Ordinary income.................................................... $ 2,167,752 $ 1,476,136 --------------- --------------- Total taxable distributions........................................... 2,167,752 1,476,136 --------------- --------------- Total distributions paid.............................................. $ 2,167,752 $ 1,476,136 =============== ===============
12 AllianceBernstein Variable Products Series Fund ================================================================================ As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income........................... $ 2,868,387 Accumulated capital and other losses.................... (660,047)(a) Unrealized appreciation/(depreciation).................. 26,015,504(b) --------------- Total accumulated earnings/(deficit).................... $ 28,223,844 =============== (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $660,047, 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. During the fiscal year, the Portfolio utilized capital loss carryforwards of $1,431,703. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, there were no permanent differences. NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance 13 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 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 ================================================================= Year Ended December 31, ----------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period.......... $11.52 $11.50 $10.75 $8.87 $ 9.78 ------ ------ ------ ----- ------ Income From Investment Operations - --------------------------------- Net investment income (a)..................... .46 .44(b) .47(b) .48(b) .56(b) Net realized and unrealized gain (loss) on investment transactions................. 3.99 (.12) .67 1.84 (1.01) ------ ------ ------ ----- ------ Net increase (decrease) in net asset value from operations............................ 4.45 .32 1.14 2.32 (.45) ------ ------ ------ ----- ------ Less: Dividends - --------------- Dividends from net investment income.......... (.35) (.30) (.39) (.44) (.46) ------ ------ ------ ----- ------ Net asset value, end of period................ $15.62 $11.52 $11.50 $10.75 $8.87 ====== ====== ====== ===== ====== Total Return - ------------ Total investment return based on net asset value (c).......................... 39.30% 2.60% 10.79% 26.69% (5.11)% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)..... $68,717 $50,062 $39,417 $29,124 $17,852 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.24% 1.06% .95% .95% .95% Expenses, before waivers and reimbursements 1.24% 1.29% 1.39% 1.67% 1.72% Net investment income...................... 3.50% 3.70%(b) 4.32%(b) 4.87%(b) 5.96%(b) Portfolio turnover rate....................... 23% 31% 33% 25% 37%
- -------------------------------------------------------------------------------- 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 ================================================ April 24, 2001(d) Year Ended December 31, to ---------------------------- 2003 2002 December 31, 2001 ------------ ------------ ----------------- Net asset value, beginning of period........................ $11.48 $ 11.49 $ 10.46 ------ ------- ------- Income From Investment Operations - --------------------------------- Net investment income (a)................................... .43 .40(b) .31(b) Net realized and unrealized gain (loss) on investment transactions ................................. 3.98 (.11) 1.11 ------ ------- ------- Net increase in net asset value from operations............. 4.41 .29 1.42 ------ ------- ------- Less: Dividends - --------------- Dividends from net investment income........................ (.34) (.30) (.39) ------ ------- ------- Net asset value, end of period.............................. $15.55 $ 11.48 $ 11.49 ====== ======= ======= Total Return - ------------ Total investment return based on net asset value (c)........ 39.02% 2.31% 13.77% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)................... $43,919 $16,626 $5,603 Ratio to average net assets of: Expenses, net of waivers and reimbursements.............. 1.49% 1.31% 1.20%(e) Expenses, before waivers and reimbursements.............. 1.49% 1.52% 1.84%(e) Net investment income.................................... 3.22% 3.43%(b) 4.40%(b)(e) Portfolio turnover rate..................................... 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) Commencement of distribution. (e) Annualized. 16 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Real Estate Investment Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Real Estate Investment Portfolio (the "Portfolio") (one of the Portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Real Estate Investment Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young - ----------------- New York, New York February 4, 2004 17 REAL ESTATE INVESTMENT PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 18 AllianceBernstein Variable Products Series Fund ================================================================================ REAL ESTATE INVESTMENT PORTFOLIO MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had (14) been associated since prior to 1999. He Chairman of the Board was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC"), (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Manage- ment since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001- Annandale, NY 12504 2002, Senior Advisor from June 1999-June (12) 2000 and President of Historic Hudson Valley (historic preservation) from December 1989- May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
19 AllianceBernstein Variable Products Series Fund ================================================================================ REAL ESTATE INVESTMENT PORTFOLIO
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel, #, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, 15 St. Bernard's Road Gordon & Reindel since February 2001 Inc. Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson, #, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 20 REAL ESTATE INVESTMENT PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information
Certain information concerning the Fund's Officers is listed below. NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Daniel G. Pine, 52(1) Vice President Senior Vice President of ACMC** with which he has been associated since prior to 1999. David A. Kruth, 40(1) Vice President Vice President of ACMC**, with which he has been associated since 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Messrs. Pine and Kruth are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 21 ALLIANCEBERNSTEIN -------------------------------------------------- VARIABLE PRODUCTS -------------------------------------------------- SERIES FUND -------------------------------------------------- ALLIANCEBERNSTEIN -------------------------------------------------- U.S. GOVERNMENT/ -------------------------------------------------- HIGH GRADE SECURITIES -------------------------------------------------- PORTFOLIO -------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered ============================= > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed ============================= This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 9, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein U.S. Government/High Grade Securities Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks a high level of current income consistent with the preservation of capital. The Portfolio invests principally in a portfolio of U.S. government securities, including mortgage-related securities and repurchase agreements relating to U.S. government securities, and other high-grade debt securities. The Portfolio also may invest in investment-grade corporate and other debt securities, and in options and futures contracts. The average weighted maturity of the Portfolio's investments varies between one year or less and 30 years. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns 1 Year 5 Years 10 Years -------------- -------- AllianceBernstein U.S. Government/ High Grade Securities Portfolio Class A 3.88% 5.53% 6.09% Composite: 67% Lehman Brothers Government Bond Index/ 33% Lehman Brothers Credit Bond Index 4.09% 6.55% 6.95% Lehman Brothers Aggregate Bond Index 4.10% 6.62% 6.95% Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Neither the unmanaged Composite nor the unmanaged Lehman Brothers (LB) Aggregate Bond Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The Composite represents a blend of 67% LB Government Bond Index and 33% LB Credit Bond Index. The LB Government Bond Index is composed of the Treasury Bond and Agency Bond Indices. The LB Credit Bond Index includes investment-grade bonds issued by corporations and non-corporate entities. The LB Aggregate Bond Index is composed of the LB Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the LB Government/Credit Index. An investor cannot invest directly in an index or composite, and its results are not indicative of the performance for any specific investment, including AllianceBernstein U.S. Government/High Grade Securities Portfolio. The table above provides performance data for the Portfolio and its new benchmark, the Lehman Brothers (LB) Aggregate Bond Index, as well as for its previous benchmark, a 67%/33% blend of the LB Government Bond Index and the LB Credit Bond Index, for the 1-Year, 5-Year and 10-Year periods ended December 31, 2003. The LB Aggregate Bond Index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. This index is the most appropriate benchmark for the Portfolio as it covers the broad investment grade fixed income market. For the 12-month period ended December 31, 2003, the Portfolio's Class A shares returned 3.88%, underperforming the new benchmark, the LB Aggregate Bond Index, which returned 4.10%. The Portfolio's overweight position in investment grade corporate bonds, particularly our focus on BBB- rated issuers, contributed positively to performance. Offsetting the positives for the annual period were yield curve structure and mortgage security selection. MARKET REVIEW AND INVESTMENT STRATEGY Interest rates reached 45-year lows in June 2003 before beginning a gradual reversal as the pace of economic growth quickened. Buoyed by visibly improving fundamentals, a rebounding economy and ample liquidity, the lower-rated credit sectors dramatically outperformed higher-quality fixed income for both the 3-month and 12-month periods ended December 31, 2003. Terrific spread compression led to record incremental returns over Treasuries for the full year. The investment-grade 1 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ credit sector outperformed like-duration Treasuries by 5.5%-- twice the previous record. As represented by the LB Aggregate Bond Index, the investment grade credit sector returned 7.70%, as compared to the Treasury sector which returned 2.24% for the year. Corporate bonds benefited from ongoing improvement in corporate profitability, continued deleveraging and a significant improvement in earnings expectations. Among investment-grade credits, the top-performing industries for the year were autos, media/entertainment and telecoms. The bottom performers were noncyclicals, supranationals/sovereigns and banks. During the course of 2003, mortgage durations shortened to less than one year as prepayments soared, then lengthened suddenly in July 2003 before stabilizing at around three years. As a result, mortgages scarcely outperformed comparable-duration Treasuries for the full year, despite their yield advantage and strong demand by banks. During the 12-month reporting period ended December 31, 2003, we reduced the Portfolio's holdings of Treasuries on expectations of increased supply to service the deficit as the expected economic recovery finally took hold. We increased corporate holdings, emphasizing BBB-rated debt, which we believed would benefit most from improving quality and economic growth. In the face of a massive refinancing wave during the second quarter of 2003, we trimmed our mortgage overweight, reducing 15-year exposure in favor of 30-year and lowering the average coupon. 2 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN U.S. GOVERNMENT/ HIGH GRADE SECURITIES PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/93 - 12/31/03 AllianceBernstein U.S. Government/High Grade Securities Portfolio Class A: $18,067 Composite: 67% Lehman Brothers Government Bond Index/33% Lehman Brothers Credit Bond Index: $19,595 Lehman Brothers Aggregate Bond Index: $19,572
[TABLE BELOW REPRESENTS MOUNTAIN GRAPH IN PRINTED MATERIAL.] Composite: 67% AllianceBernstein Lehman Brothers U.S. Government/ Government Bond High Grade Securities Index/33% Lehman Brothers Lehman Brothers Portfolio Class A Credit Bond Index Aggregate Bond Index - --------------------------------------------------------------------------------------- 12/31/93 $10,000 $10,000 $10,000 12/31/94 $ 9,597 $ 9,644 $ 9,708 12/31/95 $11,444 $11,536 $11,501 12/31/96 $11,736 $11,876 $11,919 12/31/97 $12,755 $13,040 $13,069 12/31/98 $13,803 $14,271 $14,204 12/31/99 $13,465 $13,965 $14,088 12/31/00 $14,957 $15,635 $15,726 12/31/01 $16,135 $16,930 $17,054 12/31/02 $17,392 $18,824 $18,802 12/31/03 $18,067 $19,595 $19,572
This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein U.S. Government/High Grade Securities Portfolio Class A shares (from 12/31/93 to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. Neither the unmanaged Composite nor the unmanaged Lehman Brothers (LB) Aggregate Bond Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The Composite represents a blend of 67% LB Government Bond Index and 33% LB Credit Bond Index. The LB Government Bond Index is composed of the Treasury Bond and Agency Bond Indices. The LB Credit Bond Index includes investment-grade bonds issued by corporations and non-corporate entities. The LB Aggregate Bond Index is composed of the LB Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the LB Government/Credit Index. An investor cannot invest directly in an index or composite, and its results are not indicative of the performance for any specific investment, including AllianceBernstein U.S. Government/High Grade Securities Portfolio. 3 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ---------------------------------------------------- U.S. GOVERNMENT & SPONSORED AGENCY OBLIGATIONS-48.5% FEDERAL AGENCIES-45.5% Federal Home Loan Mortgage Corp. 2.125%, 11/15/05........ $ 3,535 $ 3,552,205 2.875%, 12/15/06........ 1,630 1,642,841 4.75%, 10/11/12......... 1,625 1,604,948 5.125%, 11/07/13........ 1,835 1,829,495 5.50%, TBA.............. 12,145 12,293,023 6.00%, TBA.............. 2,230 2,304,567 Federal National Mortgage Association 3.875%, 11/17/08........ 1,095 1,096,643 4.00%, 12/15/08......... 2,010 2,007,307 4.00%, 8/01/18.......... 2,785 2,764,602 4.50%, TBA.............. 1,590 1,516,959 5.00%, 4/25/14.......... 1,260 1,310,400 5.00%, TBA.............. 2,235 2,279,700 5.50%, 2/01/18.......... 1,969 2,042,817 5.50%, 4/01/33.......... 37 37,329 5.50%, 5/01/33.......... 963 976,614 5.50%, 7/01/33.......... 160 162,234 5.50%, 12/01/33......... 1,619 1,641,248 5.50%, TBA.............. 2,945 3,051,756 6.00%, 6/01/33.......... 2,124 2,193,756 6.00%, TBA.............. 4,035 4,171,181 6.50%, 10/01/28......... 100 105,247 6.50%, 1/01/29.......... 374 391,637 6.50%, 11/01/29......... 6 6,676 6.50%, 8/01/31.......... 93 97,463 6.50%, 2/01/32.......... 11 11,768 6.50%, 3/01/32.......... 398 416,359 6.50%, TBA.............. 11,520 12,049,206 7.50%, 1/01/30.......... 22 23,333 7.50%, 1/01/31.......... 29 31,481 7.50%, 12/01/31......... 28 29,855 7.50%, 2/01/32.......... 18 19,261 7.50%, 9/01/32.......... 1,106 1,182,197 Government National Mortgage Association 5.50%, TBA.............. 4,080 4,148,850 6.00%, TBA.............. 1,745 1,813,709 ----------- 68,806,667 ----------- U.S. TREASURY SECURITIES-3.0% U.S. Treasury Bonds 5.375%, 2/15/31......... 70 73,021 7.875%, 2/15/21......... 190 252,856 8.75%, 5/15/17.......... 1,425 1,997,450 U.S. Treasury Notes 1.125%, 6/30/05......... 1,375 1,368,071 2.25%, 7/31/04.......... 845 851,107 ----------- 4,542,505 ----------- Total U.S. Government/ Agency Obligations (cost $73,105,119)...... 73,349,172 ----------- CORPORATE DEBT OBLIGATIONS-36.8% AEROSPACE/ DEFENSE-0.3% Boeing Capital Corp. 4.75%, 8/25/08.......... $ 130 134,249 Raytheon Co. 4.85%, 1/15/11.......... 370 371,036 ----------- 505,285 ----------- AUTOMOTIVE-1.8% DaimlerChrysler NA Holdings Corp. 4.75%, 1/15/08.......... 465 476,192 Ford Motor Co. 7.45%, 7/16/31.......... 145 146,955 Ford Motor Credit Co. 7.375%, 10/28/09........ 280 307,851 General Motors Acceptance Corp. 6.875%, 9/15/11......... 945 1,019,414 8.00%, 11/01/31......... 170 191,474 General Motors Corp. 8.375%, 7/15/33......... 550 640,367 ----------- 2,782,253 ----------- BANKING-6.9% Bank of America Corp. 6.25%, 4/15/12.......... 545 601,776 Barclays Bank Plc (United Kingdom) 8.55%, 6/15/49 (a)...... 365 449,205 Capital One Bank 6.50%, 6/13/13.......... 235 246,812 Citicorp 6.375%, 11/15/08........ 720 797,204 Citigroup, Inc. 7.25%, 10/01/10......... 1,110 1,295,531 Great Western Financial Trust II 8.206%, 2/01/27......... 795 910,708 GreenPoint Financial Corp. 3.20%, 6/06/08.......... 435 420,901 HSBC Capital Funding LP (United Kingdom) pfd. 10.176%, 6/30/30 (a)(b). 285 418,884 ING Capital Funding Trust III pfd. 8.439%, 12/31/10........ 385 466,810 J.P. Morgan Chase & Co. 3.625%, 5/01/08......... 770 772,315 6.75%, 2/01/11.......... 595 671,873 M&T Bank Corp. 3.85%, 4/01/13 (b)...... 215 213,786 National City Corp. 3.20%, 4/01/08.......... 225 222,399 RBS Capital Trust I pfd. 4.709%, 7/01/13 (b)..... 815 781,026 U.S. Bank NA 2.85%, 11/15/06......... 460 462,541 6.375%, 8/01/11......... 550 614,163 4 AllianceBernstein Variable Products Series Fund Principal Amount (000) U.S. $ Value - ---------------------------------------------------- UFJ Finance Aruba AEC (Aruba) 6.75%, 7/15/13.......... $ 340 $ 363,250 Unicredito Italiano Capital Trust pfd. 9.20%, 10/05/10 (a)..... 575 723,478 ----------- 10,432,662 ----------- BROADCASTING/ MEDIA-2.3% AOL Time Warner, Inc. 7.70%, 5/01/32.......... 475 556,473 Clear Channel Communications, Inc. 4.25%, 5/15/09.......... 275 276,100 4.625%, 1/15/08......... 350 361,406 Liberty Media Corp. 5.70%, 5/15/13.......... 470 476,322 News America, Inc. 6.55%, 3/15/33.......... 475 495,077 Time Warner Entertainment Co. 8.375%, 3/15/23......... 820 1,019,273 8.375%, 7/15/33......... 175 223,060 ----------- 3,407,711 ----------- BUILDING/ REAL ESTATE-0.7% EOP Operating LP 5.875%, 1/15/13......... 260 271,902 ERP Operating LP 5.20%, 4/01/13.......... 195 196,582 Lennar Corp. 5.95%, 3/01/13.......... 100 104,857 Vornado Realty Trust 4.75%, 12/01/10......... 270 270,422 5.625%, 6/15/07......... 265 283,148 ----------- 1,126,911 ----------- CABLE-1.1% AT&T Broadband Corp. 9.455%, 11/15/22........ 315 427,955 Comcast Cable Communications, Inc. 6.20%, 11/15/08......... 635 697,709 Comcast Corp. 7.05%, 3/15/33.......... 190 207,489 Cox Communications, Inc. 7.125%, 10/01/12........ 255 294,610 ----------- 1,627,763 ----------- COMMUNICATIONS-2.2% AT&T Corp. 8.05%, 11/15/11 (b)..... 190 219,077 British Telecommunications Plc (United Kingdom) 8.875%, 12/15/30........ 405 531,492 Citizens Communications Co. 9.00%, 8/15/31.......... 75 87,807 Deutsche Telekom International Finance BV (Netherlands) 8.75%, 6/15/30.......... 415 532,027 France Telecom, SA (France) 9.75%, 3/01/31.......... 120 159,989 Koninklijke (Royal) KPN NV (Netherlands) 8.00%, 10/01/10......... 270 323,511 Sprint Capital Corp. 7.625%, 1/30/11......... 660 741,048 8.75%, 3/15/32.......... 415 491,988 Vodafone Airtouch Plc (United Kingdom) 7.875%, 2/15/30......... 225 277,429 ----------- 3,364,368 ----------- COMMUNICATIONS- MOBILE-1.3% AT&T Wireless Services, Inc. 8.75%, 3/01/31.......... 210 260,020 Telus Corp. (Canada) 7.50%, 6/01/07.......... 465 520,876 Verizon Global Funding Corp. 7.375%, 9/01/12......... 610 708,234 Verizon Wireless Capital LLC 5.375%, 12/15/06........ 435 464,569 ----------- 1,953,699 ----------- CONGLOMERATE/ MISCELLANEOUS-0.3% Hutchison Whampoa International, Ltd. (Cayman Islands) 7.45%, 11/24/33 (a)..... 385 402,461 ----------- CONSUMER MANUFACTURING-0.1% Fortune Brands, Inc. 2.875%, 12/01/06........ 175 176,205 ----------- ELECTRIC UTILITIES-0.8% Carolina Power & Light Co. 6.50%, 7/15/12.......... 270 299,323 Cincinnati Gas & Electric Co. 5.70%, 9/15/12.......... 190 200,237 FirstEnergy Corp. Series C 7.375%, 11/15/31........ 400 410,659 Nisource Finance Corp. 7.875%, 11/15/10........ 215 256,067 ----------- 1,166,286 ----------- ENERGY-1.5% Conoco Funding Co. 5.45%, 10/15/06......... 380 407,964 Conoco, Inc. 6.95%, 4/15/29.......... 590 671,200 Devon Financing Corp. 7.875%, 9/30/31......... 525 629,124 5 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount (000) U.S. $ Value - ----------------------------------------------------- Noram Energy Corp. 6.50%, 2/01/08.......... $ 320 $ 343,115 Valero Energy Corp. 7.50%, 4/15/32.......... 235 262,718 ------------ 2,314,121 ------------ FINANCIAL-7.7% American General Finance Corp. 3.00%, 11/15/06......... 340 342,409 4.50%, 11/15/07......... 255 266,282 Bear Stearns Cos., Inc. 4.00%, 1/31/08.......... 260 265,066 Capital One Financial Corp. 6.25%, 11/15/13......... 125 128,384 CBA Capital Trust I pfd. 5.805%, 6/30/15 (a)..... 445 460,991 CIT Group, Inc. 4.125%, 2/21/06......... 570 590,140 5.50%, 11/30/07......... 205 219,682 Countrywide Home Loans, Inc. 4.25%, 12/19/07......... 435 449,038 Credit Suisse First Boston 5.50%, 8/15/13.......... 290 299,405 Ford Motor Credit Co. 7.00%, 10/01/13......... 595 628,645 7.375%, 2/01/11......... 955 1,042,337 General Electric Capital Corp. 5.45%, 1/15/13.......... 415 432,504 6.75%, 3/15/32.......... 1,100 1,221,881 Goldman Sachs Group, Inc. 4.75%, 7/15/13.......... 265 258,750 6.125%, 2/15/33......... 420 424,396 Household Finance Corp. 6.50%, 11/15/08......... 600 669,551 7.00%, 5/15/12.......... 235 268,419 John Deere Capital Corp. 4.50%, 8/22/07.......... 275 287,984 Lehman Brothers Holdings, Inc. 4.00%, 1/22/08.......... 795 811,609 6.625%, 1/18/12......... 270 305,182 MBNA America Bank 6.50%, 6/20/06.......... 410 446,658 MBNA Corp. 4.625%, 9/15/08......... 335 344,180 Morgan Stanley 7.25%, 4/01/32.......... 295 346,877 National Rural Utilities Cooperative Finance Corp. 7.25%, 3/01/12.......... 150 175,054 Washington Mutual Finance Corp. 6.875%, 5/15/11......... 785 902,568 ------------ 11,587,992 ------------ FOOD/BEVERAGE-1.3% Diageo Finance BV (Netherlands) 3.00%, 12/15/06......... 270 271,602 Kellogg Co. 2.875%, 6/01/08......... 270 260,967 Kraft Foods, Inc. 5.25%, 10/01/13......... 380 384,151 Pepsi Bottling Group, Inc. 7.00%, 3/01/29.......... 700 804,756 Safeway, Inc. 7.25%, 2/01/31.......... 245 269,753 ------------ 1,991,229 ------------ HEALTHCARE-1.6% Bristol-Myers Squibb Co. 4.75%, 10/01/06......... 235 248,661 HCA, Inc. 6.75%, 7/15/13.......... 200 212,474 7.125%, 6/01/06......... 345 373,992 Health Net, Inc. 8.375%, 4/15/11......... 250 300,815 Humana, Inc. 6.30%, 8/01/18.......... 275 290,191 Schering-Plough Corp. 6.50%, 12/01/33......... 410 428,219 UnitedHealth Group, Inc. 3.30%, 1/30/08.......... 285 283,689 Wyeth 6.50%, 2/01/34.......... 215 220,577 ------------ 2,358,618 ------------ INDUSTRIAL-1.2% General Electric Co. 1.22%, 1/26/04 (b)...... 880 880,000 5.00%, 2/01/13.......... 310 314,082 Lenfest Communications, Inc. 8.375%, 11/01/05........ 395 435,548 Praxair, Inc. 2.75%, 6/15/08.......... 205 198,279 ------------ 1,827,909 ------------ INSURANCE-1.2% Anthem, Inc. 6.80%, 8/01/12.......... 255 288,493 Mangrove Bay Pass-Through Trust 6.102%, 7/15/33 (a)(b).. 395 393,329 MetLife, Inc. 5.00%, 11/24/13......... 250 248,716 6.50%, 12/15/32......... 210 223,425 New York Life Insurance Co. 5.875%, 5/15/33 (a)..... 350 349,067 Oil Insurance, Ltd. 5.15%, 8/15/33 (a)...... 345 347,864 ------------ 1,850,894 ------------ METALS/MINING-0.1% Alcan, Inc. 4.50%, 5/15/13.......... 165 159,303 ------------ 6 AllianceBernstein Variable Products Series Fund Principal Amount (000) U.S. $ Value - ---------------------------------------------------- NON-AIR TRANSPORTATION-0.4% CSX Corp. 7.95%, 5/01/27.......... $ 465 $ 565,571 ------------ PAPER/PACKAGING-0.3% International Paper Co. 5.30%, 4/01/15.......... 220 215,517 Weyerhaeuser Co. 7.375%, 3/15/32......... 220 239,950 ------------ 455,467 ------------ PETROLEUM PRODUCTS-0.3% Amerada Hess Corp. 7.875%, 10/01/29........ 350 385,126 ------------ PUBLIC UTILITIES - ELECTRIC & GAS-1.4% Columbus Southern Power Co. 5.50%, 3/01/13.......... 75 77,806 Dominion Resources, Inc. 5.00%, 3/15/13.......... 285 284,294 Duke Energy Corp. 3.75%, 3/05/08.......... 350 353,075 KeySpan Corp. 7.25%, 11/15/05......... 650 708,663 MidAmerican Energy Holdings Co. 5.875%, 10/01/12........ 195 204,813 Public Service Company of Colorado 7.875%, 10/01/12........ 200 243,138 Xcel Energy, Inc. 7.00%, 12/01/10......... 260 295,237 ------------ 2,167,026 ------------ PUBLIC UTILITIES - TELEPHONE-0.6% Telecom Italia Capital (Luxembourg) 6.375%, 11/15/33 (a).... 310 312,997 Telefonos de Mexico SA de CV (Mexico) 4.50%, 11/19/08 (a)..... 255 255,666 8.25%, 1/26/06.......... 310 342,178 ------------ 910,841 ------------ SERVICE-0.3% Waste Management, Inc. 6.875%, 5/15/09......... 390 436,428 ------------ SOVEREIGN-0.8% Korea Development Bank 5.75%, 9/10/13.......... 140 147,403 Quebec Province 7.50%, 9/15/29.......... 225 281,327 Republic of Italy 2.50%, 3/31/06.......... 750 752,566 ------------ 1,181,296 ------------ TECHNOLOGY-0.2% Hewlet-Packard Co. 7.15%, 6/15/05.......... 260 279,629 ------------ TRANSPORTATION-0.1% Continental Airlines, Inc. 7.875%, 7/02/18......... 210 210,000 ------------ Total Corporate Debt Obligations (cost $52,570,992)...... 55,627,054 ------------ ASSET BACKED SECURITIES-6.2% Chase Funding Mortgage Loan Series 2003-4 Cl.2A1 1.26%, 2/25/21 (b)...... 400 399,662 Chase Funding Mortgage Loan Series 2003-5 Cl.2A1 1.26%, 2/25/21 (b)...... 424 423,784 Citibank Credit Card Issuance Trust Series 2003-A8 3.50%, 8/16/10.......... 1,270 1,265,631 Citibank Credit Card Issuance Trust Series 2003-A7 4.15%, 7/07/17.......... 795 738,517 Countrywide Asset-Backed Certificates Series 2003-4 Cl.A1 1.27%, 10/25/19 (b)..... 398 397,733 Daimler Chrysler Auto Trust Series 2003-B Cl.A4 2.86%, 3/09/09.......... 1,030 1,030,319 Discover Card Master Trust I Series 2000-9A 6.35%, 7/15/08.......... 560 605,699 Fleet Credit Card Master Trust II Series 2001-B 5.60%, 12/15/08......... 560 588,582 Honda Auto Receivables Owner Trust Series 2003-4 Cl.A3 2.19%, 5/15/07.......... 460 460,958 Master Asset Backed Securities Trust Series 2003-WMC2 Cl.A3A 1.29%, 3/25/20 (b)...... 340 339,620 MBNA Credit Card Master Note Trust Series 2003-A6 2.75%, 10/15/10......... 860 836,926 Residential Asset Mortgage Products, Inc. Series 2003-RS9 Cl.AI1 1.31%, 10/25/22 (b)..... 392 392,421 Residential Funding Mortgage Securities Sereis 2003-HS3 Cl.AI1 1.27%, 7/25/18 (b)...... 406 405,568 7 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund Principal Amount (000) U.S. $ Value - ---------------------------------------------------- Structured Asset Investment Loan Trust Series 2003-BC7 Cl.1A1 1.27%, 7/25/33 (b)...... $ 588 $ 587,981 World Omni Auto Receivables Trust Series 2003-B Cl.A3 2.20%, 1/15/08.......... 300 300,141 World Omni Auto Receivables Trust Series 2003-B Cl.A4 2.87%, 11/15/10......... 575 573,022 ------------ Total Asset Backed Securities (cost $9,331,117)....... 9,346,564 ------------ COMMERCIAL MORTGAGE BACKED SECURITIES-5.8% First Union-Lehman Brothers- Bank of America Series 1998-C2 Cl.A2 6.56%, 11/18/35......... 1,350 1,506,704 GS Mortgage Securities Corp. II Series 2003-C1 Cl.A2A 3.59%, 1/10/40.......... 765 768,191 LB-UBS Commercial Mortgage Trust Series 2001-C2 Cl.A2 6.65%, 11/15/27......... 750 848,305 LB-UBS Commercial Mortgage Trust Series 2003-C5 Cl.A2 3.48%, 7/15/27.......... 1,410 1,400,313 Merrill Lynch Mortgage Trust Series 2003-KEY1 Cl.A4 5.24%, 11/12/35......... 975 1,003,665 Morgan Stanley Capital I Series 2003-T11 Cl.A4 5.15%, 6/13/41.......... 1,600 1,635,680 Nomura Asset Securities Corp. Series 1998-D6 Cl.A1B 6.59%, 3/15/30.......... 1,355 1,517,159 ------------ Total Commercial Mortgage Backed Securities (cost $8,593,905)....... 8,680,017 ------------ COLLATERALIZED MORTGAGE OBLIGATION-0.3% Countrywide Home loans Series 2003-49 Cl.A1 1.64%, 12/19/33......... 470 469,189 ------------ Total Collateralized Mortgage Obligation (cost $469,313)......... 469,189 ------------ SHORT-TERM INVESTMENTS-30.2% U.S. TREASURY SECURITY-19.8% U.S. Treasury Bill 0.01%, 1/02/04.......... 30,000 29,999,238 ------------ TIME DEPOSIT-10.4% State Street Euro Dollar 0.50%, 1/02/04.......... 15,698 15,698,000 ------------ Total Short-Term Investments (amortized cost $45,697,238)............ 45,697,238 ------------ TOTAL INVESTMENTS-127.8% (cost $189,767,684)..... 