N-CSR 1 edg10845_ar.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: 811-05398 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (Exact name of registrant as specified in charter) 1345 Avenue of the Americas, New York, New York 10105 (Address of principal executive offices) (Zip code) Mark R. Manley 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, 2004 Date of reporting period: December 31, 2004 ITEM 1. REPORTS TO STOCKHOLDERS. ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN TOTAL RETURN PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. TOTAL RETURN PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2005 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, 2004. 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 The table on page 4 shows the performance for the Portfolio and its new composite benchmark, a 60%/40% blend of the Russell 1000 Value Index and the Lehman Brothers (LB) Government/Credit Index, respectively, in addition to the individual components of the composite, for the one-, five- and 10-year periods ended December 31, 2004. Previously, the equity portion of the Portfolio's composite benchmark consisted of 60% of the S&P 500 Stock Index. However, from this point on, the equity portion of the Portfolio will use the Russell 1000 Value Index in place of the S&P 500 Stock Index, as the Russell 1000 Value Index more closely reflects the Portfolio's equity strategy. For the annual period ended December 31, 2004, the Portfolio's Class A shares underperformed the new composite benchmark. The performance of the Portfolio's equity allocation during the annual period was hindered by an overweighted position in health care and by an underweighted position in utilities. Performance was aided by an overweighted position in transportation and an underweighted position in technology. The Portfolio's fixed-income allocation was structured to capture two investment themes which were expected to unfold over the course of 2004. First, a turn in the monetary policy cycle was expected to bring about a meaningful rise in market rates. Second, the cyclical strengthening of balance sheets and a concurrent fall in default rates was expected to result in an ongoing tightening of credit spreads. These themes were embedded in the Portfolio through a short duration exposure, and by overweighting BBB-rated bonds. The credit allocation proved positive to returns as the overall risk premium of corporate bonds narrowed over the course of the year, and lower credit quality bonds outperformed those of higher quality bonds, according to the Lehman Brothers family of bond indices. Additionally, the Portfolio's security selection added incrementally to its sector allocation. However, the Portfolio's short duration exposure did not prove positive, and essentially offset the positive returns earned in credit. When the U.S. Federal Reserve (the "Fed") raised policy rates by 125 basis points from June of 2004 through December of 2004, the impact on the market rates was unusual in that the term structure of rates actually fell, according to the LB Government/Credit Index. During this period of Fed tightening, the long rates rallied more than the short-term rates, causing the Portfolio's short duration exposure to detract from relative returns. MARKET REVIEW AND INVESTMENT STRATEGY The annual reporting period was characterized by a solid economic environment, offset to some degree by rising oil prices and increased short-term interest rates. Robust economic growth, fueled by business and consumer spending, contributed to a strong period of expansion. Employment growth, which had been lagging the economic recovery, began to improve, helping to keep consumer spending strong. The Fed finally began to tighten monetary policy, reversing an easing trend that had been in place since January 2001. During the annual reporting period, the Fed raised rates 125 basis points to 2.25%. However, it appears that this