193,169,234 Other assets less liabilities-(27.8%)..... (41,993,233) ------------ NET ASSETS-100%............ $151,176,001 ============ - -------------------------------------------------------------------------------- (a) Security is exempt from Registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the aggregate market value of these securities amounted to $4,113,942 or 2.7% of net assets. (b) Variable rate coupon, rate shown is as of December 31, 2003. 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 December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $189,767,684)...... $ 193,169,234 Cash......................................................... 54,289 Receivable for investment securities sold.................... 4,672,685 Dividends and interest receivable............................ 1,107,482 Receivable for capital stock sold............................ 591,385 -------------- Total assets................................................. 199,595,075 -------------- LIABILITIES Payable for investment securities purchased.................. 48,211,493 Advisory fee payable......................................... 77,401 Payable for capital stock redeemed........................... 18,883 Distribution fee payable..................................... 4,565 Accrued expenses............................................. 106,732 -------------- Total liabilities............................................ 48,419,074 -------------- NET ASSETS...................................................... $ 151,176,001 ============== COMPOSITION OF NET ASSETS Capital stock, at par........................................ $ 12,053 Additional paid-in capital................................... 140,221,554 Undistributed net investment income.......................... 3,779,005 Accumulated net realized gain on investment transactions............................................... 3,761,839 Net unrealized appreciation of investments................... 3,401,550 -------------- $ 151,176,001 ============== Class A Shares Net assets................................................... $ 129,194,376 ============== Shares of capital stock outstanding.......................... 10,290,053 ============== Net asset value per share.................................... $ 12.56 ============== Class B Shares Net assets................................................... $ 21,981,625 ============== Shares of capital stock outstanding.......................... 1,763,307 ============== Net asset value per share.................................... $ 12.47 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ INVESTMENT INCOME Interest.................................................... $ 4,890,504 -------------- EXPENSES Advisory fee................................................ 1,019,094 Distribution fee--Class B................................... 41,819 Custodian................................................... 152,650 Administrative.............................................. 75,000 Audit and legal............................................. 42,648 Printing.................................................... 6,999 Directors' fees and expenses................................ 1,060 Transfer agency............................................. 947 Miscellaneous............................................... 10,881 -------------- Total expenses.............................................. 1,351,098 -------------- Net investment income....................................... 3,539,406 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions................ 4,234,326 Net change in unrealized appreciation/depreciation of investments............................................... (1,612,801) -------------- Net gain on investment transactions......................... 2,621,525 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS..................... $ 6,160,931 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 3,539,406 $ 5,024,028 Net realized gain on investment transactions......................... 4,234,326 2,881,465 Net change in unrealized appreciation/depreciation of investments.... (1,612,801) 3,637,024 -------------- -------------- Net increase in net assets from operations........................... 6,160,931 11,542,517 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (4,723,237) (3,720,955) Class B............................................................ (437,765) (206,001) Net realized gain on investment transactions Class A............................................................ (1,253,621) -0- Class B............................................................ (121,738) -0- CAPITAL STOCK TRANSACTIONS Net increase (decrease).............................................. (23,315,147) 55,585,246 -------------- -------------- Total increase (decrease)............................................ (23,690,577) 63,200,807 NET ASSETS Beginning of period.................................................. 174,866,578 111,665,771 -------------- -------------- End of period (including undistributed net investment income of $3,779,005 and $5,142,142, respectively)........................... $ 151,176,001 $ 174,866,578 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein U.S. Government/High Grade Securities Portfolio (the "Portfolio"), formerly Alliance U.S. Government/High Grade Securities Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek high current income consistent with preservation of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 12 AllianceBernstein Variable Products Series Fund ================================================================================ 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .60 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2003, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2003. Any expense waivers or reimbursements were accrued daily and paid monthly. For the year ended December 31, 2003, the Portfolio received no such waivers/reimbursements. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services to the Portfolio by the Adviser for the year ended December 31, 2003. 13 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Investment Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)................... $ 64,943,300 $ 51,660,873 U.S. government securities.................. 1,153,010,414 1,195,959,232 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost.................................................... $ 189,769,055 ============== Gross unrealized appreciation........................... $ 3,773,741 Gross unrealized depreciation........................... (373,562) -------------- Net unrealized appreciation............................. $ 3,400,179 ============== NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $29,706 which is included in interest income in the accompanying statement of operations. 14 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
=================================== =================================== Shares Amount =================================== =================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 1,581,386 6,896,200 $ 20,008,752 $ 83,158,391 Shares issued in connection with acquisition of Brinson Series Trust Strategic Fixed Income Portfolio...................... -0- 214,442 -0- 2,581,245 Shares issued in reinvestment of dividends and distributions. 470,989 314,536 5,976,857 3,720,955 Shares redeemed................... (4,859,767) (3,047,586) (60,660,994) (37,024,668) -------------- -------------- -------------- -------------- Net increase (decrease)........... (2,807,392) 4,377,592 $ (34,675,385) $ 52,435,923 ============== ============== ============== ============== Class B Shares sold....................... 2,012,386 651,657 $ 25,045,603 $ 7,879,889 Shares issued in reinvestment of dividends and distributions. 44,370 17,487 559,503 206,001 Shares redeemed................... (1,143,636) (407,878) (14,244,868) (4,936,567) -------------- -------------- -------------- -------------- Net increase...................... 913,120 261,266 $ 11,360,238 $ 3,149,323 ============== ============== ============== ==============
NOTE G: Risks Involved in Investing in the Portfolio Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit 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 United States companies or of the United States government. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Acquisition of Brinson Series Trust Strategic Fixed Income Portfolio On April 5, 2002, the Portfolio acquired all of the assets and liabilities of the Brinson Series Trust Strategic Fixed Income Portfolio pursuant to a plan of reorganization approved by the shareholders of Brinson Series Trust Strategic Fixed Income Portfolio on February 25, 2002. The acquisition was accomplished by a tax-free exchange of 214,442 shares of the Portfolio for 247,070 shares of Brinson Series Trust Strategic Fixed Income Portfolio on April 5, 2002. The aggregate net assets of the Portfolio and Brinson Series Trust Strategic Fixed Income Portfolio immediately before the acquisition 15 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ were $120,888,612 and $2,581,245 (including $136,372 net unrealized appreciation of investments), respectively. Immediately after the acquisition, the combined net assets of the Portfolio amounted to $123,469,857. NOTE J: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 --- --- Distributions paid from: Ordinary income...................... $ 6,475,252 $ 3,926,956 --------------- -------------- Net long-term capital gains............. $ 61,109 $ -0- Total taxable distributions............. 6,536,361 3,926,956 --------------- -------------- Total distributions paid................ $ 6,536,361 $ 3,926,956 =============== ============== As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income.......................... $ 6,073,763 Undistributed long-term capital gains.................. 1,528,353 Accumulated capital and other losses................... (59,901)(a) Unrealized appreciation/(depreciation)................. 3,400,179(b) -------------- Total accumulated earnings/(deficit)................... $ 10,942,394 ============== (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $59,901 all of which will expire in the year 2007. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the current fiscal year, $98,605 of the capital loss carryforward was utilized. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to the tax treatment of paydown gains/losses, resulted in a net increase in undistributed net investment income and a corresponding decrease in accumulated net realized gain on investment transactions. These reclassifications had no effect on net assets. NOTE K: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and 16 AllianceBernstein Variable Products Series Fund ================================================================================ (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 17 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 ============================================================= Year Ended December 31, ------------------------------------------------------------- 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........ $12.54 $12.00 $11.68 $11.18 $12.27 ------ ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (b)................... .26 .42 .57 .67 .64 Net realized and unrealized gain (loss) on investment transactions.................. .23 .49 .33 .52 (.94) ------ ------ ------ ----- ------ Net increase (decrease) in net asset value from operations.......................... .49 0.91 .90 1.19 (.30) ------ ------ ------ ----- ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income........ (.37) (.37) (.58) (.69) (.49) Distributions from net realized gain on investment transactions.................. (.10) -0- -0- -0- (.30) ------ ------ ------ ----- ------ Total dividends and distributions........... (.47) (.37) (.58) (.69) (.79) ------ ------ ------ ----- ------ Net asset value, end of period.............. $12.56 $12.54 $12.00 $11.68 $11.18 ====== ====== ====== ====== ====== Total Return - ------------ Total investment return based on net asset value (c)...................... 3.88% 7.79% 7.88% 11.08% (2.45)% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)... $129,194 $164,265 $104,635 $58,170 $60,504 Ratio to average net assets of: Expenses................................. .77% .82% .89% .95% .86% Net investment income.................... 2.10% 3.49% 4.86% 5.95% 5.51% Portfolio turnover rate..................... 748% 551% 259% 236% 172%
- -------------------------------------------------------------------------------- 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 ============================================================= June 2, 1999(d) to Year Ended December 31, December 31, ------------------------------------------------------------- 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period......... $12.47 $11.94 $11.64 $11.16 $11.13 ------ ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (b).................... .24 .39 .55 .63 .33 Net realized and unrealized gain (loss) on investment transactions................... .21 .49 .31 .53 (.30) ------ ------ ------ ----- ------ Net increase in net asset value from operations .45 .88 .86 1.16 .03 ------ ------ ------ ----- ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income......... (.35) (.35) (.56) (.68) -0- Distributions from net realized gain on investment transactions................... (.10) -0- -0- -0- -0- ------ ------ ------ ----- ------ Total dividends and distributions............ (.45) (.35) (.56) (.68) -0- ------ ------ ------ ----- ------ Net asset value, end of period............... $12.47 $12.47 $11.94 $11.64 $11.16 ====== ====== ====== ====== ====== Total Return - ------------ Total investment return based on net asset value (c)................................ 3.61% 7.54% 7.60% 10.84% 0.27% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted).... $21,982 $10,602 $7,031 $3,627 $1,438 Ratio to average net assets of: Expenses.................................. 1.03% 1.07% 1.14% 1.20% 1.15%(e) Net investment income..................... 1.89% 3.25% 4.61% 5.67% 5.48%(e) Portfolio turnover rate...................... 748% 551% 259% 236% 172%
- -------------------------------------------------------------------------------- (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. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (b) Based on average shares outstanding. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total 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) Commencement of distribution. (e) Annualized. 19 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein U.S. Government / High Grade Securities Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein U.S. Government/High Grade Securities Portfolio, formerly Alliance U.S. Government/High Grade Securities Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein U.S. Government/High Grade Securities Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young - ----------------- New York, New York February 4, 2004 20 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 21 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 2 Sound View Drive Investment adviser and an independent 116 None Suite 100 consultant. He was formerly Senior Greenwich, CT 06830 Manager of Barrett Associates, Inc., a (14) registered investment adviser, with which Chairman of the Board he had been associated since prior to 1999. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 1994, 100 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible (14) for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) from Annandale, NY 12504 2001 - 2002, Senior Advisor from June 1999 - (12) June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989 - May 1999. Previously, Director of the National Academy of Design and during 1988 - 1992, Director and Chairman of the Audit Committee of ACMC.
22 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 23 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Kathleen A. Corbet, 44 Senior Vice President Executive Vice President of ACMC**, with which she has been associated since prior to 1999. Matthew Bloom, 47(1) Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Jeffrey L. Phlegar, 37 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Mr. Bloom is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 24 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN MONEY MARKET PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT SPONSORED AGENCY OBLIGATIONS-50.3% Federal Home Loan Bank 1.03%, 9/27/04 FRN $ 10,000 $ 9,997,038 1.23%, 7/06/04 2,000 2,000,000 1.43%, 9/22/04 1,000 1,000,000 Federal Home Loan Mortgage Corp. 1.09%, 3/04/04 3,000 2,994,278 1.14%, 4/22/04 5,000 4,982,733 1.16%, 5/20/04 5,000 4,977,833 1.17%, 8/20/04 1,000 1,000,000 5.54%, 1/28/04 4,000 3,996,670 Federal National Mortgage Association 1.07%, 2/25/04 3,846 3,839,772 1.10%, 4/07/04 3,000 2,991,108 1.10%, 6/09/04 5,000 4,975,556 1.11%, 7/06/04 2,000 2,000,000 1.14%, 3/08/04 1,000 997,878 1.17%, 5/12/04 5,000 4,979,100 1.61%, 12/30/04 1,000 1,000,000 ------------- Total U.S. Government and Government Sponsored Agency Obligations (amortized cost $51,731,966) 51,731,966 ------------- COMMERCIAL PAPER-49.3% Banque Caisse d'Epargne l'Etat 1.13%, 3/25/04 1,700 1,695,538 Barton Capital 1.09%, 1/12/04 2,000 1,999,334 Citigroup Global Market 1.08%, 1/29/04 2,000 1,998,335 Clipper Receivables Corp. 1.09%, 1/12/04 2,000 1,999,334 Depfa Bank Europe Plc 1.09%, 1/12/04 1,700 1,699,436 General Electric Capital Corp. 1.11%, 3/02/04 5,000 4,990,680 Giro Balanced Funding Corp. 1.09%, 1/13/04 4,000 3,998,547 GREENWICH CAPITAL 1.09%, 1/16/04 2,000 1,999,092 Hbos Treasury Services Plc 1.11%, 3/15/04 3,870 3,861,170 HSBC ( Hong Kong) 1.09%, 3/10/04 1,000 997,911 1.11%, 4/13/04 1,000 996,824 1.14%, 3/09/04 1,500 1,496,770 1.16%, 4/15/04 1,500 1,494,925 KFW International Finance 1.12%, 4/23/04 4,000 3,985,938 Morgan Stanley 1.08%, 2/17/04 1,000 998,590 Natexis 1.09%, 1/20/04 1,500 1,499,137 Nord 1.09%, 1/22/04 4,000 3,997,457 Northern Rock Plc 1.13%, 3/29/04 1,700 1,695,304 Prudential Plc 1.08%, 1/09/04 2,700 2,699,352 Sheffield Receivables 1.09%, 1/12/04 1,000 999,667 UBS Finance, Inc. 0.88%, 1/02/04 3,500 3,499,914 Westdeutsche Landes Bank Yankee 1.11%, 2/27/04 2,000 2,000,000 ------------- Total Comercial Paper (amortized cost $50,603,255) 50,603,255 ------------- TOTAL INVESTMENTS-99.6% (cost $102,335,221) 102,335,221 Other assets liabilities-0.4% 457,350 ------------- NET ASSETS-100% $ 102,792,571 ============= _______________________________________________________________________________ Glossary: FRN - Floating Rate Note See Notes to Financial Statements 1 MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $102,335,221) $ 102,335,221 Cash 151,639 Receivable for capital stock sold 521,373 Interest receivable 18,968 ------------- Total assets 103,027,201 ------------- LIABILITIES Payable for capital stock redeemed 122,200 Advisory fee payable 45,041 Distribution fee payable 10,537 Accrued expenses 56,852 ------------- Total liabilities 234,630 ------------- NET ASSETS $ 102,792,571 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 102,793 Additional paid-in capital 102,689,526 Accumulated net realized gain on investment transactions 252 ------------- $ 102,792,571 ============= CLASS A SHARES Net assets $ 54,846,967 ============= Shares of capital stock outstanding 54,845,194 ============= Net asset value per share $ 1.00 ============= CLASS B SHARES Net assets $ 47,945,604 ============= Shares of capital stock outstanding 47,947,456 ============= Net asset value per share $ 1.00 ============= See Notes to Financial Statements. 2 MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $ 1,572,744 ------------- EXPENSES Advisory fee 653,243 Distribution fee -- Class B 138,782 Custodian 75,426 Administrative 75,000 Audit 31,255 Legal 19,581 Transfer agency 947 Directors' fees and expenses 421 Printing 324 Miscellaneous 7,560 ------------- Total expenses 1,002,539 ------------- Net investment income 570,205 ------------- REALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 324 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 570,529 ============= See Notes to Financial Statements. 3 MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 570,205 $ 1,674,782 Net realized gain (loss) on investment transactions 324 (72) ------------- ------------- Net increase in net assets from operations 570,529 1,674,710 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (411,077) (1,243,462) Class B (159,585) (437,943) CAPITAL STOCK TRANSACTIONS Net decrease (46,739,540) (28,322,498) ------------- ------------- Total decrease (46,739,673) (28,329,193) NET ASSETS Beginning of period 149,532,244 177,861,437 ------------- ------------- End of period (including undistributed net investment income of $457 at December 31, 2002) $ 102,792,571 $ 149,532,244 ============= ============= See Notes to Financial Statements. 4 MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Money Market Portfolio (the "Portfolio"), formerly Alliance Money Market Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. 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 Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 straight-line 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 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. 4. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays Alliance Capital Management L.P. (the "Adviser"), an investment advisory fee at an annual rate of .50 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. 5 MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Prior to May 1, 2003, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2003. Any expense waivers or reimbursements were accrued daily and paid monthly. For the year ended December 31, 2003, the Portfolio received no such waivers/reimbursements. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 December 31, 2003, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE E: CAPITAL STOCK There are 2,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 1,000,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 36,286,688 132,042,828 $ 36,286,688 $ 132,042,828 Shares issued in reinvestment of dividends 475,045 1,243,462 475,045 1,243,462 Shares redeemed (79,130,806) (164,765,799) (79,130,807) (164,765,799) ------------ ----------- ------------ ------------- Net decrease (42,369,073) (31,479,509) $(42,369,074) $ (31,479,509) ============ =========== ============ ============= CLASS B Shares sold 102,776,644 142,682,740 $102,776,644 $ 142,682,740 Shares issued in reinvestment of dividends 180,806 437,943 180,806 437,943 Shares redeemed (107,327,917) (139,963,672) (107,327,916) (139,963,672) ------------ ----------- ------------ ------------- Net increase (decrease) (4,370,467) 3,157,011 $ (4,370,466) $ 3,157,011 ============ =========== ============ ============= 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. NOTE G: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 570,662 $ 1,681,405 ------------- ------------- Total distributions paid $ 570,662 $ 1,681,405 ============= ============= As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 252 Accumulated capital and other losses -0-(a) ------------- Total accumulated earnings/(deficit) $ 252 ============= (a) During the current fiscal year, the Portfolio utilized capital loss carryforwards of $72. 7 MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE H: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 9 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .01 .01 .04 .06 .05 LESS: DIVIDENDS Dividends from net investment income (.01) (.01) (.04) (.06) (.05) Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN Total investment return based on net asset value (a) .53% 1.10% 3.57% 5.91% 4.69% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $54,847 $97,216 $128,700 $146,270 $134,467 Ratio to average net assets of: Expenses .66% .68% .63% .67% .64% Net investment income .55% 1.10% 3.55% 5.73% 4.59%
See footnote summary on page 11. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B --------------------------------------------------------------- JUNE 16, YEAR ENDED DECEMBER 31, 1999(c) TO -------------------------------------------------- DECEMBER 31, 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income -0-(b) .01 .03 .05 .02 LESS: DIVIDENDS Dividends from net investment income -0-(b) (.01) (.03) (.05) (.02) Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN Total investment return based on net asset value (a) .28% 0.85% 3.32% 5.65% 2.52% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $47,946 $52,316 $49,161 $9,758 $1,163 Ratio to average net assets of: Expenses .91% .93% .90% .95% .89%(d) Net investment income .29% .85% 2.60% 5.64% 4.71%(d)
(a) 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. (b) Amount is less than $.01 per share. (c) Commencement of distribution. (d) Annualized. 11 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN MONEY MARKET PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Money Market Portfolio, formerly Alliance Money Market Portfolio, ("the Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Money Market Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 12 MONEY MARKET PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN THE BANK OF NEW YORK One Wall Street New York, NY 10286 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 (1) Member of the Audit Committee. 13 MONEY MARKET PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Suite 100 Manager of Barrett Associates, Inc., a Greenwich, CT 06830 registered investment adviser, with which (14) he had been associated since prior to 1999. Chairman of the Board He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Invest- ment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Associ- ation of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001-2002, Annandale, NY 12504 Senior Advisor from June 1999-June 2000 and (12) President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
14 MONEY MARKET PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 and Gladstone, NJ 07934 a partner of that firm for more than twenty-five (12) years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 15 MONEY MARKET PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - -------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Kathleen A. Corbet, 44 Senior Vice President Executive Vice President of ACMC**, with which she has been associated since prior to 1999. John F. Chiodi, 37(1) Vice President Vice President of ACMC**, with which he has been associated since prior to 1999. Joseph C. Dona, 43(1) Vice President Vice President of ACMC**, with which he has been associated since prior to 1999. Raymond J. Papera, 47(1) Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
(1) Messrs. Papera, Chiodi and Dona are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 16 (This page left intentionally blank.) ALLIANCEBERNSTEIN --------------------------------------------- VARIABLE PRODUCTS --------------------------------------------- SERIES FUND --------------------------------------------- ALLIANCEBERNSTEIN --------------------------------------------- TOTAL RETURN PORTFOLIO --------------------------------------------- ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered =========================== > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed =========================== This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 12, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Total Return Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks to achieve a high return through a combination of current income and capital appreciation. The Portfolio primarily invests in U.S. Government and agency obligations, bonds, fixed income senior securities (including short- and long-term debt securities and preferred stocks to the extent their value is attributable to their fixed income characteristics) and common stocks. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns 1 Year 5 Years 10 Years --------- -------- --------- AllianceBernstein Total Return Portfolio Class A 19.05% 5.47% 9.75% Composite: 60% S&P 500 Stock Index/40% Lehman Brothers Government/ Credit Bond Index 18.75% 2.70% 9.43% S&P 500 Stock Index 28.67% -0.57% 11.06% Lehman Brothers Government/Credit Bond Index 4.67% 6.66% 6.98% Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The Composite represents a blend of 60% Standard & Poor's (S&P) 500 Stock Index and 40% Lehman Brothers (LB) Government/Credit Bond Index. Neither the unmanaged S&P 500 Stock Index nor the unmanaged LB Government/Credit Bond Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Stock Index includes 500 stocks and is a common measure of the performance of the overall U.S. stock market. The LB Government/Credit Bond Index represents a combination of two indices: the LB Government Bond Index which is composed of the Treasury Bond and Agency Bond Indices, and the LB Credit Bond Index which includes investment-grade bonds issued by corporations and non-corporate entities. An investor cannot invest directly in an index or composite, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Total Return Portfolio. The Portfolio outperformed its benchmark, a 60%/40% blend of the S&P 500 Stock Index and the LB Government/Credit Bond Index, respectively, over the 12-month period ended December 31, 2003. The equity portion of the Portfolio's outperformance over the 12-month period under review was due to an overweighted position in technology holdings relative to the benchmark through the second quarter of 2003. The Portfolio's fixed income allocation outperformed the fixed income market, as measured by the LB Government/Credit Bond Index, primarily due to sector and industry allocation. At the sector level, the Portfolio was overweight in credit, which produced favorable relative returns. At the industry level, the Portfolio was overweight in telecom, cable and autos--three industries that produced strong relative performance within the credit sector. Many of the Portfolio's underweighted sectors, including chemicals, rails and basic materials, also contributed to relative returns, as they underperformed the LB Government/Credit Bond Index. Additionally, within the Portfolio's Treasury allocation, its exposure to TIPS (inflation-linked securities) benefited relative performance. MARKET REVIEW AND INVESTMENT STRATEGY The equity portion of the Portfolio's performance during 2003 was aided by strong economic data and more upbeat company commentary, as better-than-expected earnings reports provided further support for the U.S. stock market rally. The equity portion of the Portfolio's investment discipline is largely focused on stock picking (as opposed to sector rotation) and our proprietary valuation research suggested to us that the most attractive stocks were largely centered in the areas of health care and 1 TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ consumer staples. Thus, we built overweighted positions in these two areas throughout the six-month period ended December 31, 2003. Conversely, we reduced the Portfolio's technology weighting to an underweighted position as our valuation work showed that these stocks were very expensive. We also maintained underweighted positions in financial and utility stocks as our research showed that there were fewer investment opportunities in these two areas of the market. In the fixed income market, interest rates were volatile throughout 2003. During the year, Treasury rates rose 25 basis points, which is considered fairly flat historically. However, that masks tremendous volatility throughout the course of the year, where the trading range was about 120 basis points. The flattening of the rate trend towards the end of the year was attributable to benign government inflation data and constant reassuring from the U.S. Federal Reserve that rates did not need to be raised for an extended period of time. Nevertheless, the yield curve remained very steep, with investors needing an inflation and monetary policy premium given the strength of nominal Gross Domestic Product. The investment-grade corporate bond market had a strong fourth quarter to top off a record-breaking year with investment-grade corporate bonds outperforming Treasuries by 5.80% in 2003, measured in terms of excess return, as measured by the Lehman Brothers investment-grade corporate sector. Within the corporate sector, top-performing sectors included autos, airlines, cable, wireless telecommunications and utilities, while supermarkets, rails and food/beverage sectors underperformed. By ratings class, the best performance was in the lower rated credit grades, which typically see the greatest relative spread compression during a cyclical improvement in credit fundamentals. 2 TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN TOTAL RETURN PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/93 - 12/31/03 AllianceBernstein Total Return Portfolio Class A: $25,343 S&P 500 Stock Index: $28,564 Composite (60% S&P 500 Stock Index/40% LB Government/Credit Bond Index): $24,984 Lehman Brothers Government/Credit Bond Index: $19,634 [The following data is depicted as a mountain chart in the printed material.] Composite (60% S&P 500 Stock AllianceBernstein Index/40% LB Lehman Brothers Total Return Government/Credit S&P 500 Government/ Portfolio Class A Bond Index) Stock Index Credit Bond Index ================================================================================ 12/31/93 $10,000 $10,000 $10,000 $10,000 12/31/94 $ 9,623 $ 9,938 $10,132 $ 9,649 12/31/95 $11,901 $12,963 $13,940 $11,506 12/31/96 $13,707 $15,015 $17,140 $11,840 12/31/97 $16,600 $18,905 $22,858 $12,995 12/31/98 $19,420 $23,317 $29,391 $14,226 12/31/99 $20,688 $26,902 $35,576 $13,921 12/31/00 $23,278 $25,621 $32,337 $15,570 12/31/01 $23,806 $23,847 $28,494 $16,894 12/31/02 $21,287 $20,817 $22,197 $18,759 12/31/03 $25,343 $24,984 $28,564 $19,634 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Total Return Portfolio Class A shares (from 12/31/93 to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The Composite represents a blend of 60% S&P 500 Stock Index and 40% LB Government/Credit Bond Index. Neither the unmanaged S&P 500 Stock Index nor the unmanaged LB Government/Credit Bond Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Stock Index includes 500 stocks and is a common measure of the performance of the overall U.S. stock market. The LB Government/Credit Bond Index represents a combination of two indices: the LB Government Bond Index which is composed of the Treasury Bond and Agency Bond Indices, and the LB Credit Bond Index which includes investment-grade bonds issued by corporations and non-corporate entities. An investor cannot invest directly in an index or composite, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Total Return Portfolio. 3 TOTAL RETURN PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
====================================================================================== COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ====================================================================================== U.S. Treasury Notes $ 30,074,955 13.6% ====================================================================================== Federal National Mortgage Assoc. (Bonds & Common Stock) 14,742,001 6.7 ====================================================================================== Citigroup, Inc. (Bonds & Common Stock) 6,026,170 2.7 ====================================================================================== JP Morgan Chase & Co. 5,050,375 2.3 ====================================================================================== Union Pacific Corp. (Bonds & Common Stock) 4,568,578 2.1 ====================================================================================== American International Group, Inc. 4,526,924 2.0 ====================================================================================== Bank One Corp. 4,034,715 1.8 ====================================================================================== ConocoPhillips (Bonds & Common Stock) 4,007,444 1.8 ====================================================================================== Bank of America Corp. 3,643,479 1.7 ====================================================================================== Viacom, Inc. Cl. B 3,492,706 1.6 ----------- ---- $ 80,167,347 36.3% ======================================================================================
4 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- COMMON STOCKS-55.3% FINANCE-15.5% BANKING - MONEY CENTERS-2.3% JP Morgan Chase & Co. ..... 137,500 $ 5,050,375 ------------ BANKING-REGIONAL-3.5% Bank of America Corp. ..... 45,300 3,643,479 Bank One Corp. ............ 88,500 4,034,715 ------------ 7,678,194 ------------ BROKERAGE & MONEY MANAGEMENT-1.4% Merrill Lynch & Co., Inc. . 35,600 2,087,940 Morgan Stanley............. 18,900 1,093,743 ------------ 3,181,683 ------------ INSURANCE-4.1% ACE Ltd. (Cayman Island)... 53,000 2,195,260 Allstate Corp. ............ 23,000 989,460 American International Group, Inc. ............ 68,300 4,526,924 MetLife, Inc. ............. 37,500 1,262,625 ------------ 8,974,269 ------------ MORTGAGE BANKING-1.1% Fannie Mae................. 21,900 1,643,814 The PMI Group, Inc. ....... 13,600 506,328 Washington Mutual, Inc. ... 9,800 393,176 ------------ 2,543,318 ------------ MISCELLANEOUS-3.1% Citigroup, Inc. ........... 117,500 5,703,450 MBNA Corp. ................ 45,625 1,133,781 ------------ 6,837,231 ------------ 34,265,070 ------------ HEALTHCARE-7.0% DRUGS-2.9% Pfizer, Inc. .............. 97,500 3,444,675 Wyeth...................... 66,600 2,827,170 ------------ 6,271,845 ------------ MEDICAL PRODUCTS-1.0% Alcon, Inc. (Switzerland).. 15,900 962,586 Johnson & Johnson.......... 25,200 1,301,832 ------------ 2,264,418 ------------ MEDICAL SERVICES-3.1% Anthem, Inc. (a)........... 15,900 1,192,500 HCA, Inc. ................. 56,700 2,435,832 Tenet Healthcare Corp. (a). 42,400 680,520 UnitedHealth Group, Inc. .. 11,000 639,980 WellPoint Health Networks, Inc. (a)................ 20,000 1,939,800 ------------ 6,888,632 ------------ 15,424,895 ------------ ENERGY-7.0% DOMESTIC INTEGRATED-0.5% Occidental Petroleum Corp. 28,000 1,182,720 ------------ DOMESTIC PRODUCERS-1.5% Devon Energy Corp. ........ 13,000 744,380 Kerr-McGee Corp. .......... 35,000 1,627,150 Noble Energy, Inc. ........ 19,700 875,271 ------------ 3,246,801 ------------ INTERNATIONAL-2.9% BP Plc (ADR) (United Kingdom)........ 41,900 2,067,765 ChevronTexaco Corp. ....... 23,500 2,030,165 Exxon Mobil Corp. ......... 57,100 2,341,100 ------------ 6,439,030 ------------ OIL SERVICE-0.3% Nabors Industries Ltd. (Bermuda) (a)........... 15,400 639,100 ------------ MISCELLANEOUS-1.8% ConocoPhillips............. 58,800 3,855,516 ------------ 15,363,167 ------------ CONSUMER SERVICES-6.5% BROADCASTING & CABLE-4.6% Clear Channel Communications, Inc. ... 23,600 1,105,188 Comcast Corp. Cl. A (a).... 36,750 1,207,973 Comcast Corp. Special Cl. A (a)............... 46,600 1,457,648 Cox Communications, Inc. Cl. A (a)............... 17,200 592,540 Time Warner, Inc. (a)...... 60,000 1,079,400 Viacom, Inc. Cl. B......... 78,700 3,492,706 Westwood One, Inc. (a)..... 32,200 1,101,562 ------------ 10,037,017 ------------ CELLULAR COMMUNICATIONS-0.2% Nextel Communications, Inc. Cl. A (a)............... 18,500 519,110 ------------ ENTERTAINMENT & LEISURE-1.0% Carnival Corp. (Panama).... 54,200 2,153,366 ------------ RESTAURANTS & LODGING-0.3% McDonald's Corp. .......... 29,000 720,070 ------------ RETAIL - GENERAL MERCHANDISE-0.4% Home Depot, Inc. .......... 26,000 922,740 ------------ 14,352,303 ------------ 5 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- CONSUMER STAPLES-6.0% BEVERAGES-1.0% Anheuser-Busch Cos., Inc. . 44,000 $ 2,317,920 ------------ COSMETICS-1.4% Avon Products, Inc. ....... 33,490 2,260,240 International Flavors & Fragrances, Inc. ....... 21,500 750,780 ------------ 3,011,020 ------------ FOOD-0.3% Dean Foods Co. (a)......... 18,500 608,095 ------------ HOUSEHOLD PRODUCTS-1.8% Colgate-Palmolive Co. ..... 34,700 1,736,735 The Procter & Gamble Co. .. 22,200 2,217,336 ------------ 3,954,071 ------------ TOBACCO-1.4% Altria Group, Inc. ........ 56,600 3,080,172 ------------ MISCELLANEOUS-0.1% Fortune Brands, Inc. ...... 4,100 293,109 ------------ 13,264,387 ------------ UTILITIES-4.3% ELECTRIC & GAS UTILITIES-1.9% Constellation Energy Group, Inc. ............ 31,100 1,217,876 Entergy Corp. ............. 21,000 1,199,730 Exelon Corp. .............. 18,200 1,207,752 PPL Corp. ................. 14,800 647,500 ------------ 4,272,858 ------------ TELEPHONE UTILITIES-2.4% AT&T Corp. ................ 26,300 533,890 BellSouth Corp. ........... 26,600 752,780 SBC Communications, Inc. .. 40,000 1,042,800 Sprint Corp.-FON Group..... 73,700 1,210,154 Verizon Communications, Inc. ................... 49,300 1,729,444 ------------ 5,269,068 ------------ 9,541,926 ------------ TECHNOLOGY-2.8% COMMUNICATION EQUIPMENT-0.4% Juniper Networks, Inc. (a). 43,100 805,108 ------------ COMPUTER HARDWARE/ STORAGE-0.5% Hewlett-Packard Co. ....... 44,200 1,015,274 ------------ COMPUTER SERVICES-0.6% First Data Corp. .......... 33,800 1,388,842 ------------ SOFTWARE-1.3% Microsoft Corp. ........... 92,400 2,544,696 VERITAS Software Corp. (a). 10,200 379,032 ------------ 2,923,728 ------------ 6,132,952 ------------ TRANSPORTATION-2.3% RAILROAD-2.3% Burlington Northern Santa Fe Corp. .................. 41,300 1,336,055 Union Pacific Corp. ....... 53,300 3,703,284 ------------ 5,039,339 ------------ CAPITAL GOODS-1.3% ELECTRICAL EQUIPMENT-0.6% Johnson Controls, Inc. .... 10,900 1,265,708 ------------ MISCELLANEOUS-0.7% United Technologies Corp. . 17,600 1,667,952 ------------ 2,933,660 ------------ CONSUMER MANUFACTURING-0.8% BUILDING & RELATED-0.8% American Standard Cos., Inc. (a)................ 13,700 1,379,590 Mohawk Industries, Inc. (a)................ 4,900 345,646 ------------ 1,725,236 ------------ BASIC INDUSTRIES-0.7% CHEMICALS-0.3% E.I. du Pont de Nemours & Co. .................. 13,900 637,871 ------------ CONTAINERS-0.0% Ball Corp. ................ 1,100 65,527 ------------ MINING & METALS-0.4% Alcoa, Inc. ............... 21,000 798,000 ------------ 1,501,398 ------------ AEROSPACE & DEFENSE-0.6% AEROSPACE-0.6% Goodrich Corp. ............ 23,700 703,653 Northrop Grumman Corp. .... 6,600 630,960 ------------ 1,334,613 ------------ MULTI-INDUSTRY COMPANIES-0.5% Tyco International Ltd. ... 40,600 1,075,900 ------------ Total Common Stocks (cost $101,458,207)..... 121,954,846 ------------ 6 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount Company (000) U.S. $ Value - ---------------------------------------------------- U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-21.0% Federal National Mortgage Assoc. 5.00%, 1/15/07.......... $ 2,000 $ 2,136,420 6.50%, 1/25/19 TBA...... 4,000 4,240,000 6.50%, 1/01/34 TBA...... 4,000 4,182,500 6.625%, 10/15/07........ 2,250 2,539,267 U.S. Treasury Bonds 5.375%, 2/15/31......... 665 693,705 6.875%, 8/15/25......... 650 795,361 8.125%, 8/15/21......... 35 47,744 11.25%, 2/15/15......... 1,000 1,600,860 U.S. Treasury Notes 3.00%, 11/15/07......... 800 807,126 3.625%, 5/15/13......... 3,070 2,951,879 4.00%, 11/15/12......... 3,000 2,972,112 4.25%, 8/15/13.......... 410 410,641 4.625%, 5/15/06......... 7,125 7,553,618 5.625%, 5/15/08......... 4,900 5,429,429 5.75%, 8/15/10.......... 1,000 1,121,563 6.25%, 2/15/07.......... 4,600 5,129,004 6.875%, 5/15/06......... 2,750 3,057,981 7.50%, 2/15/05.......... 600 641,602 ------------ Total U.S. Government & Government Sponsored Agency Obligations (cost $44,415,956)...... 46,310,812 ------------ CORPORATE DEBT OBLIGATIONS-17.7% AEROSPACE/ DEFENSE-0.1% Northrop Grumman Corp. 7.125%, 2/15/11......... 225 260,602 ------------ AUTOMOTIVE-1.2% Ford Motor Credit Co. 7.875%, 6/15/10......... 100 111,879 General Motors Corp. 7.20%, 1/15/11.......... 250 275,254 8.375%, 7/15/33......... 1,800 2,095,746 Lear Corp. 8.11%, 5/15/09.......... 200 236,250 ------------ 2,719,129 ------------ BANKING-3.2% Abbey National Capital Trust I Plc 8.963%, 12/29/49........ 291 387,775 Barclays Bank Plc 8.55%, 9/29/49 (b)(c)... 50 61,535 BNP Paribas LLC 5.125%, 1/15/15 (b)..... 300 299,495 Capital One Bank 6.50%, 6/13/13.......... 200 210,053 Citicorp 6.375%, 11/15/08........ 500 553,614 Citigroup, Inc. 5.625%, 8/27/12......... 250 264,363 7.25%, 10/01/10......... 50 58,357 Development Bank of Singapore 7.125%, 5/15/11 (b)..... 500 574,987 Dresdner Funding Trust I 8.151%, 6/30/31 (b)..... 150 171,729 First Massachusetts Bank 7.625%, 6/15/11......... 200 234,440 First Union Capital II 7.95%, 11/15/29......... 150 182,429 First Union National Bank 7.80%, 8/18/10.......... 400 483,231 Fuji JGB Investment pfd Mizuho 9.87%, 6/30/08 (b)(c)... 500 565,758 HSBC Capital Funding LP 10.176%, 12/31/99 (b)(c) 560 823,070 HVB Funding Trust I 8.741%, 6/30/31 (b)..... 150 177,465 MBNA America Bank 7.125%, 11/15/12........ 250 286,373 Sanwa Bank Ltd. 7.40%, 6/15/11.......... 200 229,516 Scotland International Finance II BV (Netherlands) 4.25%, 5/23/13 (b)...... 250 237,830 UFJ Finance Aruba AEC 6.75%, 7/15/13.......... 200 213,677 US Bancorp 7.50%, 6/01/26.......... 400 473,258 Westpac Banking Corp. (Australia) 4.625%, 6/01/18......... 200 186,797 ------------ 6,675,752 ------------ BROADCASTING/ MEDIA-0.4% Liberty Media Corp. 8.25%, 2/01/30.......... 250 300,195 News America Holdings, Inc. 8.25%, 10/17/96......... 60 71,244 Time Warner Entertainment Co. LP 8.375%, 3/15/23......... 375 466,131 Time Warner, Inc. 7.75%, 6/15/05.......... 140 151,128 ------------ 988,698 ------------ 7 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount Company (000) U.S. $ Value - ---------------------------------------------------- BUILDING/REAL ESTATE-0.3% Beazer Homes USA, Inc. 8.375%, 4/15/12......... $ 100 $ 110,750 CRH America, Inc. 6.95%, 3/15/12.......... 250 282,504 EOP Operating LP 7.875%, 7/15/31......... 200 234,883 8.375%, 3/15/06......... 35 39,211 Meritage Corp. 9.75%, 6/01/11.......... 100 112,250 ------------ 779,598 ------------ CABLE-0.5% Continental Cablevision, Inc. 9.00%, 9/01/08.......... 300 362,161 EchoStar DBS Corp. 5.75%, 10/01/08 (b)..... 200 203,250 9.125%, 1/15/09......... 130 146,088 Rogers Cable, Inc. (Canada) 6.25%, 6/15/13.......... 250 253,125 Shaw Communications, Inc. (Canada) 7.20%, 12/15/11......... 200 217,250 ------------ 1,181,874 ------------ COMMUNICATIONS-1.5% British Telecommunications Plc (United Kingdom) 8.375%, 12/15/10........ 350 426,602 8.875%, 12/15/30........ 350 459,314 Cox Enterprises, Inc. 4.375%, 5/01/08 (b)..... 250 254,219 KPN NV (Netherlands) 8.375%, 10/01/30........ 500 636,187 Qwest Capital Funding, Inc. 5.875%, 8/03/04......... 325 327,438 Qwest Services Corp. 13.50%, 12/15/10 (b).... 259 315,980 Sprint Capital Corp. 6.875%, 11/15/28........ 850 832,372 ------------ 3,252,112 ------------ COMMUNICATIONS- MOBILE-0.6% AT&T Wireless Services, Inc. 7.875%, 3/01/11......... 500 579,543 Mobile Telesystems Finance (Luxembourg) 8.375%, 10/14/10 (b).... 250 256,250 PTC International Finance II SA (Luxembourg) 11.25%, 12/01/09........ 250 276,250 TELUS Corp. (Canada) 7.50%, 6/01/07.......... 200 224,033 ------------ 1,336,076 ------------ CONGLOMERATE/ MISCELLANEOUS-0.1% Cendant Corp. 6.25%, 1/15/08.......... 250 273,000 ------------ CONTAINERS-0.1% Packaging Corp. of America 4.375%, 8/01/08......... 200 200,404 ------------ ENERGY-0.5% Conoco Inc. 5.90%, 4/15/04.......... 150 151,928 Devon Energy Corp. 7.95%, 4/15/32.......... 500 604,775 Union Pacific Resources Group, Inc. 7.30%, 4/15/09.......... 150 171,523 XTO Energy, Inc. 7.50%, 4/15/12.......... 100 113,500 ------------ 1,041,726 ------------ ENTERTAINMENT/ LEISURE-0.1% Six Flags, Inc. 9.50%, 2/01/09.......... 200 210,500 ------------ FINANCIAL-2.6% American Reinsurance 7.45%, 12/15/26......... 140 156,421 Cho Hung Bank Co. Ltd. (South Korea) 11.875%, 4/01/10 (b).... 80 89,200 Countrywide Home Loan, Inc. 4.25%, 12/19/07......... 250 258,068 Ford Motor Credit Co. 7.00%, 10/01/13......... 200 211,309 7.375%, 2/01/11......... 650 709,443 General Electric Capital Corp. 5.00%, 6/15/07.......... 500 532,995 5.875%, 2/15/12......... 500 538,239 Goldman Sachs Group, Inc. 6.60%, 1/15/12.......... 500 559,647 6.65%, 5/15/09.......... 200 226,488 Household Finance Corp. 5.75%, 1/30/07.......... 200 216,373 6.375%, 10/15/11........ 400 441,156 6.50%, 1/24/06.......... 75 81,150 7.875%, 3/01/07......... 150 171,538 iStar Financial, Inc. 6.00%, 12/15/10......... 200 205,000 Lehman Brothers Holdings, Inc. 6.625%, 4/01/04......... 145 146,903 7.875%, 8/15/10......... 150 179,902 Markel Capital Trust I 8.71%, 1/01/46.......... 200 202,500 Merrill Lynch & Co., Inc. 6.00%, 2/17/09.......... 500 550,266 8 AllianceBernstein Variable Products Series Fund ================================================================================ Principal Amount Company (000) U.S. $ Value - ---------------------------------------------------- Morgan Stanley 5.625%, 1/20/04......... $ 75 $ 75,131 7.75%, 6/15/05.......... 125 135,723 The Hartford Financial Services, Inc. 6.375%, 11/01/08........ 125 138,942 ------------ 5,826,394 ------------ FOOD/BEVERAGE-0.4% Fosters Finance Corp. 6.875%, 6/15/11 (b)..... 200 227,803 Kellogg Co. Cl.B 6.60%, 4/01/11.......... 300 336,699 Kraft Foods, Inc. 5.25%, 10/01/13......... 300 303,277 Phillip Morris 7.75%, 1/15/27.......... 90 97,377 ------------ 965,156 ------------ HEALTHCARE-0.4% HCA, Inc. 6.25%, 2/15/13.......... 400 410,150 Triad Hospitals, Inc. 8.75%, 5/01/09.......... 280 304,850 UnitedHealth Group, Inc. 4.875%, 4/01/13......... 250 252,204 ------------ 967,204 ------------ INDUSTRIAL-0.6% Case New Holland, Inc. 9.25%, 8/01/11 (b)...... 100 112,500 CRH America, Inc. 6.40%, 10/15/33......... 300 307,849 Imperial Tobacco (Netherlands) 7.125%, 4/01/09......... 170 189,024 Tyco International Group, SA 6.375%, 10/15/11........ 200 214,750 Waste Management, Inc. 6.375%, 11/15/12........ 500 543,645 ------------ 1,367,768 ------------ INSURANCE-0.2% Loews Corp. 6.75%, 12/15/06......... 100 108,282 Mangrove Bay Pass-Through Trust 6.10%, 7/15/33.......... 400 398,308 ------------ 506,590 ------------ MUNICIPAL OBLIGATION-0.2% Dallas-Fort Worth Texas International Airport Facility 7.07%, 11/01/24......... 400 434,516 ------------ NON-AIR TRANSPORTATION-0.6% Bombardier Capital, Inc. 7.50%, 10/17/05 (b)..... 125 135,781 CSX Corp. 6.75%, 3/15/11.......... 250 281,841 Union Pacific Corp. 6.625%, 2/01/29......... 800 865,294 ------------ 1,282,916 ------------ PAPER/PACKAGING-0.5% Abitibi-Consolidated, Inc. (Canada) 8.30%, 8/01/05.......... 25 26,465 Domtar, Inc. (Canada) 7.875%, 10/15/11........ 250 295,264 MeadWestvaco Corp. 6.85%, 4/01/12.......... 500 550,863 Owens-Brockway Glass 8.875%, 2/15/09......... 150 165,188 ------------ 1,037,780 ------------ PETROLEUM PRODUCTS-0.3% Amerada Hess Corp. 7.30%, 8/15/31.......... 350 362,499 Canadian Natural Resources Ltd. 6.70%, 7/15/11.......... 300 335,982 ------------ 698,481 ------------ PUBLIC UTILITIES - ELECTRIC & GAS-1.7% American Electric Power Co., Inc. Series C 5.375%, 3/15/10......... 250 262,351 CenterPoint Energy Resources Corp. 7.875%, 4/01/13 (b)..... 200 226,799 Dominion Resources Capital Trust III 8.40%, 1/15/31.......... 200 239,272 Dominion Resources, Inc. 8.125%, 6/15/10......... 150 180,211 DPL, Inc. 8.25%, 3/01/07.......... 550 602,249 Elwood Energy LLC 8.159%, 7/05/26......... 236 245,218 FirstEnergy Corp. Series C 7.375%, 11/15/31........ 500 513,323 FPL Energy Virginia 7.52%, 6/30/19 (b)...... 239 260,675 Nevada Power Co. Series A 8.25%, 6/01/11.......... 200 219,250 NiSource Finance Corp. 7.875%, 11/15/10........ 250 297,753 Progress Energy, Inc. 7.10%, 3/01/11.......... 400 451,419 Xcel Energy, Inc. 7.00%, 12/01/10......... 175 198,717 Yorkshire Power 8.25%, 2/15/05 (b)...... 150 161,164 ------------ 3,858,401 ------------ 9 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Shares or Principal Amount Company (000) U.S. $ Value - ---------------------------------------------------- PUBLIC UTILITIES - TELEPHONE-0.8% New Jersey Bell Telephone 8.00%, 6/01/22.......... $ 500 $ 597,974 Qwest Capital Funding, Inc. 7.75%, 8/15/06.......... 45 46,800 Telecom Italia Capital SA (Italy) 4.00%, 11/15/08 (b)..... 250 251,914 Telefonos de Mexico SA de CV (Mexico) 8.25%, 1/26/06.......... 250 276,895 Verizon Maryland, Inc. 6.125%, 3/01/12......... 500 537,836 ------------ 1,711,419 ------------ RETAIL-0.1% J.C. Penney Co., Inc. 7.60%, 4/01/07.......... 100 110,875 ------------ SERVICE-0.1% Allied Waste North America 10.00%, 8/01/09......... 150 162,750 ------------ SUPERMARKET/DRUG-0.4% Delhaize America, Inc. 7.375%, 4/15/06......... 500 540,000 The Kroger Co. 5.50%, 2/01/13.......... 300 305,669 ------------ 845,669 ------------ TECHNOLOGY-0.2% Computer Sciences Corp. 5.00%, 2/15/13.......... 175 177,356 ON Semiconductor Corp. 12.00%, 3/15/10......... 200 239,500 ------------ 416,856 ------------ Total Corporate Debt Obligations (cost $35,689,950)...... 39,112,246 ------------ PREFERRED STOCK-0.9% AUTOMOTIVE-0.4% Delphi Trust I............. 11,000 289,740 Ford Motor Co. Capital Trust II................ 10,000 558,500 ------------ 848,240 ------------ BANKING-0.1% Royal Bank of Scotland Group Plc............... 10,000 245,800 ------------ COMMUNICATIONS-0.1% Centaur Funding Corp. (Cayman Islands) (b).... 200 247,066 ------------ FINANCIAL-0.1% Sovereign REIT (b)......... 90 134,775 ------------ PUBLIC UTILITIES - ELECTRIC & GAS-0.2% DTE Energy Trust I......... 20,000 542,000 ------------ Total Preferred Stock (cost $1,837,153)....... 2,017,881 ------------ SOVEREIGN DEBT OBLIGATIONS-0.4% Korea Development Bank (South Korea) 5.75%, 9/10/13.......... $ 200 210,575 United Mexican States (Mexico) 6.375%, 1/16/13......... 700 728,000 ------------ Total Sovereign Debt Obligations (cost $899,720)......... 938,575 ------------ YANKEE BONDS-0.1% Petronas Capital Ltd. 7.00%, 5/22/12 (b) (cost $149,784)......... 150 171,200 ------------ SHORT-TERM INVESTMENT-8.2% TIME DEPOSIT-8.2% The Bank of New York 0.56%, 1/02/04 (cost $18,100,000)...... 18,100 18,100,000 ------------ TOTAL INVESTMENTS-103.6% (cost $202,550,770)..... 228,605,560 Other assets less liabilities-(3.6%)...... (7,855,216) ------------ NET ASSETS-100%............ $220,750,344 ============ - -------------------------------------------------------------------------------- (a) Non-income producing security. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the aggregate market value of these securities amounted to $5,960,445 or 2.7% of net assets. (c) Variable rate coupon, rate shown as of December 31, 2003. Glossary of Terms: ADR - American Depository 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. 10 TOTAL RETURN PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $202,550,770).................................... $ 228,605,560 Cash...................................................... 39,059 Dividends and interest receivable......................... 1,312,595 Receivable for investment securities sold................. 144,892 Receivable for capital stock sold......................... 118,078 -------------- Total assets.............................................. 230,220,184 -------------- LIABILITIES Payable for investment securities purchased............... 9,178,245 Advisory fee payable...................................... 114,402 Payable for capital stock redeemed........................ 76,705 Distribution fee payable.................................. 7,006 Accrued expenses.......................................... 93,482 -------------- Total liabilities......................................... 9,469,840 -------------- NET ASSETS................................................... $ 220,750,344 ============== COMPOSITION OF NET ASSETS Capital stock, at par..................................... $ 12,434 Additional paid-in capital................................ 209,687,030 Undistributed net investment income....................... 4,992,100 Accumulated net realized loss on investment transactions............................................ (19,996,010) Net unrealized appreciation of investments................ 26,054,790 -------------- $ 220,750,344 ============== Class A Shares Net assets................................................ $ 197,333,840 ============== Shares of capital stock outstanding....................... 11,110,115 ============== Net asset value per share................................. $ 17.76 ============== Class B Shares Net assets................................................ $ 23,416,504 ============== Shares of capital stock outstanding....................... 1,323,677 ============== Net asset value per share................................. $ 17.69 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 TOTAL RETURN PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Interest................................................................................. $ 4,408,749 Dividends (net of foreign taxes withheld of $7,295)...................................... 2,164,691 -------------- Total investment income.................................................................. 6,573,440 -------------- EXPENSES Advisory fee............................................................................. 1,211,176 Distribution fee--Class B................................................................ 29,548 Custodian................................................................................ 140,653 Administrative........................................................................... 75,000 Audit and legal.......................................................................... 58,487 Printing................................................................................. 30,798 Directors' fees and expenses............................................................. 1,250 Transfer agency.......................................................................... 947 Miscellaneous............................................................................ 20,354 -------------- Total expenses........................................................................... 1,568,213 -------------- Net investment income.................................................................... 5,005,227 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions............................................. (989,573) Net change in unrealized appreciation/depreciation of investments........................................................................ 30,153,121 -------------- Net gain on investment transactions...................................................... 29,163,548 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................. $ 34,168,775 ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 TOTAL RETURN PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 5,005,227 $ 4,993,728 Net realized loss on investment transactions......................... (989,573) (15,456,926) Net change in unrealized appreciation/depreciation of investments.... 30,153,121 (10,994,614) -------------- -------------- Net increase (decrease) in net assets from operations................ 34,168,775 (21,457,812) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (4,737,202) (3,555,334) Class B............................................................ (245,968) (24,488) Net realized gain on investment transactions Class A............................................................ -0- (2,101,896) Class B............................................................ -0- (14,899) CAPITAL STOCK TRANSACTIONS Net increase......................................................... 16,592,502 17,458,182 -------------- -------------- Total increase (decrease)............................................ 45,778,107 (9,696,247) NET ASSETS Beginning of period.................................................. 174,972,237 184,668,484 -------------- -------------- End of period (including undistributed net investment income of $4,992,100 and $4,970,043, respectively)........................... $ 220,750,344 $ 174,972,237 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 13 TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein Total Return Portfolio (the "Portfolio"), formerly Alliance Total Return Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek to achieve a high return through a combination of current income and capital appreciation. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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 14 AllianceBernstein Variable Products Series Fund ================================================================================ 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. 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 or accretes discounts as adjustments to interest income. 5. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .625 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2003, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2003. Any expense waivers or reimbursements were accrued daily and paid monthly. For the year ended December 31, 2003, the Portfolio received no such waivers/reimbursements. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $141,292, none of which was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. 15 TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $ 71,380,116 $ 55,602,452 U.S. government securities.............................................. 98,614,711 95,087,166 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost........................................................................................ $ 203,258,550 -------------- Gross unrealized appreciation............................................................... $ 28,117,287 Gross unrealized depreciation............................................................... (2,770,277) -------------- Net unrealized appreciation................................................................. $ 25,347,010 ==============