had relatively little impact on monetary conditions because core inflation rose by roughly the same amount, so real policy rates stayed at essentially zero. Moreover, the trade-weighted dollar actually depreciated, which, all else being equal, typically stimulates growth via trade. Market rates had a mixed response to the turn in the monetary policy cycle; short term rates rose, but intermediate and long-term rates actually fell, a highly unusual response during the early stages of a monetary tightening cycle. Corporate profits remained very strong throughout the annual reporting period and overall credit metrics (leverage and interest coverage) continued to improve while default rates fell to historically low levels; this facilitated the ongoing contraction in credit risk premiums. Of note, the lower the credit quality, the greater the contraction in risk premiums. The investment discipline utilized by the Portfolio's equity management team was largely focused on stock selection (as opposed to sector rotation). The equity team had expected long-term interest rates to follow 1 TOTAL RETURN PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ short-term rates higher, thereby resulting in higher bond yields (which would negatively impact utility valuations) and net interest margin pressure at banks. The equity team further believed that interest rate pressures would cause multiple contractions in these sectors which had been trading at close to historic valuations. In fact, long-term rates have continued to decline even in the face of rising short-term rates, and interest-rate sensitive sectors have outperformed, as valuations have remained at high levels. The fixed-income team's strategy was to position the Portfolio for the turn in the monetary policy cycle by shortening duration versus the Portfolio's composite benchmark in order to make the Portfolio less price sensitive to a rise in market rates. Unfortunately, this detracted from performance as market rates actually fell on average as the Fed tightened from June to December, an unusual response as discussed above. The fixed-income team also positioned the Portfolio to capture the excess return that would be generated by corporate bonds in a period of contracting risk premiums. This was a successful strategy at both the sector and security selection level. Netting the Portfolio's duration and corporate strategy proved to be modestly positive to returns compared to the Portfolio's composite benchmark. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Total Return Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 2 TOTAL RETURN PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE NONE OF THE FOLLOWING INDICES OR COMPOSITES REFLECT FEES AND EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT OF A MUTUAL FUND PORTFOLIO. The unmanaged Russell 1000 Value Index is comprised of 1000 of the largest capitalized companies that are traded in the United States. The unmanaged S&P 500 Stock Index includes 500 U.S. stocks and is a common measure of the performance of the overall U.S. stock market. The unmanaged Lehman Brothers (LB) Government/Credit Index represents a combination of two indices: the LB Government Index which is composed of the LB Treasury Index and the LB Agency Index, and the LB Credit Index which includes investment-grade bonds issued by corporations and non-corporate entities. The new composite benchmark represents a 60%/40% blend of the Russell 1000 Value Index and the LB Government/Credit Index, respectively. The old benchmark represents a 60%/40% blend of the S&P 500 Stock Index and the LB Government/Credit Index, respectively. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including AllianceBernstein Total Return Portfolio. A WORD ABOUT RISK Price fluctuation in the Portfolio's securities may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater negative effect on bonds with longer maturities than on those with shorter maturities. Investments in the Portfolio are not guaranteed because of fluctuation in the net asset value for the underlying fixed-income related investments. Similar to direct bond ownership, bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the Portfolio. Portfolio purchasers should understand that, in contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. While the Portfolio invests principally in bonds and other fixed income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as covered call options and forward commitments. Also, at the discretion of the Investment Manager, the Portfolio can invest up to 10% of its total assets in illiquid securities or make loans of portfolio securities of up to 30% of its total assets. These financial instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 3 TOTAL RETURN PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________
RETURNS THE PORTFOLIO VS. ITS BENCHMARKS ------------------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------------------------------- AllianceBernstein Total Return Portfolio Class A 9.07% 5.97% 11.13% ------------------------------------------------------------------------------------------------- Russell 1000 Value Index 16.49% 5.27% 13.83% ------------------------------------------------------------------------------------------------- S&P 500 Stock Index 10.87% -2.30% 12.07% ------------------------------------------------------------------------------------------------- Lehman Brothers Government/Credit Index 4.19% 8.00% 7.80% ------------------------------------------------------------------------------------------------- New Composite: 60% Russell 1000 Value Index/ 40% LB Government/Credit Index 11.57% 6.36% 11.42% ------------------------------------------------------------------------------------------------- Old Composite: 60% S&P 500 Stock Index/ 40% LB Government/Credit Index 8.20% 1.82% 10.36% -------------------------------------------------------------------------------------------------
ALLIANCEBERNSTEIN TOTAL RETURN PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 ALLIANCEBERNSTEIN TOTAL RETURN PORTFOLIO CLASS A: $28,724 COMPOSITE (60/40 RUSSELL 1000 VALUE INDEX/LB GOVT/CREDIT INDEX): $30,305 RUSSELL 1000 VALUE INDEX: $36,509 COMPOSITE (60/40 S&P 500 STOCK INDEX/LB GOVT/CREDIT INDEX): $28,138 S&P 500 STOCK INDEX: $31,245 LEHMAN BROTHERS GOVT/CREDIT INDEX: $21,201 [THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Composite Composite (60/40 (60/40 Russell S&P 500 AllianceBernstein 1000 Value Russell Stock Lehman Total Return Index / LB 1000 Index / LB S&P 500 Brothers Portfolio Govt/Credit Value Govt/Credit Stock Govt/Credit Class A Index) Index Index) Index Index --------------------------------------------------------------------------------------------------------- 12/31/94 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 12/31/95 $ 12,367 $ 13,071 $ 13,836 $ 13,022 $ 13,753 $ 11,924 12/31/96 $ 14,243 $ 14,920 $ 16,830 $ 14,966 $ 16,909 $ 12,270 12/31/97 $ 17,250 $ 18,652 $ 22,751 $ 18,545 $ 22,549 $ 13,468 12/31/98 $ 20,181 $ 21,108 $ 26,307 $ 22,430 $ 28,997 $ 14,744 12/31/99 $ 21,498 $ 21,857 $ 28,240 $ 25,067 $ 35,096 $ 14,427 12/31/00 $ 24,190 $ 23,813 $ 30,220 $ 24,886 $ 31,902 $ 16,137 12/31/01 $ 24,739 $ 23,824 $ 28,531 $ 23,959 $ 28,112 $ 17,508 12/31/02 $ 22,122 $ 22,657 $ 24,103 $ 21,841 $ 21,902 $ 19,441 12/31/03 $ 26,336 $ 27,163 $ 31,341 $ 26,006 $ 28,181 $ 20,348 12/31/04 $ 28,724 $ 30,305 $ 36,509 $ 28,138 $ 31,245 $ 21,201