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. 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. 16 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss in the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $11,876 which is included in interest income in the accompanying statement of operations. NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
=================================== =================================== Shares Amount =================================== =================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 1,150,300 2,476,767 $ 18,599,550 $ 40,916,841 Shares issued in reinvestment of dividends and distributions. 281,808 352,256 4,737,202 5,657,229 Shares redeemed................... (1,543,162) (1,980,636) (24,808,763) (31,050,188) -------------- -------------- -------------- -------------- Net increase (decrease)........... (111,054) 848,387 $ (1,472,011) $ 15,523,882 ============== ============== ============== ==============
17 TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================
=================================== ==================================== Shares Amount =================================== ==================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class B Shares sold....................... 1,612,646 180,775 $ 26,328,138 $ 2,760,763 Shares issued in reinvestment of dividends and distributions. 14,676 2,455 245,968 39,387 Shares redeemed................... (519,958) (55,871) (8,509,593) (865,850) -------------- -------------- -------------- -------------- Net increase...................... 1,107,364 127,359 $ 18,064,513 $ 1,934,300 ============== ============== ============== ==============
NOTE G: Concentration of Risk Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows:
2003 2002 ----------------- ----------------- Distributions paid from: Ordinary income....................................................... $ 4,983,170 $ 4,856,562 Net long-term capital gains........................................... -0- 840,055 -------------- --------------- Total taxable distributions.............................................. 4,983,170 5,696,617 -------------- --------------- Total distributions paid................................................. $ 4,983,170 $ 5,696,617 ============== =============== As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income............................................................. $ 4,992,100 Accumulated capital and other losses...................................................... (19,288,230)(a) Unrealized appreciation/(depreciation).................................................... 25,347,010(b) --------------- Total accumulated earnings/(deficit)...................................................... $ 11,050,880 ===============
(a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $19,288,230 of which $16,290,423 expires in the year 2010 and $2,997,807 expires in year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. (b) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, there were no permanent differences. NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 18 AllianceBernstein Variable Products Series Fund ================================================================================ within the industry and have requested that Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 19 TOTAL RETURN PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================= Class A ============================================================= Year Ended December 31, ------------------------------------------------------------- 2003 2002 2001(a) 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $15.30 $17.65 $18.01 $17.49 $18.06 ------ ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (b)...................... .42 .45 .44 .48 .44 Net realized and unrealized gain (loss) on investment transactions..................... 2.47 (2.29) (.01) 1.63 .70 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations.................................. 2.89 (1.84) .43 2.11 1.14 ------ ------ ------ ------ ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income........... (.43) (.32) (.28) (.39) (.36) Distributions from net realized gain on investment transactions................................ -0- (.19) (.42) (1.20) (1.35) Distributions in excess of net realized gain on investment transactions..................... -0- -0- (.09) -0- -0- ------ ------ ------ ------ ------ Total dividends and distributions.............. (.43) (.51) (.79) (1.59) (1.71) ------ ------ ------ ------ ------ Net asset value, end of period................. $17.76 $15.30 $17.65 $18.01 $17.49 ====== ====== ====== ====== ====== Total Return - ------------ Total investment return based on net asset value (c)............................ 19.05% (10.58)% 2.27% 12.52% 6.53% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)...... $197,334 $171,670 $183,098 $90,736 $75,170 Ratio to average net assets of: Expenses.................................... .79% .79% .78% .87% .86% Net investment income....................... 2.60% 2.76% 2.50% 2.77% 2.48% Portfolio turnover rate........................ 81% 57% 71% 102% 91%
- -------------------------------------------------------------------------------- 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 ==================================== October 26, Year Ended 2001(d) to December 31, December 31, ----------------------- 2003 2002 2001(a) ----------- ----------- ----------- Net asset value, beginning of period................................... $15.27 $17.65 $17.56 ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (b).............................................. .36 .39 .06 Net realized and unrealized gain (loss) on investment transactions..... 2.48 (2.27) .03 ------ ------ ------ Net increase (decrease) in net asset value from operations............. 2.84 (1.88) .09 ------ ------ ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income................................... (.42) (.31) -0- Distributions from net realized gain on investment transactions........ -0- (.19) -0- ------ ------ ------ Total dividends and distributions...................................... (.42) (.50) -0- ------ ------ ------ Net asset value, end of period......................................... $17.69 $15.27 $17.65 ====== ====== ====== Total Return - ------------ Total investment return based on net asset value (c)................... 18.78% (10.80)% .51% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted).............................. $23,417 $3,302 $1,570 Ratio to average net assets of: Expenses............................................................ 1.05% 1.05% 1.00%(e) Net investment income............................................... 2.29% 2.51% 1.80%(e) Portfolio turnover rate................................................ 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 Class B shares was to decrease net investment income per share by $.02 and $.02, increase net -realized and unrealized gain (loss) on investments per share by $.02 and $.02, 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. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (b) Based on average shares outstanding. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total 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) Commencement of distribution. (e) Annualized. 21 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Total Return Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Total Return Portfolio, formerly Alliance Total Return Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Total Return Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young - ----------------- New York, New York February 4, 2004 TAX INFORMATION (unaudited) - -------------------------------------------------------------------------------- For corporate shareholders, 25% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2003 qualifies for the corporate dividends received deduction. 22 TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN The Bank of New York One Wall Street New York, NY 10286 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6033 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 23 TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was Chairman of the Board formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and Chief 96 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Spring Lake, NJ 07762 Alliance Capital Management Corporation (14) ("ACMC") responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from June (12) 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
24 TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 and Gladstone, NJ 07934 a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 25 TOTAL RETURN PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Frank Caruso, 47(1) Vice President Senior Vice President of Shields/ACMC**, with which he has been associated since prior to 1999. Paul C. Rissman, 47(1) Vice President Executive Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Messrs. Rissman and Caruso are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 26 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ---------------------------------- VARIABLE PRODUCTS ---------------------------------- SERIES FUND ---------------------------------- ALLIANCEBERNSTEIN ---------------------------------- PREMIER GROWTH PORTFOLIO ---------------------------------- ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS January 22, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Premier Growth Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks growth of capital by pursuing aggressive investment policies. Since investments will be made based on their potential for capital appreciation, current income will be incidental to the objective of capital growth. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS --------------------------------------- 1 YEAR 5 YEARS 10 YEARS ----------- ----------- ----------- ALLIANCEBERNSTEIN PREMIER GROWTHPORTFOLIO CLASS A 23.67% -4.75% 10.35% RUSSELL 1000 GROWTH INDEX 29.75% -5.11% 9.21% S&P 500 STOCK INDEX 28.67% -0.57% 11.06% Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Russell 1000 Growth Index and the unmanaged Standard & Poor's (S&P) 500 Stock Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Growth Index contains those securities in the Russell 1000 Index with a greater-than-average growth orientation. The unmanaged Russell 1000 Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of any specific investment, including AllianceBernstein Premier Growth Portfolio. For the 12-month period ended December 31, 2003, the Portfolio underperformed the S&P 500 Stock Index and the Russell 1000 Growth Index. The primary source of underperformance was the speculative orientation of the 2003 rally with low quality, smaller capitalization stocks significantly outperforming higher quality, large capitalization stocks that have been the focus of the Portfolio since inception. The health care sector led the market early in the period, yet the sector pulled back somewhat as the year progressed as investors fled to the attraction of the higher-beta securities. As a result, the Portfolio's overweight position in this sector detracted from performance but was offset by favorable stock selection. Unfavorable stock selection in the financials sector also negatively impacted performance. Consumer discretionary stocks recorded mixed performance on an individual basis. Most retailers experienced difficult sales, particularly in apparel. They cited the conflict in Iraq, joblessness, higher gas prices and tough year-over-year sales comparisons as reasons for the weak figures. Some retailers, however, saw a modest pick-up in the latter half of 2003, leading to speculation that the economy was gaining greater momentum. Strong stock selection, coupled with an underweight position in the utilities sector, served relative performance well. The positive impact from an underweight in the consumer staples sector was mildly offset by unfavorable stock selection. An overweight position in technology, which was the best-performing sector during the year, served relative performance well, yet unfavorable stock selection more than offset this. MARKET REVIEW AND INVESTMENT STRATEGY Hints of progress for the U.S. economy emerged throughout the year, gaining momentum with each consecutive quarter. Encouraging financial results from company reports lifted sales and earnings expectations, propelling the U.S. equity market higher. While technology and consumer discretionary stocks led the year's rally, all sectors of the S&P 500 Stock Index closed the year in positive territory. Geopolitical risk factors have receded as the conflict in Iraq unfolded without extreme military or oil price outcomes being realized, leading to an upswing in consumer confidence, as well as shifting focus towards company reports and economic news. 1 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Indications of continued strength in the economy fed the optimistic appetite. The government's release of the gross domestic product, which shot up to an 8.2% annual rate in the third quarter, more than doubled the second quarter's 3.3% gain. This represented the strongest quarterly advance in over 19 years. The market largely looked beyond the unfavorable unemployment figures throughout the year, which inched upward to 6.4% at its peak, but improved at year-end. The U.S. Federal Reserve took down its key interest rate target to 1.0% in an effort to ensure sustainable growth going forward, reducing the risk of deflation. Rising sentiment was additionally fueled during the year by President Bush's signing of a $350 billion package of tax cuts and state aid. Amid the improving economic front, our focus on building a more aggressive posture to the Portfolio resulted in a continued increase in exposure to companies positioned to serve as the beneficiary of this growing recovery. We continued to shift the Portfolio's positions from less cyclically-sensitive financial names to those focused on capital markets. While maintaining close attention to price, we added opportunistically to select positions in technology to take advantage of the increasing return of IT spending. 2 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/93 - 12/31/03 Alliancebernstein Premier Growth Portfolio Class A: $26,777 Russell 1000 Growth Index: $24,129 S&P 500 Index: $28,551 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] Alliance Premier Russell 1000 S&P 500 Growth Portfolio Growth Index Stock Index - ------------------------------------------------------------------------------- 12/31/93 $ 10,000 $ 10,000 $ 10,000 12/31/94 $ 9,704 $ 10,262 $ 10,131 12/31/95 $ 14,056 $ 14,077 $ 13,934 12/31/96 $ 17,247 $ 17,332 $ 17,131 12/31/97 $ 23,087 $ 22,617 $ 22,845 12/31/98 $ 34,161 $ 31,371 $ 29,378 12/31/99 $ 45,200 $ 41,773 $ 35,557 12/31/00 $ 37,707 $ 32,405 $ 32,321 12/31/01 $ 31,219 $ 25,787 $ 28,482 12/31/02 $ 21,652 $ 18,597 $ 22,190 12/31/03 $ 26,777 $ 24,129 $ 28,551 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Premier Growth Portfolio Class A shares (from 12/31/93 to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 1000 Growth Index and the unmanaged Standard & Poor's (S&P) 500 Stock Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Growth Index contains those securities in the Russell 1000 Index with a greater-than-average growth orientation. The unmanaged Russell 1000 Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Premier Growth Portfolio. 3 PREMIER GROWTH PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Microsoft Corp. $ 89,725,320 5.6% - ------------------------------------------------------------------------------- Intel Corp. 73,222,800 4.5 - ------------------------------------------------------------------------------- Citigroup, Inc. 66,577,464 4.1 - ------------------------------------------------------------------------------- Lowe's Cos., Inc. 63,582,181 4.0 - ------------------------------------------------------------------------------- Dell, Inc. 63,505,200 3.9 - ------------------------------------------------------------------------------- Viacom, Inc. Cl.B 61,956,477 3.9 - ------------------------------------------------------------------------------- UnitedHealth Group, Inc. 61,350,810 3.8 - ------------------------------------------------------------------------------- American International Group, Inc. 55,257,106 3.4 - ------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 54,970,410 3.4 - ------------------------------------------------------------------------------- Cisco Systems, Inc. 53,943,232 3.4 ------------- ---- - ------------------------------------------------------------------------------- $ 644,091,000 40.0% - ------------------------------------------------------------------------------- 4 PREMIER GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS-98.9% TECHNOLOGY-35.5% COMMUNICATION EQUIPMENT-6.2% Cisco Systems, Inc. (a) 2,220,800 $ 53,943,232 Juniper Networks, Inc. (a) 631,200 11,790,816 Nokia Corp. (ADR) (Finland) 2,022,700 34,385,900 -------------- 100,119,948 -------------- COMPUTER HARDWARE/STORAGE-4.4% Dell, Inc. (a) 1,870,000 63,505,200 EMC Corp. (a) 625,900 8,086,628 -------------- 71,591,828 -------------- INTERNET INFRASTRUCTURE-3.2% eBay, Inc. (a) 793,100 51,226,329 -------------- INTERNET MEDIA-1.8% Yahoo!, Inc. (a) 628,900 28,407,413 -------------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-0.5% Applied Materials, Inc. (a) 355,000 7,969,750 -------------- SEMI-CONDUCTOR COMPONENTS-8.6% Broadcom Corp. Cl. A (a) 652,700 22,250,543 Intel Corp. 2,274,000 73,222,800 Maxim Integrated Products, Inc. 480,700 23,938,860 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (Taiwan) (a) 1,625,108 16,641,106 Texas Instruments, Inc. 94,700 2,782,286 -------------- 138,835,595 -------------- SOFTWARE-10.8% Electronic Arts, Inc. (a) 818,100 39,088,818 Intuit, Inc. (a) 434,100 22,968,231 Microsoft Corp. 3,258,000 89,725,320 VERITAS Software Corp. (a) 584,400 21,716,304 -------------- 173,498,673 -------------- 571,649,536 -------------- FINANCE-20.4% BROKERAGE & MONEY MANAGEMENT-5.0% The Goldman Sachs Group, Inc. 218,300 21,552,759 Merrill Lynch & Co., Inc. 468,000 27,448,200 Morgan Stanley 536,300 31,035,681 -------------- 80,036,640 -------------- INSURANCE-6.0% American International Group, Inc. 833,692 55,257,106 Progressive Corp. 491,800 41,109,562 -------------- 96,366,668 -------------- MORTGAGE BANKING-2.4% Fannie Mae 519,000 38,956,140 -------------- MISCELLANEOUS-7.0% Citigroup, Inc. 1,371,600 66,577,464 MBNA Corp. 1,880,100 46,720,485 -------------- 113,297,949 -------------- 328,657,397 -------------- CONSUMER SERVICES-19.5% BROADCASTING & CABLE-8.5% Clear Channel Communications, Inc. 636,200 29,793,246 Comcast Corp. Special Cl.A (a) 1,365,700 42,719,096 The E.W. Scripps Co. Cl.A 32,500 3,059,550 Viacom, Inc. Cl.B 1,396,045 61,956,477 -------------- 137,528,369 -------------- PRINTING & PUBLISHING-0.2% Gannett Co., Inc. 29,700 2,648,052 -------------- RETAIL - GENERAL MERCHANDISE-10.8% Bed Bath & Beyond, Inc. (a) 667,300 28,927,455 Family Dollar Stores, Inc. 125,100 4,488,588 Lowe's Cos., Inc. 1,147,900 63,582,181 Target Corp. 567,700 21,799,680 Wal-Mart Stores, Inc. 1,036,200 54,970,410 -------------- 173,768,314 -------------- 313,944,735 -------------- HEALTHCARE-16.4% BIOTECHNOLOGY-3.3% Amgen, Inc. (a) 745,300 46,059,540 Gilead Sciences, Inc. (a) 133,100 7,738,434 -------------- 53,797,974 -------------- DRUGS-4.0% Pfizer, Inc. 1,143,600 40,403,388 Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 433,800 24,600,798 -------------- 65,004,186 -------------- MEDICAL PRODUCTS-5.3% Alcon, Inc. (Switzerland) 195,800 11,853,732 Medtronic, Inc. 909,100 44,191,351 St. Jude Medical, Inc. (a) 171,100 10,496,985 Stryker Corp. 39,900 3,391,899 Zimmer Holdings, Inc. (a) 212,800 14,981,120 -------------- 84,915,087 -------------- MEDICAL SERVICES-3.8% UnitedHealth Group, Inc. 1,054,500 61,350,810 -------------- 265,068,057 -------------- 5 PREMIER GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- CONSUMER STAPLES-4.3% BEVERAGES-0.8% Anheuser-Busch Cos., Inc. 246,100 $ 12,964,548 -------------- COSMETICS-1.0% Avon Products, Inc. 231,300 15,610,437 -------------- HOUSEHOLD PRODUCTS-1.5% Colgate-Palmolive Co. 180,300 9,024,015 The Procter & Gamble Co. 157,700 15,751,076 -------------- 24,775,091 -------------- RETAIL - FOOD & DRUG-1.0% Walgreen Co. 447,100 16,265,498 -------------- 69,615,574 -------------- CAPITAL GOODS-2.8% MISCELLANEOUS-2.8% General Electric Co. 1,395,700 43,238,786 United Technologies Corp. 20,600 1,952,262 -------------- 45,191,048 -------------- Total Common Stocks (cost $1,310,802,539) 1,594,126,347 -------------- PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-1.5% TIME DEPOSIT-1.5% The Bank of New York 0.56%, 1/02/04 (cost $24,000,000) $ 24,000 $ 24,000,000 -------------- TOTAL INVESTMENTS-100.4% (cost $1,334,802,539) 1,618,126,347 Other assets less liabilities-(0.4%) (6,427,223) -------------- NET ASSETS-100% $1,611,699,124 ============== - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 6 PREMIER GROWTH PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $1,334,802,539) $ 1,618,126,347 Cash 101,872 Receivable for investment securities sold 2,691,591 Dividends and interest receivable 799,322 Receivable for capital stock sold 705,327 --------------- Total assets 1,622,424,459 --------------- LIABILITIES Payable for investment securities purchased 8,473,125 Advisory fee payable 1,203,575 Payable for capital stock redeemed 502,117 Distribution fee payable 142,950 Accrued expenses 403,568 --------------- Total liabilities 10,725,335 --------------- NET ASSETS $ 1,611,699,124 =============== COMPOSITION OF NET ASSETS Capital stock, at par $ 75,052 Additional paid-in capital 2,240,802,362 Accumulated net realized loss on investment transactions (912,502,098) Net unrealized appreciation of investments 283,323,808 --------------- $ 1,611,699,124 =============== CLASS A SHARES Net assets $ 917,935,039 =============== Shares of capital stock outstanding 42,530,422 =============== Net asset value per share $ 21.58 =============== CLASS B SHARES Net assets $ 693,764,085 =============== Shares of capital stock outstanding 32,522,102 =============== Net asset value per share $ 21.33 =============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 PREMIER GROWTH PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $107,027 ) $ 11,497,701 Interest 149,291 ------------- Total investment income 11,646,992 ------------- EXPENSES Advisory fee 14,586,714 Distribution fee -- Class B 1,454,738 Printing 258,950 Custodian 219,653 Audit and legal 110,507 Administrative 75,000 Directors' fees and expenses 1,185 Transfer agency 947 Miscellaneous 73,954 ------------- Total expenses 16,781,648 Less: expenses waived and reimbursed (SeeNote B) (133,731) ------------- Net expenses 16,647,917 ------------- Net investment loss (5,000,925) ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions (79,811,980) Net change in unrealized appreciation/depreciation of investments 393,353,656 ------------- Net gain on investment transactions 313,541,676 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 308,540,751 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 PREMIER GROWTH PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============== ============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (5,000,925) $ (8,124,318) Net realized loss on investment transactions (79,811,980) (466,319,467) Net change in unrealized appreciation/ depreciation of investments 393,353,656 (179,559,420) -------------- -------------- Net increase (decrease) in net assets from operations 308,540,751 (654,003,205) CAPITAL STOCK TRANSACTIONS Net decrease (59,908,719) (141,770,338) -------------- -------------- Total increase (decrease) 248,632,032 (795,773,543) NET ASSETS Beginning of period 1,363,067,092 2,158,840,635 -------------- -------------- End of period $1,611,699,124 $1,363,067,092 ============== ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 PREMIER GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Premier Growth Portfolio (the "Portfolio"), formerly Alliance Premier Growth Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek growth of capital by pursuing aggressive investment policies. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Portfolio'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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. For the year ended December 31, 2003 the Adviser waived fees in the amount of $133,731. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003, amounted to $4,045,107, of which $188,480 was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 11 PREMIER GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============== ============== Investment securities (excluding U.S. government securities) $1,093,093,807 $1,137,402,847 U.S. government securities 50,650,761 73,715,148 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $1,364,250,719 ============== Gross unrealized appreciation $ 268,005,932 Gross unrealized depreciation (14,130,304) -------------- Net unrealized appreciation $ 253,875,628 ============== 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. 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. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 selling or buying a security or currency at a price different from the current market value. NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $60,451 which is included in interest income in the accompanying statement of operations. NOTE F: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 1,261,503 2,459,924 $ 24,349,408 $ 51,731,375 Shares redeemed (8,537,343) (15,703,442) (160,817,203) (315,011,856) ----------- ----------- ------------- ------------- Net decrease (7,275,840) (13,243,518) $(136,467,795) $(263,280,481) =========== =========== ============= ============= CLASS B Shares sold 8,653,586 11,008,978 $ 164,814,247 $ 225,136,945 Shares redeemed (4,698,475) (5,335,326) (88,255,171) (103,626,802) ----------- ----------- ------------- ------------- Net increase 3,955,111 5,673,652 $ 76,559,076 $ 121,510,143 =========== =========== ============= ============= 13 PREMIER GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE G: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT) As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $(883,053,918)(a) Unrealized appreciation/(depreciation) 253,875,628(b) ------------- Total accumulated earnings/(deficit) $(629,178,290) ============= (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $883,053,918 of which $237,722,331 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. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to net operating losses, resulted in a net decrease in net investment loss and a corresponding decrease in additional paid-in capital. These reclassifications had no effect on net assets. NOTE J: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 15 PREMIER GROWTH PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $17.45 $25.16 $32.05 $40.45 $31.03 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.05)(b) (.08) (.06) (.11) (.09) Net realized and unrealized gain (loss) on investment transactions 4.18 (7.63) (5.31) (6.18) 9.98 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.13 (7.71) (5.37) (6.29) 9.89 ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -0- -0- -0- -0- -0- Distributions from net realized gain on investment transactions -0- -0- (1.38) (2.11) (.47) Distributions in excess of net realized gain on investment transactions -0- -0- (.14) -0- -0- ------ ------ ------ ------ ------ Total dividends and distributions -0- -0- (1.52) (2.11) (.47) ------ ------ ------ ------ ------ Net asset value, end of period $21.58 $17.45 $25.16 $32.05 $40.45 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (c) 23.67% (30.64)% (17.21)% (16.58)% 32.32% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $917,935 $869,130 $1,586,575 $2,148,332 $2,345,563 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.04% 1.05% 1.04% 1.04% 1.05% Expenses, before waivers and reimbursements 1.05% 1.05% 1.04% 1.04% 1.05% Net investment loss (.24)%(b) (.41)% (.21)% (.29)% (.27)% Portfolio turnover rate 79% 109% 49% 41% 26%
- -------------------------------------------------------------------------------- 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 ----------------------------------------------------------------- JULY 14, 1999(d) YEAR ENDED DECEMBER 31, TO -------------------------------------------------- DECEMBER 31, 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $17.29 $25.00 $31.93 $40.40 $35.72 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.09)(b) (.13) (.12) (.18) (.07) Net realized and unrealized gain (loss) on investment transactions 4.13 (7.58) (5.29) (6.18) 4.75 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.04 (7.71) (5.41) (6.36) 4.68 ------ ------ ------ ------ ------ LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- (1.38) (2.11) -0- Distributions in excess of net realized gain on investment transactions -0- -0- (.14) -0- -0- ------ ------ ------ ------ ------ Total distributions -0- -0- (1.52) (2.11) -0- ------ ------ ------ ------ ------ Net asset value, end of period $21.33 $17.29 $25.00 $31.93 $40.40 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (c) 23.37% (30.84)% (17.40)% (16.78)% 13.10% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $693,764 $493,937 $572,266 $336,104 $27,124 Ratio to average net assets of: Expenses, net of waivers and reimbursement 1.29% 1.31% 1.29% 1.30% 1.29%(e) Expenses, before waivers and reimbursements 1.30% 1.31% 1.29% 1.30% 1.29%(e) Net investment loss (.49)%(b) (.64)% (.47)% (.51)% (.53)%(e) Portfolio turnover rate 79% 109% 49% 41% 26%
- -------------------------------------------------------------------------------- (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) Commencement of distribution. (e) Annualized. 17 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Premier Growth Portfolio, formerly Alliance Premier Growth Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Premier Growth Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 18 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN THE BANK OF NEW YORK ONE WALL STREET New York, NY 10286 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 19 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS, OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered invest- Greenwich, CT 06830 ment adviser, with which he had been associ- (14) ated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; Chair- (12) man and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Manage- ment since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from (12) June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989- May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
20 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS, OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ----------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior Weston, VT 05161 to 1999. Formerly a senior partner and a (8) member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 21 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - -------------------------------------------------------------------------------------------------------------------------- Marc o. Mayer, 46 President Executive Vice President Of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Thomas Kamp, 42(1) Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Daniel Nordby, 59 Vice President Senior Vice President of ACMC**, with which he has been associated since 1999. Michael J. Reilly, 39 Vice President Senior Vice President of ACMC** with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
(1) Mr. Kamp is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 22 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 9, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Growth & Income Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks reasonable current income and reasonable opportunities for appreciation through investments primarily in dividend-paying common stocks of good quality. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS --------------------------------------- 1 YEAR 5 YEARS 10 YEARS ----------- ----------- ----------- ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO CLASS A 32.50% 5.62% 13.14% RUSSELL 1000 VALUE INDEX 30.03% 3.56% 11.88% Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Russell 1000 Value Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index contains those securities in the Russell 1000 Index with a less-than-average growth orientation. The Russell 1000 Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Growth & Income Portfolio. The Portfolio outperformed its benchmark, the Russell 1000 Value Index, for the 12-month period ended December 31, 2003 due to strong stock selection. Additionally, long-term performance was quite strong versus our benchmark. For the five-year and 10-year periods ended December 31, 2003, the Portfolio returned 5.62% and 13.14%, respectively, versus 3.56% and 11.88%, respectively for the benchmark. Relative to the Russell 1000 Value Index, the Portfolio was overweighted primarily in the health care and technology sectors, and underweighted in the utilities sector during the 12-month period under review. The Portfolio's technology overweight and utilities underweight contributed to the Portfolio's relative outperformance versus its benchmark. However, good stock selection within the health care sector couldn't offset the negative impact of its sector overweight. MARKET REVIEW AND INVESTMENT STRATEGY Stocks finished 2003 strongly as prospects for global economic and corporate profits recovery improved throughout the year. Equity market leaders during 2003 were generally smaller companies in economically sensitive businesses. As the economy improved, equity investments in industries most closely tied to the economy generally performed best. Against this backdrop, the opportunity for value investments shifted during the year away from such companies and into less economically sensitive, global franchise companies. As the global recovery strengthens, the language and policy of central bankers is likely to shift away from its currently accommodating stance to something more neutral. 1 GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/93-12/31/03 AllianceBernstein Growth & Income Portfolio Class A: $34,361 Russell 1000 Value Index: $30,722 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] AllianceBernstein Growth & Income Russell 1000 Portfolio Class A Value Index - ------------------------------------------------------------------------------- 12/31/93 $ 10,000 $ 10,000 12/31/94 $ 9,965 $ 9,802 12/31/95 $ 13,528 $ 13,562 12/31/96 $ 16,786 $ 16,497 12/31/97 $ 21,620 $ 22,302 12/31/98 $ 26,136 $ 25,787 12/31/99 $ 29,108 $ 27,682 12/31/00 $ 33,150 $ 29,624 12/31/01 $ 33,268 $ 27,968 12/31/02 $ 25,932 $ 23,627 12/31/03 $ 34,361 $ 30,722 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Growth & Income Portfolio Class A shares (from 12/31/93 to 12/31/03) as compared to the performance of an appropriate broad-based index. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 1000 Value Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index contains those securities in the Russell 1000 Index with a less-than-average growth orientation. The Russell 1000 Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Growth & Income Portfolio. 2 GROWTH & INCOME PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Citigroup, Inc. $ 97,080,000 4.3% - ------------------------------------------------------------------------------- American International Group, Inc. 92,792,000 4.1 - ------------------------------------------------------------------------------- UNION PACIFIC CORP. 80,944,200 3.6 - ------------------------------------------------------------------------------- Bank One Corp. 79,782,500 3.5 - ------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 73,460,000 3.2 - ------------------------------------------------------------------------------- Bank of America Corp. 72,387,000 3.2 - ------------------------------------------------------------------------------- Viacom, Inc. Cl. B 72,117,500 3.2 - ------------------------------------------------------------------------------- Pfizer, Inc. 70,660,000 3.1 - ------------------------------------------------------------------------------- ConocoPhillips 55,734,500 2.4 - ------------------------------------------------------------------------------- Altria Group, Inc. 54,420,000 2.4 ------------- ---- - ------------------------------------------------------------------------------- $ 749,377,700 33.0% - ------------------------------------------------------------------------------- 3 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS-96.9% FINANCE-28.3% BANKING - MONEY CENTER-3.2% JP Morgan Chase & Co. 2,000,000 $ 73,460,000 -------------- BANKING - REGIONAL-6.9% Bank of America Corp. 900,000 72,387,000 Bank One Corp. 1,750,000 79,782,500 Commerce Bancorp, Inc. 100,000 5,268,000 -------------- 157,437,500 -------------- BROKERAGE & MONEY MANAGEMENT-2.3% MERRILL LYNCH & CO., INC. 285,000 16,715,250 Morgan Stanley 595,000 34,432,650 -------------- 51,147,900 -------------- INSURANCE-8.1% ACE Ltd. (Cayman Islands) 1,000,000 41,420,000 Allstate Corp. 600,000 25,812,000 American International Group, Inc. 1,400,000 92,792,000 Axis Capital Holdings Ltd. (Bermuda) 152,700 4,471,056 Metlife, Inc. 600,000 20,202,000 -------------- 184,697,056 -------------- MORTGAGE BANKING-2.0% Fannie Mae 600,000 45,036,000 -------------- MISCELLANEOUS-5.8% Citigroup, Inc. 2,000,000 97,080,000 MBNA Corp. 1,427,100 35,463,435 -------------- 132,543,435 -------------- 644,321,891 -------------- HEALTHCARE-15.2% BIOTECHNOLOGY-1.6% Applera Corp.-Applied Biosystems Group 585,700 12,129,847 Cephalon, Inc. (a) 109,200 5,286,372 MedImmune, Inc. (a) 750,000 19,050,000 -------------- 36,466,219 -------------- DRUGS-5.1% Pfizer, Inc. 2,000,000 70,660,000 Wyeth 1,050,000 44,572,500 -------------- 115,232,500 -------------- MEDICAL PRODUCTS-1.5% Alcon, Inc. (Switzerland) 250,000 15,135,000 Johnson & Johnson 385,000 19,889,100 -------------- 35,024,100 -------------- MEDICAL SERVICES-7.0% Anthem, Inc. (a) 500,000 37,500,000 HCA, Inc. 1,000,000 42,960,000 Health Management Associates, Inc. Cl. A 504,300 12,103,200 Tenet Healthcare Corp. (a) 1,200,000 19,260,000 WellPoint Health Networks, Inc. (a) 500,000 48,495,000 -------------- 160,318,200 -------------- 347,041,019 -------------- CONSUMER SERVICES-11.8% BROADCASTING & CABLE-8.6% Clear Channel Communications, Inc. 475,000 22,244,250 Comcast Corp. Cl.A (a) 1,250,000 41,087,500 Comcast Corp. Special Cl. A (a) 500,000 15,640,000 Time Warner, Inc. (a) 1,250,000 22,487,500 Viacom, Inc. Cl.B 1,625,000 72,117,500 Westwood One, Inc. (a) 650,000 22,236,500 -------------- 195,813,250 -------------- ENTERTAINMENT & LEISURE-2.2% Carnival Corp. (Panama) 285,000 11,323,050 Harley-Davidson, Inc. 750,000 35,647,500 Royal Caribbean Cruises Ltd. (Liberia) 104,500 3,635,555 -------------- 50,606,105 -------------- RETAIL - GENERAL MERCHANDISE-1.0% Home Depot, Inc. 600,000 21,294,000 -------------- 267,713,355 -------------- CONSUMER STAPLES-10.8% BEVERAGES-1.7% Anheuser-Busch Cos., Inc. 750,000 39,510,000 -------------- COSMETICS-1.6% Avon Products, Inc. 425,000 28,683,250 International Flavors & Fragrances, Inc. 193,300 6,750,036 -------------- 35,433,286 -------------- FOOD-0.7% Dean Foods Co. 500,000 16,435,000 -------------- HOUSEHOLD PRODUCTS-3.4% Colgate-Palmolive Co. 750,000 37,537,500 The Procter & Gamble Co. 400,000 39,952,000 -------------- 77,489,500 -------------- 4 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- TOBACCO-3.4% Altria Group, Inc. 1,000,000 $ 54,420,000 Loews Corp.- Carolina Group 900,000 22,716,000 -------------- 77,136,000 -------------- 246,003,786 -------------- ENERGY-10.8% DOMESTIC INTEGRATED-0.6% Occidental Petroleum Corp. 350,000 14,784,000 -------------- DOMESTIC PRODUCERS-2.7% Devon Energy Corp. 250,000 14,315,000 Kerr-McGee Corp. 800,000 37,192,000 Noble Energy, Inc. 200,000 8,886,000 -------------- 60,393,000 -------------- INTERNATIONAL-2.6% BP Plc (ADR) (United Kingdom) 750,000 37,012,500 EXXON MOBIL CORP. 515,000 21,115,000 -------------- 58,127,500 -------------- OIL SERVICE-2.5% Baker Hughes, Inc. 419,700 13,497,552 Nabors Industries Ltd. (Bermuda) (a) 550,000 22,825,000 Noble Corp. (Cayman Islands) (a) 321,200 11,492,536 Weatherford International Ltd. (Bermuda) (a) 253,870 9,139,320 -------------- 56,954,408 -------------- MISCELLANEOUS-2.4% ConocoPhillips 850,000 55,734,500 -------------- 245,993,408 -------------- UTILITIES-6.6% ELECTRIC & GAS UTILITY-2.0% Edison International 94,700 2,076,771 Entergy Corp. 350,000 19,995,500 Exelon Corp. 100,000 6,636,000 PPL Corp. 400,000 17,500,000 -------------- 46,208,271 -------------- TELEPHONE UTILITY-4.6% BellSouth Corp. 650,000 18,395,000 SBC Communications, Inc. 850,000 22,159,500 Sprint Corp.- FON Group 1,350,000 22,167,000 Verizon Communications, Inc. 1,150,000 40,342,000 -------------- 103,063,500 -------------- 149,271,771 -------------- TRANSPORTATION-5.5% RAILROADS-5.5% Burlington Northern Santa Fe Corp. 1,350,000 43,672,500 Union Pacific Corp. 1,165,000 80,944,200 -------------- 124,616,700 -------------- TECHNOLOGY-4.3% COMMUNICATION EQUIPMENT-0.3% Juniper Networks, Inc. (a) 400,000 7,472,000 -------------- COMPUTER HARDWARE/STORAGE-0.5% Hewlett-Packard Co. 500,000 11,485,000 -------------- COMPUTER SERVICES-1.5% First Data Corp. 850,000 34,926,500 -------------- SOFTWARE-2.0% Microsoft Corp. 1,600,000 44,064,000 -------------- 97,947,500 -------------- CAPITAL GOODS-1.5% ELECTRICAL EQUIPMENT-0.8% Johnson Controls, Inc. 150,000 17,418,000 -------------- MISCELLANEOUS-0.7% United Technologies Corp. 175,000 16,584,750 -------------- 34,002,750 -------------- CONSUMER MANUFACTURING-0.9% BUILDINGS RELATED-0.9% American Standard Cos., Inc. (a) 200,000 20,140,000 -------------- AEROSPACE & DEFENSE-0.7% AEROSPACE-0.7% Northrop Grumman Corp. 175,000 16,730,000 -------------- BASIC INDUSTRY-0.5% MINING & METALS-0.5% Alcoa, Inc. 200,000 7,600,000 Ashland, Inc. 75,000 3,304,500 -------------- 10,904,500 -------------- Total Common Stocks (cost $1,877,087,527) 2,204,686,680 -------------- 5 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-3.3% TIME DEPOSIT-3.3% The Bank of New York 0.56%, 1/02/04 (cost $76,000,000) $ 76,000 $ 76,000,000 -------------- TOTAL INVESTMENTS-100.2% (cost $1,953,087,527) $2,280,686,680 Other assets less liabilities-(0.2%) (5,342,198) -------------- NET ASSETS-100% $2,275,344,482 ============== - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 6 GROWTH & INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $1,953,087,527) $ 2,280,686,680 Cash 679,416 Dividends and interest receivable 3,108,623 Receivable for investment securities sold 2,286,376 Receivable for capital stock sold 1,136,875 --------------- Total assets 2,287,897,970 --------------- LIABILITIES Payable for capital stock redeemed 7,152,971 Payable for securities purchased 3,629,768 Advisory fee payable 1,165,833 Distribution fee payable 354,992 Accrued expenses 249,924 --------------- Total liabilities 12,553,488 --------------- NET ASSETS $ 2,275,344,482 =============== COMPOSITION OF NET ASSETS Capital stock, at par $ 105,001 Additional paid-in capital 2,199,801,063 Undistributed net investment income 19,059,915 Accumulated net realized loss on investment transactions (271,220,650) Net unrealized appreciation of investments 327,599,153 --------------- $ 2,275,344,482 =============== CLASS A SHARES Net assets $ 603,673,356 =============== Shares of capital stock outstanding 27,693,533 =============== Net asset value per share $ 21.80 =============== CLASS B SHARES Net assets $ 1,671,671,126 =============== Shares of capital stock outstanding 77,307,668 =============== Net asset value per share $ 21.62 =============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 GROWTH & INCOME PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $125,596) $ 33,916,670 Interest 387,916 ------------- Total investment income 34,304,586 ------------- EXPENSES Advisory fee 11,253,144 Distribution fee -- Class B 3,232,624 Custodian 219,547 Printing 163,772 Administrative 75,000 Audit and legal 67,023 Directors' fees and expenses 1,285 Transfer agency 947 Miscellaneous 99,229 ------------- Total expenses 15,112,571 ------------- Net investment income 19,192,015 ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 27,303,599 Net change in unrealized appreciation/depreciation of investments 468,948,547 ------------- Net gain on investment transactions 496,252,146 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 515,444,161 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 GROWTH & INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============== ============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 19,192,015 $ 16,080,580 Net realized gain (loss) on investment transactions 27,303,599 (263,159,269) Net change in unrealized appreciation/ depreciation of investments 468,948,547 (180,481,515) -------------- -------------- Net increase (decrease) in net assets from operations 515,444,161 (427,560,204) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (5,298,556) (3,650,674) Class B (10,692,656) (5,894,113) Net realized gain on investment transactions Class A -0- (18,762,071) Class B -0- (36,231,462) CAPITAL STOCK TRANSACTIONS Net increase 251,538,159 453,336,029 -------------- -------------- Total increase (decrease) 750,991,108 (38,762,495) NET ASSETS: Beginning of period 1,524,353,374 1,563,115,869 -------------- -------------- End of period (including undistributed net investment income of $19,059,915 and $15,859,112, respectively) $2,275,344,482 $1,524,353,374 ============== ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Growth & Income Portfolio (the "Portfolio"), formerly Alliance Growth & Income Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek reasonable current income and reasonable opportunity for appreciation through investments primarily in dividend-paying, common stocks of good quality. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Portfolio'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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .625 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2003, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2003. Any expense waivers or reimbursements were accrued daily and paid monthly. For the year ended December 31, 2003, the Portfolio received no such waivers/reimbursements. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. 11 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $3,904,261, of which $260,705 was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============== ============== Investment securities (excluding U.S. government securities) $1,190,025,738 $ 945,190,500 U.S. government securities 6,298,355 41,896,134 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $1,972,189,092 ============== Gross unrealized appreciation $ 335,005,722 Gross unrealized depreciation (26,508,134) -------------- Net unrealized appreciation $ 308,497,588 ============== 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. 12 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 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 selling or buying a security or currency at a price different from the current market value. NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $29,885which is included in the interest income in the accompanying statement of operations. 13 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE F: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 4,525,746 5,460,821 $ 85,909,173 $ 106,480,252 Shares issued in reinvestment of dividends and distributions 271,026 1,176,522 5,298,557 22,412,745 Shares redeemed (4,570,168) (9,569,370) (83,057,077) (178,686,522) ----------- ----------- ------------ ------------- Net increase (decrease) 226,604 (2,932,027) $ 8,150,653 $ (49,793,525) =========== =========== ============ ============= CLASS B Shares sold 23,010,963 30,976,887 $432,799,344 $ 611,740,824 Shares issued in reinvestment of dividends and distributions 550,600 2,225,334 10,692,656 42,125,575 Shares redeemed (11,015,402) (8,811,877) (200,104,494) (150,736,845) ----------- ----------- ------------ ------------- Net increase 12,546,161 24,390,344 $243,387,506 $ 503,129,554 =========== =========== ============ ============= NOTE G: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ============= ============= Distributions paid from: Ordinary income $ 15,991,212 $ 9,560,093 Net long-term capital gains -- 54,978,227 ------------- ------------- Total taxable distributions 15,991,212 64,538,320 ------------- ------------- Total distributions paid $ 15,991,212 $ 64,538,320 ============= ============= 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 19,059,915 Accumulated capital and other losses (252,119,085)(a) Unrealized appreciation/(depreciation) 308,497,588(b) ------------- Total accumulated earnings/(deficit) $ 75,438,418 ============= (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $252,119,085 of which $229,142,961 expires in the year 2010 and $22,976,124 expires in the year 2011. 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. For the current fiscal year, there were no permanent differences. NOTE J: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance 15 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 GROWTH & INCOME PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $16.62 $22.16 $23.15 $21.79 $21.84 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .23 .22 .21 .22 .16 Net realized and unrealized gain (loss) on investment and foreign currency transactions 5.15 (5.01) (.05) 2.75 2.25 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 5.38 (4.79) .16 2.97 2.41 ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.20) (.12) (.14) (.14) (.18) Distributions from net realized gain on investment transactions -0- (.63) (1.01) (1.47) (2.28) ------ ------ ------ ------ ------ Total dividends and distributions (.20) (.75) (1.15) (1.61) (2.46) ------ ------ ------ ------ ------ Net asset value, end of period $21.80 $16.62 $22.16 $23.15 $21.79 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (b) 32.50% (22.05)% 0.36% 13.89% 11.37% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $603,673 $456,402 $673,722 $596,547 $522,163 Ratio to average net assets of: Expenses .66% .68% .67% .69% .71% Net investment income 1.25% 1.15% .95% 1.01% .75% Portfolio turnover rate 57% 69% 80% 74% 46%
- -------------------------------------------------------------------------------- See footnote summary on page 18. 17 GROWTH & INCOME PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B ----------------------------------------------------------------- JUNE 1, 1999(c) YEAR ENDED DECEMBER 31, TO -------------------------------------------------- DECEMBER 31, 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $16.49 $22.03 $23.06 $21.76 $21.37 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .18 .17 .16 .18 .07 Net realized and unrealized gain (loss) on investment and foreign currency transactions 5.11 (4.98) (.05) 2.73 .32 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 5.29 (4.81) .11 2.91 .39 ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.16) (.10) (.13) (.14) -0- Distributions from net realized gain on investment transactions -0- (.63) (1.01) (1.47) -0- ------ ------ ------ ------ ------ Total dividends and distributions (.16) (.73) (1.14) (1.61) -0- ------ ------ ------ ------ ------ Net asset value, end of period $21.62 $16.49 $22.03 $23.06 $21.76 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (b) 32.18% (22.26)% 0.15% 13.59% 1.83% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $1,671,671 $1,067,952 $889,394 $151,739 $7,993 Ratio to average net assets of: Expenses .91% .93% .92% .95% .97%(d) Net investment income .99% .91% .75% .85% .55%(d) Portfolio turnover rate 57% 69% 80% 74% 46%
- -------------------------------------------------------------------------------- (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) Commencement of distribution. (d) Annualized. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Growth & Income Portfolio, formerly Alliance Growth & Income Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Growth & Income Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 TAX INFORMATION (unaudited) _______________________________________________________________________________ For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2003 qualifies for the corporate dividends received deduction. 19 GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN THE BANK OF NEWYORK ONE WALL STREET New York, NY 10286 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 _______________________________________________________________________________ (1) Member of the Audit Committee. 20 GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,#, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered invest- Greenwich, CT 06830 ment adviser, with which he had been associ- (14) ated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,#, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,#, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001- Annandale, NY 12504 2002, Senior Advisor from June 1999-June (12) 2000 and President of Historic Hudson Valley (historic preservation) from December 1989- May 1999. Previously, Director of the National Academy of Design and during 1988- 1992, Director and Chairman of the Audit Committee of ACMC.