This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Total Return Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmarks. The Portfolio's new composite benchmark is a 60%/40% blend of the Russell 1000 Value Index and the Lehman Brothers (LB) Government/Credit Index, respectively. The Portfolio's prior composite benchmark was a 60%/40% blend of the S&P 500 Stock Index and the LB Government/Credit Index, respectively. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 4 TOTAL RETURN PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED TOTAL RETURN PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,070.66 $3.70 0.71% Hypothetical (5% return before expenses) $1,000 $1,021.57 $3.61 0.71% CLASS B Actual $1,000 $1,069.28 $4.99 0.96% Hypothetical (5% return before expenses) $1,000 $1,020.31 $4.88 0.96%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 5 TOTAL RETURN PORTFOLIO TEN LARGEST HOLDINGS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ U.S. Treasury Notes $ 46,305,980 19.4% ------------------------------------------------------------------------------- U.S. Treasury Bonds 11,833,228 5.0 ------------------------------------------------------------------------------- General Electric Co. (Bonds & Common Stock) 6,540,166 2.7 ------------------------------------------------------------------------------- Citigroup, Inc. 5,661,151 2.4 ------------------------------------------------------------------------------- JPMorgan Chase & Co. 5,645,527 2.4 ------------------------------------------------------------------------------- Viacom, Inc. Cl. B (Bonds & Common Stock) 5,245,400 2.2 ------------------------------------------------------------------------------- American International Group, Inc. 5,214,198 2.2 ------------------------------------------------------------------------------- ConocoPhillips 5,105,604 2.1 ------------------------------------------------------------------------------- Federal National Mortgage Assoc. (Bonds & Common Stock) 4,667,272 1.9 ------------------------------------------------------------------------------- Bank of America Corp. 4,304,284 1.8 ------------ ---- ------------------------------------------------------------------------------- $100,522,810 42.1% ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION DECEMBER 31, 2004 _______________________________________________________________________________ PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ U.S. Government & Sponsored Agency Obligations $ 60,577,607 25.4% ------------------------------------------------------------------------------- Finance 47,598,293 19.9 ------------------------------------------------------------------------------- Consumer Services 20,577,564 8.6 ------------------------------------------------------------------------------- Energy 20,415,897 8.6 ------------------------------------------------------------------------------- Healthcare 12,867,518 5.4 ------------------------------------------------------------------------------- Capital Goods 12,739,418 5.3 ------------------------------------------------------------------------------- Consumer Staples 12,687,080 5.3 ------------------------------------------------------------------------------- Utilities 12,581,991 5.3 ------------------------------------------------------------------------------- Technology 11,388,698 4.8 ------------------------------------------------------------------------------- Transportation 5,910,655 2.5 ------------------------------------------------------------------------------- Industrials 4,423,326 1.8 ------------------------------------------------------------------------------- Basic Industry 4,035,432 1.7 ------------------------------------------------------------------------------- Consumer Manufacturing 3,355,527 1.4 ------------------------------------------------------------------------------- Multi-Industry Companies 2,098,340 0.9 ------------------------------------------------------------------------------- Aerospace & Defense 1,043,712 0.4 ------------------------------------------------------------------------------- Sovereign Debt Obligations 956,046 0.4 ------------------------------------------------------------------------------- Municipal Obligation 436,240 0.2 ------------------------------------------------------------------------------- Miscellaneous/Conglomerate 377,643 0.2 ------------ ----- ------------------------------------------------------------------------------- Total Investments* 234,070,987 98.1 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 4,575,609 1.9 ------------ ----- ------------------------------------------------------------------------------- Net Assets $238,646,596 100.0% ------------------------------------------------------------------------------- * Excludes short-term obligations. 