21 GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Clifford L. Michel,#, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, Inc. 15 St. Bernard's Road Gordon & Reindel since February 2001 and Gladstone, NJ 07934 a partner of that firm for more than twenty-five (12) years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,#, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 22 GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ---------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Frank Caruso, 47(1) Vice President Senior Vice President of Shields/ACMC**, with which he has been associated since prior to 1999. Paul C. Rissman, 47(1) Vice President Executive Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Messrs. Rissman and Caruso are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS, and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ------------------------ VARIABLE PRODUCTS ------------------------ SERIES FUND ------------------------ ALLIANCEBERNSTEIN ------------------------ GROWTH PORTFOLIO ------------------------ ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS January 28, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Growth Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES This Portfolio seeks long-term growth of capital. Current income is incidental to the Portfolio's objective. The Portfolio invests primarily in equity securities of companies with favorable earnings outlooks and whose long-term growth rates are expected to exceed that of the U.S. economy over time. The Portfolio emphasizes investments in large- and mid-cap companies. The Portfolio also may invest up to 25% of its total assets in lower-rated, fixed income securities and convertible bonds, and generally up to 20% of its total assets in foreign securities. INVESTMENT RESULTS PERIODS ENDED DECEMBER 31, 2003 RETURNS --------------------------------------- SINCE 1 YEAR 5 YEARS INCEPTION* ----------- ----------- ----------- ALLIANCEBERNSTEIN GROWTH PORTFOLIO CLASS A 35.06% -3.78% 10.48% RUSSELL 3000 INDEX 31.06% 0.37% 11.44% S&P 500 STOCK INDEX 28.67% -0.57% 11.66% * The Portfolio's Class A share inception date is 9/15/94. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged Russell 3000 Index and the unmanaged Standard & Poor's (S&P) 500 Stock Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 3000 Index is comprised of 3000 of the largest capitalized companies that are traded in the United States. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Growth Portfolio. For the 12-month period ended December 31, 2003, the Portfolio outperformed both benchmarks, the Russell 3000 Index and the S&P 500 Stock Index. Technology holdings provided particularly strong performance, led by several telecommunication capital goods and storage software companies. Financial services holdings performed well, in particular the securities-related firms. This strength was partially offset by weakness of several consumer holdings. MARKET REVIEW AND INVESTMENT STRATEGY The past year bridged remarkable extremes in investor perceptions, confidence and expectations. The year began with subdued expectations for economic growth and corporate profits. Expectations of potential U.S. real gross domestic product (GDP) growth were generally 2.0%-2.5% for 2003. These anxieties were reinforced by uncertainties and political tensions, which arose from the looming military conflict in Iraq. In retrospect, the Iraqi confrontation proved to be pivotal in transforming expectations. As the dimensions of the conflict became clearer, investor sentiment rebounded with risk aversion abating, beginning in the second quarter, and expectations of economic growth improving. Equity markets rallied and corporate credit spreads narrowed toward historical norm levels not seen for three to four years. Subsequent months have witnessed a broadening equity recovery, more recently validated and reinforced by confirmation of cyclical recovery in economic growth, corporate profits and cash flow. Recently reported third quarter real GDP growth of 8.2% substantially exceeded expectations. This was particularly impressive as it occurred without the benefit of inventory investment that is typically associated with recovery. Accelerating corporate profits and cash flow have over the past several quarters led to a recovery in 1 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ capital spending and manufacturing, which are currently expanding at double-digit rates. In anticipation of an improving economic environment with accelerating corporate profits, the Portfolio's exposure to cyclical growth was increased during the spring and summer months; most notably through investment in technology and securities-related stocks. This was accomplished with increases in select, longer term holdings of dominant leadership companies. In addition, initial positions were established in a number of successful companies judged to enjoy commanding competitive positions and distinctly superior growth prospects. 2 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN GROWTH PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 9/15/94*-12/31/03 ALLIANCEBERNSTEIN GROWTH PORTFOLIO CLASS A: $25,251 RUSSELL 3000 INDEX: $27,358 S&P 500 STOCK INDEX: $27,849 [THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL] Alliance Growth Portfolio Russell 3000 Index S&P 500 Stock Index - -------------------------------------------------------------------------------- 9/15/94* $10,000 $10,000 $10,000 12/31/94 $10,530 $ 9,852 $ 9,882 12/31/95 $14,239 $13,477 $13,591 12/31/96 $18,295 $16,418 $16,710 12/31/97 $23,788 $21,635 $22,283 12/31/98 $30,621 $26,858 $28,656 12/31/99 $41,176 $32,471 $34,682 12/31/00 $33,967 $30,049 $31,526 12/31/01 $25,995 $26,605 $27,781 12/31/02 $18,697 $20,875 $21,644 12/31/03 $25,251 $27,358 $27,849 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Growth Portfolio Class A shares (from 9/15/94* to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged Russell 3000 Index and the unmanaged Standard & Poor's (S&P) 500 Stock Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 3000 Index is comprised of 3000 of the largest capitalized companies that are traded in the United States. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Growth Portfolio. - -------------------------------------------------------------------------------- * Portfolio and benchmark data are from the Portfolio's inception date of 9/15/94. 3 GROWTH PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Citigroup, Inc. $ 11,199,974 4.3% - ------------------------------------------------------------------------------- Legg Mason, Inc. 11,098,484 4.2 - ------------------------------------------------------------------------------- American International Group, Inc. 10,775,073 4.1 - ------------------------------------------------------------------------------- Forest Laboratories, Inc. 9,696,420 3.7 - ------------------------------------------------------------------------------- eBay, Inc. 8,913,420 3.4 - ------------------------------------------------------------------------------- Juniper Networks, Inc. 8,049,212 3.1 - ------------------------------------------------------------------------------- Dell, Inc. 7,625,718 2.9 - ------------------------------------------------------------------------------- Harley-Davidson, Inc. 7,552,517 2.9 - ------------------------------------------------------------------------------- Wellpoint Health Networks, Inc. 7,351,842 2.8 - ------------------------------------------------------------------------------- VERITAS Software Corp. 7,045,536 2.7 ------------ ---- - ------------------------------------------------------------------------------- $ 89,308,196 34.1% - ------------------------------------------------------------------------------- 4 GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS-97.6% TECHNOLOGY-28.4% COMMUNICATION EQUIPMENT-4.3% Cisco Systems, Inc. (a) 128,730 $ 3,126,852 Juniper Networks, Inc. (a) 430,900 8,049,212 ------------- 11,176,064 ------------- COMPUTER HARDWARE/STORAGE-2.9% Dell, Inc. (a) 224,550 7,625,718 ------------- COMPUTER SERVICES-0.5% Affiliated Computer Services, Inc. Cl.A (a) 21,900 1,192,674 ------------- INTERNET INFRASTRUCTURE-3.4% eBay, Inc. (a) 138,000 8,913,420 ------------- SEMI-CONDUCTOR COMPONENTS-6.8% Broadcom Corp. Cl.A (a) 156,500 5,335,085 Intel Corp. 30,500 982,100 Linear Technology Corp. 75,900 3,193,113 Marvell Technology Group Ltd. (Bermuda) (a) 171,980 6,523,201 Maxim Integrated Products, Inc. 41,100 2,046,780 ------------- 18,080,279 ------------- SOFTWARE-8.8% Electronic Arts, Inc. (a) 83,550 3,992,019 Intuit, Inc. (a) 50,800 2,687,828 Mercury Interactive Corp. (a) 69,450 3,378,048 Microsoft Corp. 48,900 1,346,706 Symantec Corp. (a) 138,800 4,809,420 VERITAS Software Corp. (a) 189,600 7,045,536 ------------- 23,259,557 ------------- MISCELLANEOUS-1.7% Amphenol Corp.Cl.A (a) 46,700 2,985,531 Tektronix, Inc. 46,400 1,466,240 ------------- 4,451,771 ------------- 74,699,483 ------------- FINANCE-23.7% BROKERAGE & MONEY MANAGEMENT-9.1% Legg Mason, Inc. 143,800 11,098,484 Merrill Lynch & Co., Inc. 55,800 3,272,670 Morgan Stanley 79,700 4,612,239 The Goldman Sachs Group, Inc. 49,100 4,847,643 ------------- 23,831,036 ------------- INSURANCE-5.5% American International Group, Inc. 162,569 10,775,073 Everest Re Group Ltd. (Bermuda) 44,100 3,730,860 ------------- 14,505,933 ------------- MISCELLANEOUS-9.1% Ambac Financial Group, Inc. 87,250 6,054,278 Citigroup, Inc. 230,737 11,199,974 MBNA Corp. 263,672 6,552,249 ------------- 23,806,501 ------------- 62,143,470 ------------- HEALTHCARE-20.7% BIOTECHNOLOGY-1.3% Cephalon, Inc. (a) 24,100 1,166,681 Gilead Sciences, Inc. (a) 37,200 2,162,808 ------------- 3,329,489 ------------- DRUGS-5.6% Forest Laboratories, Inc. (a) 156,900 9,696,420 Patterson Dental Co. (a) 36,700 2,354,672 Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 48,000 2,722,080 ------------- 14,773,172 ------------- MEDICAL PRODUCTS-4.2% Alcon, Inc. (Switzerland) 36,800 2,227,872 St. Jude Medical, Inc. (a) 15,000 920,250 Stryker Corp. 78,600 6,681,786 Zimmer Holdings, Inc. (a) 17,900 1,260,160 ------------- 11,090,068 ------------- MEDICAL SERVICES-9.6% Anthem, Inc. (a) 33,000 2,475,000 Caremark Rx, Inc. (a) 62,500 1,583,125 Express Scripts, Inc. (a) 97,370 6,468,289 Health Management Associates, Inc. Cl.A 193,900 4,653,600 Stericycle, Inc. (a) 53,900 2,517,130 Wellpoint Health Networks, Inc. (a) 75,800 7,351,842 ------------- 25,048,986 ------------- 54,241,715 ------------- CONSUMER SERVICES-14.8% BROADCASTING & CABLE-2.3% Comcast Corp. Special Cl.A (a) 196,500 6,146,520 ------------- ENTERTAINMENT & LEISURE-2.9% Harley-Davidson, Inc. 158,900 7,552,517 ------------- 5 GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- RETAIL - GENERAL MERCHANDISE-2.9% Bed Bath & Beyond, Inc. (a) 90,200 $ 3,910,170 Lowe's Cos., Inc. 48,700 2,697,493 Tiffany & Co. 23,500 1,062,200 ------------- 7,669,863 ------------- MISCELLANEOUS-6.7% Apollo Group, Inc. Cl.A (a) 7,400 503,200 Career Education Corp. (a) 169,300 6,783,851 CDW Corp. 44,200 2,552,992 Education Management Corp. (a) 79,000 2,452,160 Iron Mountain, Inc. (a) 102,100 4,037,034 Strayer Education, Inc. 9,200 1,001,236 ------------- 17,330,473 ------------- 38,699,373 ------------- CONSUMER MANUFACTURING-5.6% BUILDING & RELATED-5.6% Centex Corp. 41,100 4,424,415 D.R. Horton, Inc. 83,900 3,629,514 Lennar Corp. Cl.A 41,700 4,003,200 NVR, Inc. (a) 5,500 2,563,000 ------------- 14,620,129 ------------- CAPITAL GOODS-1.6% ENGINEERING & CONSTRUCTION-1.6% Jacobs Engineering Group, Inc. (a) 86,700 4,162,467 ------------- SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- MULTI-INDUSTRY COMPANIES-1.2% Danaher Corp. 35,100 $ 3,220,425 ------------- ENERGY-1.1% DOMESTIC PRODUCERS-1.1% Apache Corp. 35,350 2,866,885 ------------- AEROSPACE & DEFENSE-0.5% L-3 Communications Holdings, Inc. (a) 25,900 1,330,224 ------------- Total Common Stocks (cost $187,188,147) 255,984,171 ------------- SHORT-TERM INVESTMENT-2.5% U.S. GOVERNMENT OBLIGATION-2.5% Federal Home Loan Bank 0.75%, 1/02/04 (amortized cost $6,599,869) $ 6,600 6,600,000 ------------- TOTAL INVESTMENTS-100.1% (cost $193,788,016) 262,584,171 Other assets less liabilities-(0.1%) (315,044) ------------- NET ASSETS-100% $ 262,269,127 ============= - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 6 GROWTH PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $193,788,016) $ 262,584,171 Cash 90,770 Dividends and interest receivable 62,433 Receivable for capital stock sold 54,122 ------------- Total assets 262,791,496 ------------- LIABILITIES Advisory fee payable 163,954 Payable for capital stock redeemed 119,443 Payable for investment securities purchased 60,036 Distribution fee payable 26,888 Accrued expenses 152,048 ------------- Total liabilities 522,369 ------------- NET ASSETS $ 262,269,127 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 16,534 Additional paid-in capital 355,163,268 Accumulated net realized loss on investment transactions (161,706,830) Net unrealized appreciation of investments 68,796,155 ------------- $ 262,269,127 ============= CLASS A SHARES Net assets $ 141,808,769 ============= Shares of capital stock outstanding 8,893,051 ============= Net asset value per share $ 15.95 ============= CLASS B SHARES Net assets $ 120,460,358 ============= Shares of capital stock outstanding 7,641,242 ============= Net asset value per share $ 15.76 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 GROWTH PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $1,110) $ 969,356 Interest 41,332 ------------- Total investment income 1,010,688 ------------- EXPENSES Advisory fee 1,640,872 Distribution fee -- Class B 224,579 Custodian 106,883 Administrative 75,000 Printing 74,030 Audit and legal 42,853 Directors' fees and expenses 1,250 Transfer agency 947 Miscellaneous 15,027 ------------- Total expenses 2,181,441 ------------- Net investment loss (1,170,753) ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions (10,808,268) Net change in unrealized appreciation/depreciation of investments 77,063,597 ------------- Net gain on investment transactions 66,255,329 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 65,084,576 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 GROWTH PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (1,170,753) $ (1,309,598) Net realized loss on investment transactions (10,808,268) (82,305,960) Net change in unrealized appreciation/ depreciation of investments 77,063,597 (3,556,232) ------------- ------------- Net increase (decrease) in net assets from operations 65,084,576 (87,171,790) CAPITAL STOCK TRANSACTIONS Net increase (decrease) 4,021,668 (40,117,567) ------------- ------------- Total increase (decrease) 69,106,244 (127,289,357) NET ASSETS Beginning of period 193,162,883 320,452,240 ------------- ------------- End of period $ 262,269,127 $ 193,162,883 ============= ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Growth Portfolio (the "Portfolio"), formerly Alliance Growth Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek to provide long-term growth of capital. Current income is incidental to the Portfolio's objective. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .75 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Prior to May 1, 2003, the Adviser agreed to waive its fee and to reimburse the additional operating expenses ("Expense Limitation Undertaking") to the extent necessary to limit total operating expenses on an annual basis to .95% and 1.20% of the average daily net assets for Class A and Class B shares, respectively. The Adviser terminated the Expense Limitation Undertaking effective May 1, 2003. Any expense waivers or reimbursements were accrued daily and paid monthly. For the year ended December 31, 2003, the Portfolio received no such waivers/reimbursements. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003, amounted to $300,559 of which $1,240 was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. 11 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ The Portfolio compensates 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 $947 for the year ended December 31, 2003. 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 Research and Management, Inc., (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 106,528,859 $ 110,004,028 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $ 194,068,770 ------------- Gross unrealized appreciation $ 71,917,609 Gross unrealized depreciation (3,402,208) ------------- Net unrealized appreciation $ 68,515,401 ============= 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. 12 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 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 selling or buying a security or currency at a price different from the current market value. NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC(the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $4,078 which is included in interest income in the accompanying statement of operations. NOTE F: CAPITAL STOCK There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows: SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 503,509 239,912 $ 6,916,297 $ 3,353,475 Shares issued in connection with acquisition of Brinson Series Trust Aggressive Growth Portfolio -0- 314,032 -0- 4,809,787 Shares redeemed (1,895,109) (4,049,973) (25,118,830) (54,578,657) ----------- ----------- ------------ ------------- Net decrease (1,391,600) (3,496,029) $(18,202,533) $ (46,415,395) =========== =========== ============ ============= 13 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS B Shares sold 4,048,545 2,192,539 $ 56,912,203 $ 30,153,624 Shares redeemed (2,536,343) (1,839,171) (34,688,002) (23,855,796) ----------- ----------- ------------ ------------- Net increase 1,512,202 353,368 $ 22,224,201 $ 6,297,828 =========== =========== ============ ============= NOTE G: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: ACQUISITION OF BRINSON SERIES TRUST AGGRESSIVE GROWTH PORTFOLIO On April 5, 2002, the Portfolio acquired all of the assets and liabilities of the Brinson Series Trust Aggressive Growth Portfolio pursuant to a plan of reorganization approved by the shareholders of Brinson Series Trust Aggressive Growth Portfolio on February 25, 2002. The acquisition was accomplished by a tax-free exchange of 314,032 shares of the Portfolio for 905,429 shares of Brinson Series Trust Aggressive Growth Portfolio on April 5, 2002. The aggregate net assets of the Portfolio and Brinson Series Trust Aggressive Growth Portfolio immediately before the acquisition were $295,037,323 and $4,809,787 (including $52,821 of net unrealized depreciation of investments), respectively. Immediately after the acquisition, the combined net assets of the Portfolio amounted to $299,847,110. NOTE J: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT) As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $ (161,426,076)(a) Unrealized appreciation/(depreciation) 68,515,401(b) -------------- Total accumulated earnings/(deficit) $ (92,910,675) ============== (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $161,426,076 of which $546,450 expires in the year 2008, $61,644,805 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. 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 Aggressive Growth Portfolio, may apply. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to net operating losses, resulted in a net decrease in accumulated net investment loss and a decrease in additional paid in capital. This reclassification had no effect on net assets. NOTE K: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ within the industry and have requested that Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 15 GROWTH PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $11.81 $16.42 $25.10 $33.59 $27.25 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (.06) (.06) (.06) .08 .03 Net realized and unrealized gain (loss) on investment transactions 4.20 (4.55) (5.47) (5.36) 8.73 ----- ------ ------ ------ ----- Net increase (decrease) in net asset value from operations 4.14 (4.61) (5.53) (5.28) 8.76 ----- ------ ------ ------ ----- LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -0- -0- (.06) (.02) (.09) Distributions from net realized gain on investment transactions -0- -0- (1.85) (3.19) (2.33) Distributions in excess of net realized gain on investment transactions -0- -0- (1.23) -0- -0- Return of capital -0- -0- (.01) -0- -0- ----- ------ ------ ------ ----- Total dividends and distributions -0- -0- (3.15) (3.21) (2.42) ----- ------ ------ ------ ----- Net asset value, end of period $15.95 $11.81 $16.42 $25.10 $33.59 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (b) 35.06% (28.08)% (23.47)% (17.51)% 34.47% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $141,809 $121,439 $226,237 $357,664 $456,027 Ratio to average net assets of: Expenses .89% .88% .85% .81% .84% Net investment income (loss) (.43)% (.44)% (.31)% .26% .12% Portfolio turnover rate 49% 38% 104% 58% 54%
- -------------------------------------------------------------------------------- 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 ----------------------------------------------------------------- JUNE 1, 1999(c) YEAR ENDED DECEMBER 31, TO -------------------------------------------------- DECEMBER 31, 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ------------- Net asset value, beginning of period $11.70 $16.31 $24.99 $33.54 $26.83 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (.09) (.09) (.11) .04 (.03) Net realized and unrealized gain (loss) on investment transactions 4.15 (4.52) (5.44) (5.39) 6.74 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.06 (4.61) (5.55) (5.35) 6.71 ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -0- -0- (.04) (.01) -0- Distributions from net realized gain on investment transactions -0- -0- (1.85) (3.19) -0- Distributions in excess of net realized gain on investment transactions -0- -0- (1.23) -0- -0- Return of capital -0- -0- (.01) -0- -0- ------ ------ ------ ------ ------ Total dividends and distributions -0- -0- (3.13) (3.20) -0- ------ ------ ------ ------ ------ Net asset value, end of period $15.76 $11.70 $16.31 $24.99 $33.54 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (b) 34.70% (28.26)% (23.65)% (17.75)% 25.01% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $120,460 $71,724 $94,215 $54,127 $5,707 Ratio to average net assets of: Expenses 1.14% 1.13% 1.11% 1.08% 1.12%(d) Net investment income (loss) (.68)% (.69)% (.59)% .13% (.20)%(d) Portfolio turnover rate 49% 38% 104% 58% 54%
- -------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect 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) Commencement of distribution. (d) Annualized. 17 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN GROWTH PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Growth Portfolio, formerly Alliance Growth Portfolio (the"Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Growth Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 18 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1) CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN THE BANK OF NEW YORK One Wall Street New York, NY 10286 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 19 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Manager Suite 100 of Barrett Associates, Inc., a registered Greenwich, CT 06830 investment adviser, with which he had been (14) associated since prior to 1999. He was formerly Chairman of the Board Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and Chief 96 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 1994, 100 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible (14) for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save Venice, 98 None P.O. Box 12 Inc. (preservation organization) from 2001-2002, Annandale, NY 12504 Senior Advisor from June 1999-June 2000 (12) and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC. Clifford L. Michel,+, 64 Senior Counsel to the law firm of Cahill Gordon 97 Placer Dome, 15 St. Bernard's Road & Reindel since February 2001 and a partner of Inc. Gladstone, NJ 07934 that firm for more than twenty-five years prior (12) thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining).
20 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - --------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 21 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ----------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Alan Levi, 54(1) Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
(1) Mr. Levi is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 22 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ---------------------------------------------------- VARIABLE PRODUCTS ---------------------------------------------------- SERIES FUND ---------------------------------------------------- ALLIANCEBERNSTEIN ---------------------------------------------------- UTILITY INCOME PORTFOLIO ---------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2003 Investment Products Offered =========================== > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed =========================== This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. AllianceBernstein Variable Products Series Fund ================================================================================ UTILITY INCOME PORTFOLIO LETTER TO INVESTORS February 10, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Utility Income Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks current income and capital appreciation by investing primarily in the equity and fixed-income securities of companies in the utilities industry. INVESTMENT RESULTS Periods Ended December 31, 2003 Returns Since 1 Year 5 Years Inception* ------- ------- --------- AllianceBernstein Utility Income Portfolio Class A 19.88% -0.75% 7.21% S&P 500 GICS Utilities Composite 26.26% -2.58% 5.85% NYSE Utility Index 13.94% -9.85% 2.88% * The since inception returns for the Portfolio and the NYSE Utility Index are from the Portfolio's inception date of 5/10/94. The since inception return for the S&P 500 GICS Utilities Composite is from the closest month-end to the Portfolio's inception date, which is 4/30/94. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Neither the unmanaged Standard & Poor's ("S&P") 500 GICS Utilities Composite (the "Composite") nor the New York Stock Exchange ("NYSE") Utility Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 GICS Utilities Composite encompasses those companies considered gas, electric or water utilities, or companies that operate as independent producers and/or distributors of power, including both nuclear and non-nuclear facilities. The NYSE Utility Index is comprised of utility stocks traded on the New York Stock Exchange. An investor cannot invest directly in an index or composite, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Utility Income Portfolio. The table above provides performance data for the Portfolio and its new benchmark, the S&P 500 GICS Utilities Composite, as well as for its previous benchmark, the New York Stock Exchange (NYSE) Utility Index, for the 12-month, 5-Year and since inception periods ended December 31, 2003. The NYSE has dissolved its NYSE Utility Index. Therefore, the Composite will be the Portfolio's benchmark going forward. The Portfolio's Class A shares underperformed the new benchmark, the S&P 500 GICS Utilities Composite, for the 12-month period ended December 31, 2003. The Portfolio's relative underperformance for the fiscal year was principally attributed to its overweight position in high quality, more defensive electric names. As we look deeper in the electric sector, we find that the electric utilities with weaker fundamentals outperformed the electrics with stronger fundamentals in 2003. The reason for this was that most of these companies received refinancing from their banks, thus easing their short-term liquidity problems and preventing them from filing for bankruptcy. Most of these fundamentally weak companies abandoned their growth business models and returned to "back-to-basic" strategies. So far, these companies have restored some credibility in management and have started to execute on fundamentals and cash flow improvement. MARKET REVIEW AND INVESTMENT STRATEGY We regard 2003 as a rebuilding year for the utility sector, as most companies aggressively improved their balance 1 UTILITY INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ sheets by selling non-core assets, cutting capital expenditures, issuing equity, paying down debt, and exiting from some non-regulated businesses. Most encouraging was the sector's improving free cash flow and more disciplined capital deployment. Separately, utilities benefited from a number of macro trends in 2003, including the improved credit environment, rising gas and power prices, the reduction of tax rates on dividends, and very low long-term interest rates. We continued to focus the Portfolio's investments on high quality names with attractive valuations. Within the electric utilities, we focused on the regulated integrated utilities instead of the non-regulated electric power marketers and generators. We remained cautious of the telephone utilities, primarily because of their fundamental uncertainties and competitive pressures. On the electric side, we remained cautious of the non-regulated generation and marketing sectors. While the sectors have improving balance sheets and easing liquidity concerns, management execution skills are still questionable. However, we are positive on the traditional regulated integrated utilities due to their earnings stability, high dividend yields and reasonable valuations. 2 UTILITY INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ PERFORMANCE UPDATE ALLIANCEBERNSTEIN UTILITY INCOME PORTFOLIO CLASSA GROWTH OF A $10,000 INVESTMENT 5/10/94*-12/31/03 AllianceBernstein Utility Income Portfolio Class A: $19,571 S&P 500 GICS Utilities Composite: $17,300 NYSE Utility Index: $13,148 [TABLE BELOW REPRESENTS MOUNTAIN CHART IN PRINTED MATERIAL.] AllianceBernstein S&P 500 Utility Income GICS Utilities NYSE Portfolio Class A Composite Utility Index - ----------------------------------------------------------------------- 5/10/94* $10,000 $10,000 $10,000 12/31/94 $ 9,960 $ 9,825 $ 9,815 12/31/95 $12,096 $12,523 $13,029 12/31/96 $13,049 $12,869 $13,769 12/31/97 $16,404 $16,596 $17,164 12/31/98 $20,326 $22,080 $19,710 12/31/99 $24,270 $25,308 $17,901 12/31/00 $27,048 $21,813 $28,137 12/31/01 $20,962 $16,331 $19,573 12/31/02 $16,326 $11,540 $13,702 12/31/03 $19,571 $13,148 $17,300 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Utility Income Portfolio Class A shares (from 5/10/94* to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. Neither the unmanaged Standard & Poor's ("S&P") 500 GICS Utilities Composite nor the New York Stock Exchange ("NYSE") Utility Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 GICS Utilities Composite encompasses those companies considered gas, electric or water utilities, or companies that operate as independent producers and/or distributors of power, including both nuclear and non-nuclear facilities. The NYSE Utility Index is comprised of utility stocks traded on the New York Stock Exchange. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Utility Income Portfolio. - ------------------------------------------------------------------------------- * Portfolio and NYSE Utility Index data is from the Portfolio's inception date of 5/10/94. Data for the S&P 500 GICS Utilities Composite is from the closest month-end to the Portfolio's inception date, which is 4/30/94. 3 UTILITY INCOME PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ================================================================================ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS FPL Group, Inc. (common & preferred) $ 2,264,867 4.9% ================================================================================ Exelon Corp. 2,063,796 4.5 ================================================================================ Dominion Resources, Inc. 1,563,835 3.4 ================================================================================ Vodafone Group Plc (ADR) 1,559,992 3.4 ================================================================================ Public Service Enterprise (common & preferred) 1,332,750 2.9 ================================================================================ NSTAR 1,251,300 2.7 ================================================================================ Entergy Corp. 1,211,156 2.6 ================================================================================ PG&E Corp. 1,194,110 2.6 ================================================================================ America Movil S.A. de C.V. Series L (ADR) 1,175,620 2.5 ================================================================================ BellSouth Corp. 1,148,980 2.5 ----------- ---- $ 14,766,406 32.0% 4 UTILITY INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- COMMON & PREFERRED STOCKS-97.0% UNITED STATES INVESTMENTS-80.0% UTILITIES-72.9% ELECTRIC & GAS UTILITIES-63.1% AES Corp. (a).............. 84,600 $ 798,624 AGL Resources, Inc. ....... 16,100 468,510 Alliant Energy Corp. ...... 33,000 821,700 Ameren Corp. .............. 20,000 920,000 American Electric Power Co., Inc. .............. 29,000 884,790 American Electric Power Co., Inc. pfd. ......... 18,800 856,528 Black Hills Corp. ......... 11,000 328,130 Cinergy Corp. ............. 24,000 931,440 Cinergy Corp. pfd. ........ 4,000 254,800 Consolidated Edison, Inc. . 9,600 412,896 Constellation Energy Group, Inc. ............ 13,000 509,080 Dominion Resources, Inc. .. 24,500 1,563,835 DTE Energy Co. ............ 15,000 591,000 DTE Energy Co. pfd. ....... 16,800 430,416 Duke Energy Corp. ......... 36,800 752,560 Entergy Corp. ............. 21,200 1,211,156 Equitable Resources, Inc. . 18,700 802,604 Exelon Corp. .............. 31,100 2,063,796 FirstEnergy Corp. ......... 22,600 795,520 FPL Group, Inc. ........... 20,200 1,321,484 FPL Group, Inc. pfd. ...... 16,700 943,383 KeySpan Corp. ............. 4,100 150,880 KeySpan Corp. pfd. ........ 17,000 916,300 New Jersey Resources Corp.................... 23,800 916,538 NSTAR...................... 25,800 1,251,300 Pepco Holdings, Inc. ...... 7,300 142,642 PG&E Corp. (a)............. 43,000 1,194,110 Piedmont Natural Gas Co., Inc. ................... 5,100 221,646 PPL Corp. ................. 25,800 1,128,750 Progress Energy, Inc. ..... 17,400 787,524 Public Service Enterprise Group, Inc. ............ 5,000 219,000 Public Service Enterprise Group, Inc. pfd. ....... 18,000 1,113,750 Questar Corp. ............. 7,000 246,050 Sempra Energy pfd. ........ 32,500 924,950 Southern Co. .............. 14,200 429,550 TXU Corp. pfd. ............ 25,000 867,500 Wisconsin Energy Corp. .... 14,000 468,300 Xcel Energy, Inc. ......... 28,000 475,440 ----------- 29,116,482 ----------- TELEPHONE UTILITIES-9.8% ALLTEL Corp. .............. 19,000 $ 885,020 BellSouth Corp. ........... 40,600 1,148,980 SBC Communications, Inc. .. 36,000 938,520 Sprint Corp.-FON Group..... 34,200 561,564 Verizon Communications, Inc...................... 27,700 971,716 ----------- 4,505,800 ----------- 33,622,282 ----------- ENERGY-3.1% PIPELINES-3.1% Kinder Morgan, Inc. ....... 11,500 679,650 ONEOK, Inc. ............... 16,000 353,280 Southern Union Co. pfd. ... 6,900 407,790 ----------- 1,440,720 ----------- CONSUMER SERVICES-3.1% BROADCASTING & CABLE-1.0% Comcast Corp. Cl. A (a).... 14,209 467,050 ----------- CELLULAR COMMUNICATIONS-2.1% Nextel Communications, Inc. Cl. A (a).......... 22,000 617,320 Nextel Partners, Inc. Cl. A (a)............... 24,800 333,560 ----------- 950,880 ----------- 1,417,930 ----------- TECHNOLOGY-0.9% COMMUNICATION EQUIPMENT-0.9% QUALCOMM, Inc. ............ 8,000 431,440 ----------- Total United States Investments (cost $31,182,969)...... 36,912,372 ----------- FOREIGN INVESTMENTS-17.0% FRANCE-2.5% France Telecom SA (ADR) (a)............... 32,000 914,880 Veolia Environnement (ADR)................... 9,000 243,000 ----------- 1,157,880 ----------- HONG KONG-3.3% China Resources Power Holdings Co. Ltd. (a)... 942,000 439,841 Hong Kong & China Gas Co., Ltd..................... 476,000 726,544 HongKong Electric Holdings Ltd..................... 81,000 320,302 ----------- 1,486,687 ----------- 5 UTILITY INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value - ---------------------------------------------------- MEXICO-4.7% America Movil S.A. de C.V. Series L (ADR).......... 43,000 $ 1,175,620 Telefonos de Mexico, SA Series L (ADR).......... 30,600 1,010,718 ----------- 2,186,338 ----------- PEOPLE'S REPUBLIC OF CHINA-1.2% Huaneng Power International, Inc. (ADR).............. 8,000 555,280 ----------- SOUTH KOREA-0.6% SK Telecom Co., Ltd. (ADR). 15,701 292,824 ----------- SPAIN-1.3% Telefonica de Espana, SA (ADR)................... 13,126 580,038 ----------- Shares or Principal Amount Company (000) U.S. $ Value - ---------------------------------------------------- UNITED KINGDOM-3.4% Vodafone Group Plc (ADR)... 62,300 $ 1,559,992 ----------- Total Foreign Investments (cost $5,524,860)....... 7,819,039 ----------- Total Common & Preferred Stocks (cost $36,707,829)...... 44,731,411 ----------- SHORT-TERM INVESTMENT-4.1% TIME DEPOSIT-4.1% The Bank of New York 0.56%, 1/02/04 (cost $1,900,000)....... $ 1,900 1,900,000 ----------- TOTAL INVESTMENTS-101.1% (cost $38,607,829)...... 46,631,411 Other assets less liabilities-(1.1%)...... (506,267) ------------ NET ASSETS-100%............ $ 46,125,144 ============ - -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR-American Depository Receipt See Notes to Financial Statements. 6 UTILITY INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================ ASSETS Investments in securities, at value (cost $38,607,829)... $ 46,631,411 Cash..................................................... 43,834 Receivable for investment securities sold................ 417,109 Dividends and interest receivable........................ 52,547 Receivable for capital stock sold........................ 2,679 -------------- Total assets............................................. 47,147,580 -------------- LIABILITIES Payable for investment securities purchased.............. 842,577 Payable for capital stock redeemed....................... 61,839 Advisory fee payable..................................... 28,621 Distribution fee payable................................. 548 Accrued expenses......................................... 88,851 -------------- Total liabilities........................................ 1,022,436 -------------- NET ASSETS.................................................. $ 46,125,144 ============== COMPOSITION OF NET ASSETS Capital stock, at par.................................... $ 3,086 Additional paid-in capital............................... 55,689,130 Undistributed net investment income...................... 1,041,027 Accumulated net realized loss on investment and foreign currency transactions.......................... (18,631,681) Net unrealized appreciation of investments............... 8,023,582 -------------- $ 46,125,144 ============== Class A Shares Net assets............................................... $ 43,322,834 ============== Shares of capital stock outstanding...................... 2,898,545 ============== Net asset value per share................................ $ 14.95 ============== Class B Shares Net assets............................................... $ 2,802,310 ============== Shares of capital stock outstanding...................... 187,823 ============== Net asset value per share................................ $ 14.92 ============== - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 UTILITY INCOME PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Dividends (net of foreign taxes withheld of $6,286)...................................... $ 1,659,176 Interest................................................................................. 14,391 -------------- Total investment income.................................................................. 1,673,567 -------------- EXPENSES Advisory fee............................................................................. 307,994 Distribution fee--Class B................................................................ 2,755 Custodian................................................................................ 113,159 Administrative........................................................................... 75,000 Printing................................................................................. 46,529 Audit.................................................................................... 39,466 Legal.................................................................................... 10,692 Directors' fees and expenses............................................................. 3,130 Transfer agency.......................................................................... 947 Miscellaneous............................................................................ 10,688 -------------- Total expenses........................................................................... 610,360 -------------- Net investment income.................................................................... 1,063,207 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized loss on: Investment transactions................................................................ (356,609) Foreign currency transactions.......................................................... (16,807) Net change in unrealized appreciation/depreciation of: Investments............................................................................ 6,918,375 Foreign currency denominated assets and liabilities.................................... (93) -------------- Net gain on investment and foreign currency transactions................................. 6,544,866 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................. $ 7,608,073 ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 UTILITY INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2003 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 1,063,207 $ 1,279,054 Net realized loss on investment and foreign currency transactions.... (373,416) (15,571,148) Net change in unrealized appreciation/depreciation of investment and foreign currency transactions...................................... 6,918,282 261,108 -------------- -------------- Net increase (decrease) in net assets from operations................ 7,608,073 (14,030,986) DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (1,261,672) (937,618) Class B............................................................ (24,223) -0- CAPITAL STOCK TRANSACTIONS Net decrease......................................................... (376,197) (7,536,471) -------------- -------------- Total increase (decrease)............................................ 5,945,981 (22,505,075) NET ASSETS Beginning of period.................................................. 40,179,163 62,684,238 -------------- -------------- End of period (including undistributed net investment income of $1,041,027 and $1,280,522, respectively).......................... $ 46,125,144 $ 40,179,163 ============== ==============
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 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"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek current income and capital appreciation by investing primarily in equity and fixed-income securities of companies in the utilities industry. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 10 AllianceBernstein Variable Products Series Fund ================================================================================ 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. 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. Income and Expenses Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of .75 of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $148,510, of which $6,140 was paid to Sanford C. Bernstein &Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 11 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ 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 Research and Management,Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $ 29,980,411 $ 31,317,020 U.S. government securities.............................................. -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost ....................................................................................... $ 39,004,791 ============== Gross unrealized appreciation............................................................... $ 7,886,685 Gross unrealized depreciation............................................................... (260,065) -------------- Net unrealized appreciation................................................................. $ 7,626,620 ==============
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 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. 12 AllianceBernstein Variable Products Series Fund ================================================================================ 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 selling or buying a security or currency at a price different from the current market value. NOTE E: Securities Lending The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss in the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Government securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $4,447 which is included in interest income in the accompanying statement of operations. NOTE F: Capital Stock There are 1,000,000,000 shares of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were as follows:
==================================== ==================================== Shares Amount ==================================== ==================================== Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 318,483 495,562 $ 4,272,481 $ 7,188,203 Shares issued in reinvestment of dividends and distributions.... 90,572 67,943 1,261,672 937,618 Shares redeemed................... (632,323) (1,167,979) (8,408,753) (15,700,846) -------------- -------------- -------------- -------------- Net decrease...................... (223,268) (604,474) $ (2,874,600) $ (7,575,025) ============== ============== ============== ==============
13 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================
==================================== ==================================== Shares Amount ==================================== ==================================== Year Ended July 22, 2002* Year Ended July 22, 2002* December 31, to December 31, to 2003 December 31, 2002 2003 December 31, 2002 ---------------- ---------------- ---------------- ---------------- Class B Shares sold....................... 192,779 3,085 $ 2,610,572 $ 38,903 Shares issued in reinvestment of dividends and distributions.... 1,740 -0- 24,223 -0- Shares redeemed................... (9,754) (27) (136,392) (349) -------------- -------------- -------------- -------------- Net increase...................... 184,765 3,058 $ 2,498,403 $ 38,554 ============== ============== ============== ==============
NOTE G: Concentration of Risk Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2003 and December 31, 2002 were as follows: 2003 2002 ---------------- ----------------- Distributions paid from: Ordinary income..................... $ 1,285,895 $ 937,618 --------------- --------------- Total taxable distributions............ 1,285,895 937,618 --------------- --------------- Total distributions paid............... $ 1,285,895 $ 937,618 =============== =============== As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income............................. $ 1,041,074 Accumulated capital and other losses...................... (18,234,766)(a) Unrealized appreciation/(depreciation).................... 7,626,620(b) --------------- Total accumulated earnings/(deficit)...................... $ (9,567,072) --------------- (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $18,234,719, of which $1,498,725 expires in the year 2009, $16,291,115 expires in the year 2010 and $444,879 expires in the year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. 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, 2003, the Portfolio deferred to January 1, 2004, post-October foreign currency losses of $47. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. - -------------------------------------------------------------------------------- * Commencement of distribution. 14 AllianceBernstein Variable Products Series Fund ================================================================================ During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses resulted in a net decrease in undistributed net investment income and a decrease in accumulated net realized gain on investment and foreign currency transactions. This reclassification had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled Hindo et al. v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. 15 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 16 UTILITY INCOME PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================= Class A ============================================================= Year Ended December 31, ------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $12.86 $16.82 $22.65 $21.66 $18.90 ------ ------ ------ ------ ------ Income From Investment Operations - --------------------------------- Net investment income (a)...................... .35 .36 .29 1.01(b) .41(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions........... 2.18 (4.06) (5.23) 1.36 3.19 ------ ------ ------ ----- ------ Net increase (decrease) in net asset value from operations............................. 2.53 (3.70) (4.94) 2.37 3.60 ------ ------ ------ ----- ------ Less: Dividends and Distributions - --------------------------------- Dividends from net investment income........... (.44) (.26) (.76) (.36) (.30) Distributions from net realized gain on investment transactions................................ -0- -0- (.13) (1.02) (.54) ------ ------ ------ ----- ------ Total dividends and distributions.............. (.44) (.26) (.89) (1.38) (.84) ------ ------ ------ ----- ------ Net asset value, end of period................. $14.95 $12.86 $16.82 $22.65 $21.66 ====== ====== ====== ====== ====== Total Return - ------------ Total investment return based on net asset value (c).................................. 19.88% (22.12)% (22.50)% 11.45% 19.40% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)...... $43,323 $40,140 $62,684 $62,362 $46,158 Ratio to average net assets of: Expenses, net of waivers and reimbursements. 1.48% 1.22% 1.02% 1.00% .95% Expenses, before waivers and reimbursements. 1.48% 1.22% 1.02% 1.04% 1.14% Net investment income....................... 2.60% 2.60% 1.49% 4.63%(b) 2.07%(b) Portfolio turnover rate........................ 76% 90% 25% 18% 16%
- -------------------------------------------------------------------------------- See footnote summary on page 18. 17 UTILITY INCOME PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
========================== Class B ========================== Year July 22, 2002(d) Ended to December 31, December 31, 2003 2002 ----------- ----------- Net asset value, beginning of period................................................ $12.86 $11.40 ----- ------ Income From Investment Operations - --------------------------------- Net investment income (a)........................................................... .28 .07 Net realized and unrealized gain on investment and foreign currency transactions.... 2.21 1.39 ----- ------ Net increase in net asset value from operations..................................... 2.49 1.46 ----- ------ Less: Dividends - --------------- Dividends from net investment income................................................ (.43) -0- ----- ------ Net asset value, end of period...................................................... $14.92 $12.86 ====== ====== Total Return - ------------ Total investment return based on net asset value (c)................................ 19.64% 12.81% Ratios/Supplemental Data - ------------------------ Net assets, end of period (000's omitted)........................................... $2,802 $39 Ratio to average net assets of: Expenses......................................................................... 1.73% 1.45%(e) Net investment income............................................................ 2.07% 1.92%(e) Portfolio turnover rate............................................................. 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) Commencement of distribution. (e) Annualized. 18 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Utility Income Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Utility Income Portfolio (the "Portfolio"), (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Product Series Fund, Inc.) as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Utility Income Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP - --------------------- New York, New York February 4, 2004 TAX INFORMATION (unaudited) ================================================================================ For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2003 qualifies for the corporate dividends received deduction. 19 UTILITY INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (1) Clifford L. Michel (1) Donald J. Robinson (1) CUSTODIAN The Bank of New York One Wall Street New York, NY 10286 DISTRIBUTOR AllianceBernstein Investment Research and Management, Inc. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL Seward & Kissel One Battery Park Plaza New York, NY 10004 TRANSFER AGENT Alliance Global Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 20 AllianceBernstein Variable Products Series Fund ================================================================================ UTILITY INCOME PORTFOLIO MANAGEMENT OF THE FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an independent 116 None 2 Sound View Drive consultant. He was formerly Senior Suite 100 Manager of Barrett Associates, Inc., a Greenwich, CT 06830 registered investment adviser, with which (14) he had been associated since prior to 1999. Chairman of the Board He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President and 96 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Boca Raton, FL 33432 Life Assurance Society of the United States; (12) Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Associ- ation of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") (14) responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Manage- ment since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953. John H. Dobkin,+, 62 Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from (12) June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and Chairman of the Audit Committee of ACMC.
21 AllianceBernstein Variable Products Series Fund ================================================================================ UTILITY INCOME PORTFOLIO
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (continued) Clifford L. Michel,+, 64 Senior Counsel of the law firm of Cahill 97 Placer Dome, 15 St. Bernard's Road a Gordon & Reindel since February 2001 Inc. Gladstone, NJ 07934 and a partner of that firm for more than (12) twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of Orrick, 96 None 98 Hell's Peak Road Herrington & Sutcliffe LLP since prior to Weston, VT 05161 1999. Formerly a senior partner and a member (8) of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. 22 AllianceBernstein Variable Products Series Fund ================================================================================ UTILITY INCOME PORTFOLIO Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - ------------------------------------------------------------------------------------------------------------------------------------ Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Paul C. Rissman, 47(1) Vice President Executive Vice President of ACMC**, with which he has been associated since prior to 1999. Annie Tsao, 51(1) Vice President Senior Vice President of ACMC**, with which she has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Mr. Rissman and Ms. Tsao are the persons primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, AGIS and ABIRM are affiliates of the Fund. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 23 ALLIANCEBERNSTEIN ----------------------------- VARIABLE PRODUCTS ----------------------------- SERIES FUND ----------------------------- ALLIANCEBERNSTEIN ----------------------------- TECHNOLOGY PORTFOLIO ----------------------------- ANNUAL REPORT DECEMBER 31, 2003 INVESTMENT PRODUCTS OFFERED - --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED - --------------------------- This shareholder report must be preceded or accompanied by the Portfolio's prospectus for individuals who are not current investors in the Portfolio. You may obtain a description of the Portfolio's proxy voting policies and procedures, without charge, upon request by visiting Alliance Capital's web site at www.investor.alliancecapital.com or on the Securities and Exchange Commission's web site at http://www.sec.gov, or by calling Alliance Capital at (800) 227-4618. AllianceBernstein Investment Research and Management, Inc. is an affiliate of Alliance Capital Management L.P., the manager of the portfolios, and is a member of the NASD. TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS January 28, 2004 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Technology Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2003. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks growth of capital. Current income is incidental to the Portfolio's objective. The Portfolio invests principally in securities of companies that use technology extensively in the development of new or improved products or processes. INVESTMENT RESULTS Periods Ended December 31, 2003 RETURNS --------------------------------------- SINCE 1 YEAR 5 YEARS INCEPTION* ----------- ----------- ----------- ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO CLASS A 44.18% -2.82% 6.63% NASDAQ COMPOSITE INDEX 50.01% -1.79% 9.24% S&P 500 STOCK INDEX 28.67% -0.57% 9.81% * The Portfolio's Class A share inception date is 1/11/96. Returns are based on net asset value (NAV) performance for Class A shares as of December 31, 2003 and reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. The unmanaged NASDAQ Composite Index and the unmanaged S&P 500 Stock Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. The NASDAQ Composite Index is market-value weighted and includes over 5,000 companies. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Technology Portfolio. During the 12-month period ended December 31, 2003, the Portfolio posted strong absolute performance, outperforming its benchmark, the S&P 500 Stock Index, as technology stocks outdistanced the broader stock markets. However, the Portfolio underperformed the NASDAQ Composite Index, a broad stock index with a higher technology weighting. While several high market cap stocks were strong absolute Portfolio holdings during the year, they were negative relative performers due to their underweight positions in the Portfolio relative to the NASDAQ. From a sector perspective, contract manufacturing holdings contributed positively for both stock selection and sector weighting; communications equipment and semiconductor names were also positive relative contributors. Negative relative contributions came principally from telecommunications and computer services holdings. MARKET REVIEW AND INVESTMENT STRATEGY During the six- and 12-month periods ended December 31, 2003, technology stocks advanced as an improving economic environment led to higher than expected demand for technology products. Economic data continued to point to recovery, with inventory levels near historic lows and order trends and cash flows improving. During the fourth quarter, we increased the Portfolio's holdings in the communications equipment and semiconductor sectors, while continuing to reduce positions in computer services. 1 TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERFORMANCE UPDATE ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 1/11/96* - 12/31/03 ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO CLASS A: $16,682 NASDAQ COMPOSITE INDEX: $20,233 S&P 500 STOCK INDEX: $21,077 ALLIANCEBERNSTEIN TECHNOLOGY NASDAQ INDEX S&P 500 PORTFOLIO CLASS A COMPOSITE STOCK INDEX - ------------------------------------------------------------------------------- 1/11/96* $10,000 $10,000 $10,000 12/31/96 $11,040 $13,038 $12,647 12/31/97 $11,755 $15,859 $16,864 12/31/98 $19,252 $22,144 $21,687 12/31/99 $33,828 $41,098 $26,248 12/31/00 $26,548 $24,950 $23,859 12/31/01 $19,850 $19,698 $21,025 12/31/02 $11,571 $13,487 $16,381 12/31/03 $16,672 $20,233 $21,077 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Technology Portfolio Class A shares (from 1/11/96* to 12/31/03) as compared to the performance of appropriate broad-based indices. Returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. The chart assumes the reinvestment of dividends and capital gains. Performance for Class B shares will vary from the results shown above due to differences in expenses charged to this class. Past performance is not indicative of future results, and is not representative of future gain or loss in capital value or dividend income. The unmanaged NASDAQ Composite Index and the unmanaged Standard & Poor's (S&P) 500 Stock Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ Stock Market. The NASDAQ Composite Index is market-value weighted and includes over 5,000 companies. The S&P 500 Stock Index is comprised of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Technology Portfolio. - -------------------------------------------------------------------------------- * Portfolio and benchmark data are from the Portfolio's inception date of 1/11/96. 2 TECHNOLOGY PORTFOLIO TEN LARGEST HOLDINGS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Intel Corp. $ 18,563,299 5.9% - ------------------------------------------------------------------------------- Cisco Systems, Inc. 14,022,617 4.4 - ------------------------------------------------------------------------------- Microsoft Corp. 13,703,904 4.3 - ------------------------------------------------------------------------------- Dell, Inc. 12,451,434 3.9 - ------------------------------------------------------------------------------- eBay, Inc. 10,534,629 3.3 - ------------------------------------------------------------------------------- QUALCOMM, Inc. 8,795,983 2.8 - ------------------------------------------------------------------------------- Sanmina Corp. 7,957,541 2.5 - ------------------------------------------------------------------------------- Juniper Networks, Inc. 7,687,754 2.4 - ------------------------------------------------------------------------------- Samung Electronics Co., Ltd. 7,420,924 2.3 - ------------------------------------------------------------------------------- Vodafone Group Plc. 7,145,990 2.3 ------------- ---- - ------------------------------------------------------------------------------- $ 108,284,075 34.1% - ------------------------------------------------------------------------------- 3 TECHNOLOGY PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- COMMON STOCKS & OTHER INVESTMENTS-98.3% TECHNOLOGY-89.6% COMMUNICATION EQUIPMENT-15.7% Alcatel SA (France) (a) 509,000 $ 6,555,108 Cisco Systems, Inc. (a) 577,300 14,022,617 Corning, Inc. (a) 298,200 3,110,226 Juniper Networks, Inc. (a) 411,550 7,687,754 Motorola, Inc. 227,900 3,206,553 Nokia Corp. (ADR) (Finland) 386,300 6,567,100 QUALCOMM, Inc. 163,100 8,795,983 ------------- 49,945,341 ------------- COMPUTER HARDWARE/STORAGE-8.7% Agilent Technologies, Inc. (a) 187,200 5,473,728 Dell, Inc. (a) 366,650 12,451,434 EMC Corp. (a) 247,863 3,202,390 Lexmark International, Inc. Cl.A 44,000 3,460,160 Seagate Technology (Cayman Islands) (a) 157,700 2,980,530 ------------- 27,568,242 ------------- COMPUTER PERIPHERALS-0.4% Network Appliance, Inc. (a) 58,400 1,198,952 ------------- COMPUTER SERVICES-5.3% Affiliated Computer Services, Inc. Cl.A (a) 67,650 3,684,219 Computer Sciences Corp. (a) 94,450 4,177,524 First Data Corp. 88,400 3,632,356 Fiserv, Inc. (a) 138,325 5,465,221 ------------- 16,959,320 ------------- COMPUTER SOFTWARE-20.4% BMC Software, Inc. (a) 92,700 1,728,855 Cognos, Inc. (Canada) (a) 92,000 2,817,040 Electronic Arts, Inc. (a) 108,000 5,160,240 Infosys Technologies Ltd. (ADR) (India) 39,800 3,808,860 Intuit, Inc. (a) 70,700 3,740,737 Macrovision Corp. (a) 166,000 3,749,940 Mercury Interactive Corp. (a) 125,200 6,089,728 Microsoft Corp. 497,600 13,703,904 Oracle Corp. (a) 484,550 6,396,060 SAP AG (ADR) (Germany) 152,550 6,339,978 Symantec Corp. (a) 144,600 5,010,390 VERITAS Software Corp. (a) 168,900 6,276,324 ------------- 64,822,056 ------------- CONTRACT MANUFACTURING-4.9% Deutsche Bank warrants expiring 4/18/08 (a) 889,500 2,191,728 Flextronics International Ltd. (Singapore) (a) 360,100 5,343,884 Sanmina-SCI Corp. (a) 631,050 7,957,541 ------------- 15,493,153 ------------- INTERNET MEDIA-2.1% Yahoo!, Inc. (a) 151,000 6,820,670 ------------- INTERNET INFRASTRUCTURE-3.3% eBay, Inc. (a) 163,100 10,534,629 ------------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-5.7% Applied Materials, Inc. (a) 313,650 7,041,443 ASML Holding N.V. (Netherlands) (a) 166,000 3,328,300 KLA-Tencor Corp. (a) 79,600 4,670,132 Lam Research Corp. (a) 91,000 2,939,300 ------------- 17,979,175 ------------- SEMI-CONDUCTOR COMPONENTS-23.1% Agere Systems, Inc. Cl.A (a) 907,000 2,766,350 Altera Corp. (a) 209,880 4,764,276 Broadcom Corp. Cl.A (a) 150,600 5,133,954 Fairchild Semiconductor International, Inc. (a) 133,500 3,333,495 Intel Corp. 576,500 18,563,299 Linear Technology Corp. 116,200 4,888,534 Marvell Technology Group Ltd. (Bermuda) (a) 121,650 4,614,185 Maxim Integrated Products, Inc. 93,450 4,653,810 Samsung Electronics Co., Ltd. (GDR) (South Korea) (b) 39,473 7,420,924 SanDisk Corp. (a) 52,700 3,222,078 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (Taiwan) (a) 413,299 4,232,182 Texas Instruments, Inc. 108,500 3,187,730 United Microelectronics Corp. (ADR) (Taiwan) (a) 597,400 2,957,130 Vishay Intertechnology, Inc. (a) 152,200 3,485,380 ------------- 73,223,327 ------------- 284,544,865 ------------- 4 TECHNOLOGY PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE - ------------------------------------------------------------------------------- CONSUMER SERVICES-6.1% BROADCASTING & CABLE-3.8% Comcast Corp. Cl. A (a) 127,560 $ 4,192,897 News Corp. Ltd. pfd. (ADR) (Australia) 108,800 3,291,200 Viacom, Inc. Cl. B 104,600 4,642,148 ------------- 12,126,245 ------------- CELLULAR COMMUNICATIONS-2.3% Vodafone Group Plc (ADR) (United Kingdom) 285,383 7,145,990 ------------- 19,272,235 ------------- CAPITAL GOODS-2.6% ELECTRICAL EQUIPMENT-1.2% Hon Hai (Salomon Smith Barney) warrants expiring 1/15/04 (a) 978,953 3,852,180 ------------- SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE - ------------------------------------------------------------------------------- MISCELLANEOUS-1.4% KEMET Corp. (a) 70,300 $ 962,407 NITTO DENKO Corp. (Japan) 63,300 3,366,707 ------------- 4,329,114 ------------- 8,181,294 ------------- Total Common Stocks & Other Investments (cost $231,929,581) 311,998,394 ------------- SHORT-TERM INVESTMENT-1.8% TIME DEPOSIT-1.8% Bank of New York 0.56%, 1/02/04 (cost $5,900,000) $ 5,900 5,900,000 ------------- TOTAL INVESTMENTS-100.1% (cost $237,829,581) 317,898,394 Other assets less liabilities-(0.1%) (452,438) ------------- NET ASSETS-100% $ 317,445,956 ============= - -------------------------------------------------------------------------------- (a) Non-income producing security. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2003, the market value of this security amounted to $7,420,924 or 2.3% of net assets. Glossary of Terms: ADR - American Depository Receipt GDR - Global Depository Receipt See Notes to Financial Statements. 