6 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- COMMON STOCKS-58.2% FINANCE-15.0% BANKING-MONEY CENTER-2.7% JPMorgan Chase & Co. 144,720 $ 5,645,527 Wachovia Corp. 16,300 857,380 ------------- 6,502,907 ------------- BANKING-REGIONAL-1.8% Bank of America Corp. 91,600 4,304,284 ------------- BROKERAGE & MONEY MANAGEMENT-1.3% Merrill Lynch & Co., Inc. 35,600 2,127,812 Morgan Stanley 18,900 1,049,328 ------------- 3,177,140 ------------- INSURANCE-5.1% ACE Ltd. (Cayman Islands) 67,400 2,881,350 AFLAC, Inc. 27,500 1,095,600 Allstate Corp. 23,000 1,189,560 American International Group, Inc. 79,400 5,214,198 Axis Capital Holdings Ltd. (Bermuda) 14,200 388,512 MetLife, Inc. 33,100 1,340,881 ------------- 12,110,101 ------------- MORTGAGE BANKING-1.2% Fannie Mae 31,300 2,228,873 The PMI Group, Inc. 13,600 567,800 ------------- 2,796,673 ------------- MISCELLANEOUS-2.9% Citigroup, Inc. 117,500 5,661,150 MBNA Corp. 45,625 1,286,169 ------------- 6,947,319 ------------- 35,838,424 ------------- ENERGY-7.8% DOMESTIC INTEGRATED-0.7% Occidental Petroleum Corp. 28,000 1,634,080 ------------- DOMESTIC PRODUCERS-0.7% Noble Energy, Inc. 26,400 1,627,824 ------------- INTERNATIONAL-3.1% BP p.l.c. (ADR) (United Kingdom) 41,900 2,446,960 ChevronTexaco Corp. 39,400 2,068,894 Exxon Mobil Corp. 55,900 2,865,434 ------------- 7,381,288 ------------- OIL SERVICE-1.2% EnCana Corp. (Canada) 16,600 947,196 Halliburton Co. 17,700 694,548 Nabors Industries Ltd. (Bermuda)(a) 25,300 1,297,637 ------------- 2,939,381 ------------- MISCELLANEOUS-2.1% ConocoPhillips 58,800 5,105,604 ------------- 18,688,177 ------------- CONSUMER SERVICES-7.7% BROADCASTING & CABLE-5.3% Clear Channel Communications, Inc. 48,900 1,637,661 Comcast Corp. Cl. A(a) 36,750 1,223,040 Comcast Corp. Special Cl. A(a) 46,600 1,530,344 Time Warner, Inc.(a) 113,100 2,198,664 Viacom, Inc. Cl. B 141,200 5,138,268 Westwood One, Inc.(a) 32,200 867,146 ------------- 12,595,123 ------------- ENTERTAINMENT & LEISURE-0.7% Carnival Corp. (Panama) 30,400 1,751,952 ------------- RESTAURANT & LODGING-0.5% McDonald's Corp. 32,900 1,054,774 ------------- RETAIL-GENERAL MERCHANDISE-1.2% The Home Depot, Inc. 67,400 2,880,676 ------------- 18,282,525 ------------- CAPITAL GOODS-5.3% ELECTRICAL EQUIPMENT-1.1% Emerson Electric Co. 17,300 1,212,730 Johnson Controls, Inc. 21,800 1,382,992 ------------- 2,595,722 ------------- MACHINERY-1.2% Ingersoll-Rand Co. Cl. A (Bermuda) 24,200 1,943,260 PACCAR, Inc. 12,200 981,856 ------------- 2,925,116 ------------- MISCELLANEOUS-3.0% General Electric Co. 150,200 5,482,300 United Technologies Corp. 16,800 1,736,280 ------------- 7,218,580 ------------- 12,739,418 ------------- 7 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- HEALTHCARE-5.2% BIOTECHNOLOGY-0.3% Applera Corp.-Applied Biosystems Group 33,300 $ 696,303 ------------- DRUGS-0.4% Pfizer, Inc. 33,900 911,571 ------------- MEDICAL PRODUCTS-1.5% Beckman Coulter, Inc. 14,200 951,258 Boston Scientific Corp.(a) 76,100 2,705,355 ------------- 3,656,613 ------------- MEDICAL SERVICES-3.0% Caremark Rx, Inc.(a) 35,300 1,391,879 UnitedHealth Group, Inc. 20,200 1,778,206 Wellpoint Inc. 34,600 3,979,000 ------------- 7,149,085 ------------- 12,413,572 ------------- CONSUMER STAPLES-4.7% BEVERAGES-0.5% Anheuser-Busch Cos., Inc. 12,900 654,417 PepsiCo, Inc. 12,800 668,160 ------------- 1,322,577 ------------- COSMETICS-1.2% Avon Products, Inc. 72,580 2,808,846 ------------- FOOD-0.3% Dean Foods Co.(a) 21,600 711,720 ------------- HOUSEHOLD PRODUCTS-1.1% The Procter & Gamble Co. 46,400 2,555,712 ------------- TOBACCO-1.4% Altria Group, Inc. 56,600 3,458,260 ------------- MISCELLANEOUS-0.2% Fortune Brands, Inc. 5,500 424,490 ------------- 11,281,605 ------------- TECHNOLOGY-3.6% COMMUNICATION-EQUIPMENT MANUFACTURERS-0.3% Corning, Inc. 59,300 697,961 ------------- COMPUTER HARDWARE/ STORAGE-1.4% EMC Corp.(a) 50,000 743,500 Hewlett-Packard Co. 55,300 1,159,641 International Business Machines Corp. (IBM) 14,500 1,429,410 ------------- 3,332,551 ------------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-0.2% Applied Materials, Inc.(a) 30,600 523,260 ------------- SEMI-CONDUCTOR COMPONENTS-0.3% Marvell Technology Group Ltd. (Bermuda)(a) 18,000 638,460 ------------- SOFTWARE-1.4% Microsoft Corp. 130,000 3,472,300 ------------- 8,664,532 ------------- UTILITIES-3.1% ELECTRIC & GAS UTILITY-1.6% Entergy Corp. 21,000 1,419,390 Exelon Corp. 36,400 1,604,148 PPL Corp. 14,800 788,544 ------------- 3,812,082 ------------- TELEPHONE UTILITY-1.5% BellSouth Corp. 26,600 739,214 Sprint Corp. (FON Group) 55,500 1,379,175 Verizon Communications, Inc. 33,200 1,344,932 ------------- 3,463,321 ------------- 7,275,403 ------------- TRANSPORTATION-2.3% RAILROAD-2.3% Burlington Northern Santa Fe Corp. 56,700 2,682,477 Union Pacific Corp. 40,400 2,716,900 ------------- 5,399,377 ------------- BASIC INDUSTRY-1.2% CHEMICALS-0.9% Air Products and Chemicals, Inc. 21,200 1,228,964 E.I. du Pont de Nemours and Co. 18,900 927,045 ------------- 2,156,009 ------------- CONTAINERS-0.0% Ball Corp. 2,200 96,756 ------------- MINING & METALS-0.3% Alcoa, Inc. 21,000 659,820 ------------- 2,912,585 ------------- 8 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- CONSUMER MANUFACTURING-1.0% BUILDING & RELATED-1.0% American Standard Cos., Inc.(a) 44,400 $ 1,834,608 Mohawk Industries, Inc.(a) 4,900 447,125 ------------- 2,281,733 ------------- MULTI-INDUSTRY COMPANIES-0.9% 3M Co. 13,200 1,083,324 Tyco International Ltd. 28,400 1,015,016 ------------- 2,098,340 ------------- AEROSPACE & DEFENSE-0.4% AEROSPACE-0.4% Northrop Grumman Corp. 19,200 1,043,712 ------------- Total Common Stocks (cost $106,293,845) 138,919,403 ------------- U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-25.4% Federal National Mortgage Assoc. 6.625%, 10/15/07 $ 2,250 2,438,399 U.S. Treasury Bonds 3.625%, 5/15/13 3,045 2,950,675 4.00%, 2/15/14 1,165 1,148,936 4.25%, 8/15/13 1,085 1,093,562 5.375%, 2/15/31 3,885 4,200,959 6.875%, 8/15/25 650 818,721 8.125%, 8/15/21 35 48,461 11.25%, 2/15/15 1,000 1,571,914 U.S. Treasury Notes 2.00%, 8/31/05 15,000 14,941,410 3.00%, 11/15/07-2/15/09 2,000 1,972,984 3.125%, 4/15/09 650 640,149 4.00%, 11/15/12 5,145 5,136,356 4.25%, 8/15/14 335 335,746 4.625%, 5/15/06 7,125 7,289,210 5.625%, 5/15/08 5,425 5,818,736 5.75%, 8/15/10 1,295 1,425,765 6.00%, 8/15/09 220 242,636 6.125%, 8/15/07 100 107,320 6.25%, 2/15/07 4,600 4,896,125 6.875%, 5/15/06 2,750 2,895,558 7.50%, 2/15/05 600 603,985 ------------- Total U.S. Government & Government Sponsored Agency Obligations (cost $59,414,079) 60,577,607 ------------- CORPORATE DEBT OBLIGATIONS-13.3% AUTOMOTIVE-1.0% Ford Motor Credit Co. 7.00%, 10/01/13 200 212,026 7.375%, 2/01/11 650 700,538 7.875%, 6/15/10 100 110,176 General Motors Corp. 7.20%, 1/15/11 250 256,411 8.375%, 7/15/33 850 880,671 Lear Corp. 8.11%, 5/15/09 200 226,830 ------------- 2,386,652 ------------- BANKING-1.6% Abbey National Capital Trust I Plc 8.963%, 12/29/49(b) 291 405,579 ABN Amro Holdings 6.523%, 12/29/49 (c) 250 274,683 Barclays Bank Plc 8.55%, 9/29/49(b)(c) 50 60,884 Development Bank of Singapore 7.125%, 5/15/11(c) 500 569,881 Dresdner Funding Trust I 8.151%, 6/30/31(c) 150 185,424 Fuji JGB Investment pfd. Mizuho 9.87%, 6/30/08(b)(c) 500 584,925 HBOS Plc (United Kingdom) 5.375%, 11/29/49(b)(c) 250 256,327 HSBC Bank USA 5.875%, 11/01/34 560 567,055 Northern Rock Plc 5.60%, 4/30/49 300 309,748 Sanwa Bank Ltd. 7.40%, 6/15/11 200 229,306 UBS Preferred Funding Trust II 7.247%, 6/26/49(b) 250 