5 TECHNOLOGY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $237,829,581) $ 317,898,394 Cash 54,200 Receivable for capital stock sold 196,230 Dividends and interest receivable 58,887 ------------- Total assets 318,207,711 ------------- LIABILITIES Payable for capital stock redeemed 303,176 Advisory fee payable 247,191 Distribution fee payable 39,005 Accrued expenses 172,383 ------------- Total liabilities 761,755 ------------- NET ASSETS $ 317,445,956 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 22,029 Additional paid-in capital 573,534,492 Accumulated net investment loss (2,121) Accumulated net realized loss on investment and foreign currency transactions (336,177,257) Net unrealized appreciation of investments 80,068,813 ------------- $ 317,445,956 ============= CLASS A SHARES Net assets $ 130,126,956 ============= Shares of capital stock outstanding 8,978,459 ============= Net asset value per share $ 14.49 ============= CLASS B SHARES Net assets $ 187,319,000 ============= Shares of capital stock outstanding 13,050,768 ============= Net asset value per share $ 14.35 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 TECHNOLOGY PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $58,852) $ 546,618 Interest 73,416 ------------- Total investment income 620,034 ------------- EXPENSES Advisory fee 2,458,125 Distribution fee -- Class B 340,464 Custodian 126,944 Administrative 75,000 Audit and legal 46,707 Printing 25,495 Directors' fees and expenses 1,446 Transfer agency 947 Miscellaneous 9,155 ------------- Total expenses 3,084,283 ------------- Net investment loss (2,464,249) ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized loss on: Investment transactions (8,551,763) Foreign currency transactions (31,453) Net change in unrealized appreciation/depreciation of investments 97,858,822 ------------- Net gain on investment transactions 89,275,606 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 86,811,357 ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 TECHNOLOGY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2003 2002 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (2,464,249) $ (3,217,372) Net realized loss on investment and foreign currency transactions (8,583,216) (171,058,574) Net change in unrealized appreciation/ depreciation of investments 97,858,822 9,156,763 ------------- ------------- Net increase/(decrease) in net assets from operations 86,811,357 (165,119,183) CAPITAL STOCK TRANSACTIONS Net increase (decrease) 37,738,092 (56,312,426) ------------- ------------- Total increase (decrease) 124,549,449 (221,431,609) NET ASSETS Beginning of period 192,896,507 414,328,116 ------------- ------------- End of period $ 317,445,956 $ 192,896,507 ============= ============= - -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 TECHNOLOGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2003 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Technology Portfolio (the "Portfolio"), formerly Alliance Technology Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"), formerly Alliance Variable Products Series Fund, Inc. The Portfolio's investment objective is to seek growth of capital. Current income is incidental to the Portfolio's objective. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty 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 accounting principles generally accepted in the United States, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Portfolio'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 In accordance with Pricing Policies adopted by the Board of Directors of the Fund (the "Pricing Policies") and applicable law, portfolio securities are valued at current market value or at fair value. The Board of Directors has delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the Board's continuing oversight, certain responsibilities with respect to the implementation of the Pricing Policies. Pursuant to the Pricing Policies, securities for which market quotations are readily available are valued at their current market value. In general, the market value of these securities is 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. If no bid or asked prices are quoted on such day, then the security is valued in good faith at fair value in accordance with the Pricing Policies. 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 valuations, the last available closing settlement price is used; securities traded in the over-the-counter market, (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 Pricing Policies provide that 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 are valued at fair value in accordance with the Pricing Policies. 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. 9 TECHNOLOGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. 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. INCOME AND EXPENSES Expenses attributable to a single portfolio are charged to that portfolio. Expenses of the Fund are charged to each portfolio in proportion to net assets. All income earned and expenses incurred by a portfolio with multi-class shares outstanding 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 that the portfolio's Class B shares bear the distribution fees. 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 accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an investment advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Such fee is accrued daily and paid monthly. Effective January 1, 2004, the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced 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 average daily net assets of the Portfolio. The amount of the fee waiver may increase or decrease as a result of a final, definitive agreement with the New York Attorney General's Office ("NYAG"). For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. Pursuant to the advisory agreement, the Portfolio paid $75,000 to the Adviser representing the cost of certain legal and accounting services provided to the Portfolio by the Adviser for the year ended December 31, 2003. Brokerage commissions paid on investment transactions for the year ended December 31, 2003 amounted to $1,053,536, of which $30,500 was paid to Sanford C. Bernstein & Co. LLC, an affiliate of the Adviser. The Portfolio compensates 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 $947 for the year ended December 31, 2003. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 Research and Management, Inc. (the "Distributor"), formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50 of 1% 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 1% 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 year ended December 31, 2003, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 249,877,327 $ 211,570,569 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $ 255,624,739 ============= Gross unrealized appreciation $ 65,158,822 Gross unrealized depreciation (2,885,167) ------------- Net unrealized appreciation $ 62,273,655 ============= 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. 11 TECHNOLOGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 selling or buying a security or currency at a price different from the current market value. NOTE E: SECURITIES LENDING The Portfolio has entered into a securities lending agreement with UBS Warburg LLC (the "Lending Agent"), formerly UBS/PaineWebber, Inc. Under the terms of the agreement, the Lending Agent, on behalf of the Portfolio, administers the lending of portfolio securities to certain broker-dealers. In return, the Portfolio receives fee income from the lending transactions or it retains a portion of interest on the investment of any cash received as collateral. The Portfolio also continues to receive dividends or interest on the securities loaned. Unrealized gain or loss on the value of the securities loaned that may occur during the term of the loan will be reflected in the accounts of the Portfolio. All loans are continuously secured by collateral exceeding the value of the securities loaned. All collateral consists of either cash or U.S. Goverment securities. The Lending Agent invests the cash collateral received in an eligible money market vehicle in accordance with the investment restrictions of the Portfolio. The Lending Agent will indemnify the Portfolio for any loss resulting from a borrower's failure to return a loaned security when due. As of December 31, 2003, the Portfolio had no securities on loan. For the year ended December 31, 2003, the Portfolio earned fee income of $16,733 which is included in interest income in the accompanying statement of operations. NOTE F: CAPITAL STOCK There are 1,000,000,000 share of $.001 par value capital stock authorized, divided into two classes, designated Class A and Class B shares. Each class consists of 500,000,000 authorized shares. Transactions in capital stock were follows: SHARES AMOUNT -------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 ------------ ------------ -------------- -------------- CLASS A Shares sold 1,984,424 1,162,533 $ 24,443,993 $ 15,764,788 Shares redeemed (2,293,157) (5,522,368) (27,150,563) (68,585,069) ----------- ----------- ------------ ------------- Net decrease (308,733) (4,359,835) $ (2,706,570) $ (52,820,281) =========== =========== ============ ============= CLASS B Shares sold 6,947,943 4,869,200 $ 86,020,360 $ 62,693,924 Shares redeemed (3,870,229) (5,335,709) (45,575,698) (66,186,069) ----------- ----------- ------------ ------------- Net increase (decrease) 3,077,714 (466,509) $ 40,444,662 $ (3,492,145) =========== =========== ============ ============= 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE G: CONCENTRATION OF RISK Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. NOTE H: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $500 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 year ended December 31, 2003. NOTE I: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT) As of December 31, 2003, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $ (318,384,220)(a) Unrealized appreciation/(depreciation) 62,273,655(b) -------------- Total accumulated earnings/(deficit) $ (256,110,565) ============== (a) On December 31, 2003, the Portfolio had a net capital loss carryforward of $318,382,099 of which $124,840,492 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. 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, 2003, the Portfolio deferred to January 1, 2004, post October foreign currency losses of $2,121. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. During the current fiscal year, permanent differences, primarily due to net operating losses and the tax treatment of foreign currency gains and losses, resulted in a net decrease in accumulated net investment loss, a decrease in accumulated net realized loss on investment and foreign currency transactions, and a decrease in additional paid-in capital. This reclassification had no effect on net assets. NOTE J: LEGAL PROCEEDINGS As has been previously reported in the press, the Staff of the U.S. Securities and Exchange Commission ("SEC") and the 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 Alliance Capital Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information to them. Alliance Capital has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, Alliance Capital 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 subject to final, definitive documentation. Among the key provisions of these agreements are the following: (i) Alliance Capital 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) Alliance Capital agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds, commencing January 1, 2004, for a period of at least five years. The determination of which funds will have their fees reduced and to what degree is subject to the terms of the definitive agreement with the NYAG; and 13 TECHNOLOGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ (iii) Alliance Capital agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order contemplates that Alliance Capital's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. For a more complete description of this waiver, please see "Advisory Fee and Other Transactions with Affiliates" above. The special committee of Alliance Capital's Board of Directors, comprised of the members of Alliance Capital's Audit Committee and the other independent member of the Board, is continuing to direct and oversee 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 putative class action complaint entitled HINDO ET AL. V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND ET AL. (the "Hindo Complaint") was filed against Alliance Capital; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with Alliance Capital. 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 Mutual Funds. The Hindo Complaint alleges that certain of the Alliance Capital 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 Alliance Capital, including recovery of all fees paid to Alliance Capital pursuant to such contracts. Since October 2, 2003, approximately forty additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against Alliance Capital and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. As a result of the matters discussed above, investors in the AllianceBernstein Mutual Funds may choose to redeem their investments. 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. 14 TECHNOLOGY PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $10.05 $17.24 $24.95 $33.61 $19.17 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.11) (.13) (.12) (.14)(b) (.09)(b) Net realized and unrealized gain (loss) on investment transactions 4.55 (7.06) (5.92) (6.40) 14.57 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.44 (7.19) (6.04) (6.54) 14.48 ------ ------ ------ ------ ------ LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- (.11) (2.12) (.04) Distributions in excess of net realized gain on investment transactions -0- -0- (1.56) -0- -0- ------ ------ ------ ------ ------ Total dividends and distributions -0- -0- (1.67) (2.12) (.04) ------ ------ ------ ------ ------ Net asset value, end of period $14.49 $10.05 $17.24 $24.95 $33.61 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN Total investment return based on net asset value (c) 44.18% (41.71)% (25.23)% (21.52)% 75.71% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $130,127 $93,369 $235,252 $343,601 $357,480 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.11% 1.20% 1.08% 1.02% .95% Expenses, before waivers and reimbursements 1.11% 1.20% 1.08% 1.06% 1.12% Net investment loss (.86)% (1.01)% (.64)% (.38)%(b) (.39)%(b) Portfolio turnover rate 90% 68% 40% 61% 64%
- -------------------------------------------------------------------------------- See footnote summary on page 16. 15 TECHNOLOGY PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B --------------------------------------------------------------- SEPTEMBER 22, YEAR ENDED DECEMBER 31, 1999(d) TO ------------------------------------------------- DECEMBER 31, 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $9.98 $17.15 $24.90 $33.61 $23.59 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.14) (.16) (.17) (.21)(b) (.05)(b) Net realized and unrealized gain (loss) on investment transactions 4.51 (7.01) (5.91) (6.38) 10.07 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 4.37 (7.17) (6.08) (6.59) 10.02 ------ ------ ------ ------ ------ LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- (.11) (2.12) -0- Distributions in excess of net realized gain on investment transactions -0- -0- (1.56) -0- -0- ------ ------ ------ ------ ------ Total distributions -0- -0- (1.67) (2.12) -0- ------ ------ ------ ------ ------ Net asset value, end of period $14.35 $9.98 $17.15 $24.90 $33.61 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (c) 43.79% (41.81)% (25.45)% (21.68)% 42.48% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $187,319 $99,528 $179,076 $178,768 $10,350 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.37% 1.46% 1.33% 1.31% 1.20%(e) Expenses, before waivers and reimbursements 1.37% 1.46% 1.33% 1.33% 1.52%(e) Net investment loss (1.11)% (1.27)% (.92)% (.66)%(b) (.64)%(b)(e) Portfolio turnover rate 90% 68% 40% 61% 64%
- -------------------------------------------------------------------------------- (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) Commencement of distribution. (e) Annualized. 16 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO. We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the AllianceBernstein Technology Portfolio, formerly Alliance Technology Portfolio (the "Portfolio") (one of the portfolios constituting the AllianceBernstein Variable Products Series Fund, Inc., formerly Alliance Variable Products Series Fund, Inc.), as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AllianceBernstein Technology Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2003, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP New York, New York February 4, 2004 17 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TECHNOLOGY PORTFOLIO BOARD OF DIRECTORS WILLIAM H. FOULK, JR. (1), CHAIRMAN RUTH BLOCK (1) DAVID H. DIEVLER (1) JOHN H. DOBKIN (1) CLIFFORD L. MICHEL (1) DONALD J. ROBINSON (1) CUSTODIAN THE BANK OF NEW YORK One WallStreet New York, NY 10256 DISTRIBUTOR ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. 1345 Avenue of the Americas New York, NY 10105 INDEPENDENT AUDITORS ERNST & YOUNG LLP 5 Times Square New York, NY 10036 LEGAL COUNSEL SEWARD & KISSEL One Battery Park Plaza New York, NY 10004 TRANSFER AGENT ALLIANCE GLOBAL INVESTOR SERVICES, INC. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-free 1-(800) 221-5672 - -------------------------------------------------------------------------------- (1) Member of the Audit Committee. 18 TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ MANAGEMENT OF THE FUND BOARD OF DIRECTORS INFORMATION The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - -------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,+, 71 Investment adviser and an 116 None 2 Sound View Drive independent consultant. He Suite 100 was formerly Senior Manager Greenwich, CT 06830 of Barrett Associates, Inc., a (14) registered investment adviser, Chairman of the Board with which he had been associated since prior to 1999. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,+, 73 Formerly Executive Vice President 96 None 500 SE Mizner Blvd. and Chief Insurance Officer of The Boca Raton, FL 33432 Equitable Life Assurance Society of (12) the United States; Chairman and Chief Executive Officer of Evlico; Director of Avon, BP (oil and gas), Ecolab Incorporated (specialty chemicals), Tandem Financial Group and Donaldson, Lufkin & Jenrette Securities Corporation; former Governor at Large National Association of Securities Dealers, Inc. David H. Dievler,+, 74 Independent consultant. Until December 100 None P.O. Box 167 1994, he was Senior Vice President of Spring Lake, NJ 07762 Alliance Capital Management Corporaation (14) ("ACMC"), responsible for mutual fund administration. Prior to joining ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset Management since 1968. Prior to that, he was a Senior Manager at Price Waterhouse & Co. Member of American Institute of Certified Public Accountants since 1953.
19 TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
PORTFOLIOS IN FUND OTHER NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY (YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR - -------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS (CONTINUED) John H. Dobkin,+, 62 Consultant. Formerly President 98 None P.O. Box 12 of Save Venice, Inc. (preservation ANNANDALE, NY 12504 organization) FROM 2001-2002, (12) Senior Advisor from June 1999- June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988 -1992, Director and Chairman of the Audit Committee of ACMC. Clifford L. Michel,+, 64 Senior Counsel of the law firm of 97 Placer 15 St. Bernard's Road Cahill Gordon & Reindel since February Dome, Inc. Gladstone, NJ 07934 2001 and a partner of that firm for more (12) than twenty-five years prior thereto. He is President and Chief Executive Officer of Wenonah Development Company (investments) and a Director of Placer Dome, Inc. (mining). Donald J. Robinson,+, 69 Senior Counsel to the law firm of 96 None 98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP Weston, VT 05161 since prior to 1999. Formerly a senior (8) partner and a member of the Executive Committee of that firm. He was also a member and Chairman of the Municipal Securities Rulemaking Board and a Trustee of the Museum of the City of New York.
- -------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. + Member of the Audit Committee and the Nominating Committee. 20 TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND AGE WITH FUND DURING PAST 5 YEARS** - -------------------------------------------------------------------------------------------------------------------- Marc O. Mayer, 46 President Executive Vice President of Alliance Capital Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC**, with which he has been associated since prior to 1999. Janet A. Walsh, 42(1) Vice President Senior Vice President of ACMC**, with which she has been associated since prior to 1999. Mark R. Manley, 41 Secretary Senior Vice President and Acting General Counsel of ACMC**, with which he has been associated since prior to 1999. Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global Investor Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Management, Inc. ("ABIRM")**, with which he has been associated since prior to 1999. Thomas R. Manley, 52 Controller Vice President of ACMC**, with which he has been associated since prior to 1999.
- -------------------------------------------------------------------------------- (1) Ms. Walsh is the person primarily responsible for the day-to-day management of the investment portfolio. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM and AGIS are affiliates of the Fund. The Fund's Statement of Additional Information ("SAI") has additional information about the Fund's Directors and Officers and is available without charge upon request. Contact your financial representative or Alliance Capital at (800) 227-4618 for a free prospectus or SAI. 21 ITEM 2. CODE OF ETHICS. (a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant's code of ethics is filed herewith as Exhibit 11(a)(1). (b) During the period covered by this report, no amendments were made to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Directors has determined that independent directors David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial experts. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The following table sets forth the aggregate fees billed by the independent auditors for each Portfolio's last two fiscal years for professional services rendered for: (i) the audit of the Portfolio's annual financial statements included in the Portfolio's annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Portfolio's financial statements and are not reported under (i), which include multi-class distribution testing, advice and education on accounting and auditing issues, and consent letters; (iii) tax compliance, tax advice and tax return preparation; and (iv) aggregate non-audit services provided to the Portfolio, the Fund's Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund ("Service Affiliates"), which include conducting an annual internal control report pursuant to Statement on Auditing Standards No. 70. No other services were provided to the Fund during this period. AllianceBernstein Variable Products Series Fund, Inc.
All Fees for Non-Audit Services Provided to the Fund, the Adviser Audit-Related and Service Audit Fees* Fees** Tax Fees*** Affiliates ------------ --------------- ---------- --------------------- Global Bond 2002: $12,396 $10,055 $9,952 $587,077 2003: $23,500 $2,173 $8,747 $910,185 Global Dollar 2002: $9,997 $6,214 $8,023 $581,237 2003: $23,500 $2,173 $8,747 $910,185 Growth 2002: $19,759 $7,554 $11,455 $586,009 2003: $23,500 $2,173 $8,747 $910,185 Growth and Income 2002: $84,424 $7,748 $23,867 $598,615 2003: $23,500 $2,185 $8,747 $910,185 High Yield 2002: $10,766 $7,481 $9,676 $584,157 2003: $23,500 $2,173 $8,747 $910,185 International 2002: $11,316 $7,523 $9,810 $584,333 2003: $23,500 $2,173 $8,747 $910,185 Money Market 2002: $18,002 $6,273 $14,937 $588,210 2003: $23,500 $2,173 $7,729 $909,167 Americas Govt Income 2002: $12,604 $6,222 $8,482 $581,704 2003: $23,500 $2,173 $8,747 $910,185 Premier Growth 2002: $81,856 $6,521 $22,003 $595,524 2003: $23,500 $2,185 $8,747 $910,197 Quasar 2002: $13,868 $7,538 $10,393 $584,931 2003: $23,500 $2,173 $8,747 $910,197 Real Estate 2002: $12,539 $6,254 $8,485 $581,739 2003: $23,500 $2,173 $8,747 $910,185 Technology 2002: $18,263 $6,298 $9,833 $583,131 2003: $23,500 $2,173 $8,747 $910,185 Total Return 2002: $18,029 $8,807 $22,046 $597,853 2003: $23,500 $2,172 $8,747 $910,184 US Govt High Grade 2002: $18,585 $8,798 $10,998 $586,796 2003: $23,500 $2,172 $8,747 $910,184 Utility 2002: $11,154 $4,955 $8,270 $580,225 2003: $23,500 $2,172 $8,748 $910,185 Worldwide Privatization 2002: $10,566 $6,253 $8,156 $581,409 2003: $23,500 $2,172 $8,747 $910,184 Value 2002: $11,922 $4,947 $8,376 $580,323 2003: $23,500 $2,172 $8,747 $910,184 International Value 2002: $10,480 $6,247 $8,101 $581,348 2003: $23,500 $2,172 $8,747 $910,184 Small Cap Value 2002: $12,474 $6,247 $8,482 $581,729 2003: $23,500 $2,172 $8,747 $910,184 US Large Cap 2002: N/A N/A N/A N/A 2003: $23,500 $822 $6,543 $906,630
* For fiscal year 2002, the total audit fee billed by the independent auditor with respect to the Fund was allocated among the Portfolios pro rata based upon average net assets. For fiscal year 2003, the total audit fee with respect to the Fund was allocated equally among the Portfolios. ** For fiscal year 2002, a portion of the total audit-related fee billed by the independent auditor with respect to the Fund was allocated among the series pro rata based upon average net assets, and a portion was allocated equally among the Portfolios. For fiscal year 2003, the total audit-related fee with respect to the Fund was allocated equally among the Portfolios, except with respect to US Large Cap which commenced operations on May 2, 2003. *** For fiscal year 2002, the total tax fee billed by the independent auditor with respect to the Fund was allocated primarily among the Portfolios pro rata based upon average net assets. For fiscal year 2003, the total tax fee with respect to the Fund primarily was allocated equally among the Series. Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund's Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Portfolios by the Fund's independent auditors. The Fund's Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of a Portfolio. Accordingly, all of the amounts in the table for Audit Fees, Audit-Related Fees and Tax Fees for 2003 are for services pre-approved by the Fund's Audit Committee. The amounts of the Fees for Non-Audit Services provided to the Fund, the Adviser and Service Affiliates in the table for each Portfolio, that were subject to pre-approval by the Audit Committee for 2003 were as follows: Non-Audit Services Pre-Approved by the Audit Committee . Audit Related Tax Fees Fees Total --------------- ------- --------- Global Bond $364,173 $8,747 $372,920 Global Dollar $364,173 $8,747 $372,920 Growth $364,173 $8,747 $372,920 Growth and Income $364,185 $8,747 $372,920 High Yield $364,173 $8,747 $372,920 International $364,173 $8,747 $372,920 Money Market $364,173 $7,729 $371,902 Americas Govt Income $364,173 $8,747 $372,920 Premier Growth $364,185 $8,747 $372,932 Quasar $364,173 $8,747 $372,932 Real Estate $364,173 $8,747 $372,920 Technology $364,173 $8,747 $372,920 Total Return $364,172 $8,747 $372,919 US Govt High Grade $364,172 $8,747 $372,919 Utility $364,172 $8,748 $372,920 Worldwide Privatization $364,172 $8,747 $372,919 Value $364,172 $8,747 $372,919 International Value $364,172 $8,747 $372,919 Small Cap Value $364,172 $8,747 $372,919 US Large Cap $362,822 $6,543 $369,365 The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund's independent auditor to the Adviser and Service Affiliates is compatible with maintaining the auditor's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the registrant. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the registrant. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Form N-CSR disclosure requirement not yet effective with respect to the registrant. ITEM 10. 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 significant changes in the registrant's internal controls that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 11. EXHIBITS. The following exhibits are attached to this Form N-CSR: EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 11 (a) (1) Code of ethics that is subject to the disclosure of Item 2 hereof 11 (b) (1) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11 (b) (2) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 11 (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: February 26, 2004 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: February 26, 2004 By: /s/ Mark D. Gersten ---------------------- Mark D. Gersten Treasurer and Chief Financial Officer Date: February 26, 2004 EX-99.CERT 3 vp-comb_ex10b302.txt Exhibit 10(b)(1) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Marc O. Mayer, certify that: 1. I have reviewed this report on Form N-CSR (the "Report") of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this Report; 4. The Fund's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this Report based on such evaluation; and c) disclosed in this Report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year [or second fiscal half-year in the case of an annual report] that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors: a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls. Date: February 26, 2004 /s/ Marc O. Mayer ----------------- Marc O. Mayer President Exhibit 10(b)(2) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Mark D. Gersten, certify that: 1. I have reviewed this report on Form N-CSR (the "Report") of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this Report; 4. The Fund's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under- our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this Report based on such evaluation; and c) disclosed in this Report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year [or second fiscal half-year in the case of an annual report] that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors: a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls. Date: February 26, 2004 /s/ Mark D. Gersten ------------------- Mark D. Gersten Treasurer and Chief Financial Officer EX-99.906 CERT 4 vp-comb_ex10c906.txt Exhibit 10 (c) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Pursuant to 18 U.S.C. 1350, each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of AllianceBernstein Variable Products Series Fund, Inc. (the "Registrant"), hereby certifies that the Registrant's report on Form N-CSR for the period ended December 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: February 26, 2004 By: /s/ Marc O. Mayer ----------------------------------------- Marc O. Mayer President By: /s/ Mark D. Gersten ------------------------------ Mark D. Gersten Treasurer and Chief Financial Officer This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.CODE ETH 5 vp-comb_ethics.txt Exhibit 10(a)(1) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Officers/Purpose of the Code The AllianceBernstein Mutual Fund Complex's code of ethics (this "Code") for the investment companies within the complex (collectively, the "Funds" and each, a "Company") applies to each Company's Principal Executive Officer, Principal Financial and Accounting Officer and Controller (the "Covered Officers," each of whom is set forth in Exhibit A) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company. For the purposes of this Code, members of the Covered Officer's family include his or her spouse, children, stepchildren, financial dependents, parents and stepparents. Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The Company's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Company's Board of Directors or Trustees (the "Directors") that the Covered Officers may also be officers or employees of one or more of the other Funds or of other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. Each Covered Officer must: o not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company; o not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Company; o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; There are some conflict of interest situations, whether involving a Covered Officer directly or a member of his family, that should always be discussed with the General Counsel of AllianceBernstein Investment Research and Management, Inc.(the "General Counsel"), if material. Examples of these include: o service as a director on the board of directors or trustees of any public or private company (other than a not-for-profit organization); o the receipt of any non-nominal gifts; o the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. Disclosure and Compliance o Each Covered Officer should familiarize himself with the disclosure requirements and disclosure controls and procedures generally applicable to the Company; o each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and; o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the General Counsel that he has received, read, and understands the Code; o annually thereafter affirm to the General Counsel that he has complied with the requirements of the Code; o complete at least annually a questionnaire relating to affiliations or other relationships that may give rise to conflicts of interest; o not retaliate against any other Covered Officer or any employee of the Company or their affiliated persons for reports of potential violations that are made in good faith; and o notify the General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, waivers sought by a Covered Officer will be considered by the Company's Audit Committee (the "Committee"). The Company will follow these procedures in investigating and enforcing this Code: o the General Counsel will take all appropriate action to investigate any potential violations reported to him; o if, after such investigation, the General Counsel believes that no material violation has occurred, the General Counsel is not required to take any further action; o any matter that the General Counsel believes is a material violation will be reported to the Committee; o if the Committee concurs that a material violation has occurred, it will inform and make a recommendation to the Directors, who will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o the Committee will be responsible for granting waivers, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Company for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Company, the Company's adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, it is understood that this Code is in all respects separate and apart from, and operates independently of, any such policies and procedures.. In particular, the Company's and its investment adviser's and principal underwriter's codes of ethics under Rule 17j-l under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Directors, including a majority of independent directors. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Directors, the investment adviser, their counsel, counsel to the Company and, if deemed appropriate by the Directors of the Company, to the Directors of the other Funds. VIII. Internal Use The Code is intended solely for internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. Date: July 22, 2003 Exhibit A Persons Covered by this Code of Ethics Marc O. Mayer, Principal Executive Officer Mark Gersten, Principal Financial and Accounting Officer Tom Manley, Controller -----END PRIVACY-ENHANCED MESSAGE-----