287,191 UFJ Finance Aruba AEC 6.75%, 7/15/13 200 222,874 ------------- 3,953,877 ------------- BROADCASTING/MEDIA-0.4% News America Holdings 9.25%, 2/01/13 100 128,872 News America Holdings, Inc. 8.25%, 10/17/96 60 73,619 Primedia, Inc. 8.00%, 5/15/13 100 102,875 Time Warner, Inc. 6.875%, 5/01/12 150 170,828 7.75%, 6/15/05 140 142,636 9 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- Viacom, Inc. 5.625%, 8/15/12 $ 100 $ 107,132 WPP Finance (UK) Corp. 5.875%, 6/15/14(c) 250 260,185 ------------- 986,147 ------------- BUILDING/REAL ESTATE-0.3% CRH America, Inc. 6.95%, 3/15/12 250 284,964 EOP Operating LP 7.875%, 7/15/31 200 242,428 8.375%, 3/15/06 35 36,917 William Lyon Homes 10.75%, 4/01/13 100 112,375 ------------- 676,684 ------------- CABLE-0.3% British Sky Broadcasting 8.20%, 7/15/09 100 115,702 Continental Cablevision, Inc. 9.00%, 9/01/08 200 233,626 Innova S. de R.L., SA (Mexico) 9.375%, 9/19/13 100 113,750 Rogers Cable, Inc. (Canada) 6.25%, 6/15/13 100 100,250 Shaw Communications, Inc. (Canada) 7.20%, 12/15/11 100 110,375 ------------- 673,703 ------------- CHEMICALS-0.1% Eastman Chemical 7.25%, 1/15/24 175 200,808 ------------- COMMUNICATIONS-0.4% British Telecommunications Plc (United Kingdom) 8.875%, 12/15/30 175 234,329 Qwest Services Corp. 14.00%, 12/15/10(c) 259 311,448 Sprint Capital Corp. 6.875%, 11/15/28 450 492,653 ------------- 1,038,430 ------------- COMMUNICATIONS-MOBILE-0.9% America Movil SA de CV (Mexico) 5.50%, 3/01/14 125 123,488 AT&T Wireless Services, Inc. 8.75%, 3/01/31 325 438,202 Bellsouth Corp. 5.20%, 9/15/14 100 101,922 Cincinnati Bell, Inc. 8.375%, 1/15/14 100 101,250 Inmarsat Finance Plc 7.625%, 6/30/12 100 104,000 Kyivstar 10.375%, 8/17/09 200 220,000 Nextel Communications, Inc. 5.95%, 3/15/14 100 103,500 SBC Communications 6.45%, 6/15/34 525 562,467 Telecom Italia 4.00%, 11/15/08 250 249,044 TELUS Corp. (Canada) 7.50%, 6/01/07 200 217,300 ------------- 2,221,173 ------------- CONGLOMERATE/MISCELLANEOUS-0.2% Cendant Corp. 6.25%, 1/15/08 250 266,804 Hutchison Whamp International Ltd. 7.45%, 11/24/33 (c) 100 110,839 ------------- 377,643 ------------- CONSUMER MANUFACTURING-0.1% Jostens IH Corp. 7.625%, 10/01/12(c) 185 192,400 ------------- CONTAINERS-0.1% Packaging Corp. of America 4.375%, 8/01/08 200 200,911 ------------- ENERGY-0.3% Devon Financing Corp. 7.875%, 9/30/31 300 377,724 Williams Cos., Inc. 7.875%, 9/01/21 200 223,000 XTO Energy, Inc. 7.50%, 4/15/12 100 117,021 ------------- 717,745 ------------- ENTERTAINMENT/LEISURE-0.1% Six Flags, Inc. 9.75%, 4/15/13 200 203,000 ------------- FINANCIAL-2.3% Capital One Bank 6.50%, 6/13/13 400 437,075 Chohung Bank (South Korea) 11.875%, 4/01/10(b)(c) 80 81,720 Countrywide Home Loan, Inc. 4.25%, 12/19/07 250 252,794 General Electric Capital Corp. 5.00%, 6/15/07 500 516,858 5.875%, 2/15/12 500 541,008 Goldman Sachs Capital I 6.345%, 2/15/34 250 260,326 10 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- Goldman Sachs Group, Inc. 6.60%, 1/15/12 $ 500 $ 558,019 6.65%, 5/15/09 200 220,695 Household Finance Corp. 5.75%, 1/30/07 200 208,772 6.50%, 1/24/06 75 77,533 7.875%, 3/01/07 150 163,227 iStar Financial, Inc. 5.70%, 3/01/14 200 204,710 6.00%, 12/15/10 200 210,965 Lehman Brothers Holdings, Inc. 7.875%, 8/15/10 150 176,062 Markel Capital Trust I 8.71%, 1/01/46 200 210,000 Merrill Lynch & Co., Inc. 6.00%, 2/17/09 500 536,637 Morgan Stanley 7.75%, 6/15/05 125 127,728 Rabobank Capital Fund II 5.26%, 12/29/49 (c) 230 234,023 The Hartford Financial Services, Inc. 6.375%, 11/01/08 125 134,222 Tig Holding 8.597%, 1/15/27(c) 350 307,125 ------------- 5,459,499 ------------- FOOD/BEVERAGE-0.4% Dimon, Inc. Series B 9.625%, 10/15/11 200 219,000 Kellogg Co. Cl.B 6.60%, 4/01/11 300 336,068 Kraft Foods, Inc. 5.25%, 10/01/13 300 308,655 ------------- 863,723 ------------- HEALTHCARE-0.2% HCA, Inc. 6.25%, 2/15/13 450 453,946 ------------- HOTEL/LODGING-0.1% Intrawest Corp. (Canada) 7.50%, 10/15/13 200 212,750 ------------- INDUSTRIAL-0.6% CRH America, Inc. 6.40%, 10/15/33 300 327,693 Imperial Tobacco (Netherlands) 7.125%, 4/01/09 170 187,296 Inco Ltd. 7.75%, 5/15/12 200 236,796 Trimas Corp. 9.875%, 6/15/12 200 212,000 Tyco International Group, SA 6.375%, 10/15/11 200 220,811 Waste Management, Inc. 6.375%, 11/15/12 175 193,854 ------------- 1,378,450 ------------- INSURANCE-0.6% American Reinsurance 7.45%, 12/15/26 140 155,356 Loews Corp. 6.75%, 12/15/06 100 105,839 Mangrove Bay Pass-Through Trust 6.102%, 7/15/33(b)(c) 400 396,904 North Front Pass-Through Trust 5.81%, 12/15/24 (c) 250 254,229 Royal Bank of Scotland Group Plc (United Kingdom) 7.648%, 8/29/49(b) 250 304,356 Zurich Capital Trust 8.376%, 6/01/37 200 224,553 ------------- 1,441,237 ------------- INSURANCE CARRIERS-0.2% Liberty Mutual Group 5.75%, 3/15/14 (c) 350 344,093 Royal & Sun Alliance Insurance 8.95%, 10/15/29 150 189,422 ------------- 533,515 ------------- METALS & MINING-0.1% International Steel Group 6.50%, 4/15/14 205 219,863 ------------- MUNICIPAL OBLIGATION-0.2% Dallas-Fort Worth Texas International Airport Facility 7.07%, 11/01/24 400 436,240 ------------- NON-AIR TRANSPORTATION-0.2% Bombardier Capital, Inc. 7.50%, 10/17/05(c) 125 126,875 CSX Corp. 5.50%, 8/01/13 100 104,581 6.75%, 3/15/11 250 279,822 ------------- 511,278 ------------- OIL SERVICE-0.2% Enterprise Products 5.60%, 10/15/14(c) 150 151,331 Valero Energy Corp. 4.75%, 6/15/13 300 296,354 ------------- 447,685 ------------- 11 TOTAL RETURN PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- PAPER/PACKAGING-0.3% Abitibi-Consolidated, Inc. (Canada) 8.30%, 8/01/05 $ 25 $ 25,563 Domtar, Inc. (Canada) 7.875%, 10/15/11 250 288,516 Georgia-Pacific Corp. 7.25%, 6/01/28 275 294,249 Owens-Brockway Glass 8.875%, 2/15/09 150 162,938 ------------- 771,266 ------------- PETROLEUM PRODUCTS-0.2% Amerada Hess Corp. 7.30%, 8/15/31 350 390,460 Tengizchevroil Finance Co. 6.124%, 11/15/14 (c) 130 130,325 ------------- 520,785 ------------- PUBLIC UTILITIES-ELECTRIC & GAS-1.6% American Electric Power Co., Inc. Series C 5.375%, 3/15/10 250 261,606 Calpine Corp. 8.50%, 7/15/10(c) 200 171,500 CenterPoint Energy Resources Corp. Series B 7.875%, 4/01/13 200 237,718 Consumers Energy Co. Series B 5.375%, 4/15/13 150 155,129 Dominion Resources Capital Trust III 8.40%, 1/15/31 200 251,147 DPL Capital Trust II 8.125%, 9/01/31 550 623,094 DPL, Inc. 6.875%, 9/01/11 450 491,459 FirstEnergy Corp. Series C 7.375%, 11/15/31 500 570,992 Nevada Power Co. Series A 8.25%, 6/01/11 200 229,750 NiSource Finance Corp. 7.875%, 11/15/10 250 293,895 Xcel Energy, Inc. 7.00%, 12/01/10 175 197,265 Yorkshire Power 8.25%, 2/15/05(c) 150 152,910 Yorkshire Power Series B 6.496%, 2/25/08 200 211,089 ------------- 3,847,554 ------------- ------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- RETAIL-0.1% TM Group Holdings (United Kingdom) 11.00%, 5/15/08 211 219,440 ------------- SUPERMARKET/DRUG-0.2% Couche-Tard Finance Corp. 7.50%, 12/15/13 200 214,500 Safeway, Inc. 5.80%, 8/15/12 310 327,252 ------------- 541,752 ------------- TECHNOLOGY-0.0% Motorola, Inc. 7.625%, 11/15/10 100 115,996 ------------- Total Corporate Debt Obligations (cost $30,220,481) 31,804,152 ------------- PREFERRED STOCKS-0.7% AUTOMOTIVE-0.2% Ford Motor Co. Capital Trust II 10,000 527,900 ------------- BANKING-0.1% Royal Bank of Scotland Group Plc 10,000 245,100 ------------- COMMUNICATIONS-0.1% Centaur Funding Corp. (Cayman Islands)(c) 200 262,000 ------------- PUBLIC UTILITIES-ELECTRIC & GAS-0.2% DTE Energy Trust I 20,000 535,600 ------------- FINANCIAL-0.1% Sovereign REIT(c) 90 136,350 ------------- Total Preferred Stocks (cost $1,560,503) 1,706,950 ------------- SOVEREIGN DEBT OBLIGATIONS-0.4% Korea Development Bank (South Korea) 5.75%, 9/10/13 $ 200 210,546 United Mexican States (Mexico) 6.375%, 1/16/13 700 745,500 ------------- Total Sovereign Debt Obligations (cost $899,728) 956,046 ------------- 12 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK-0.1% FINANCE-0.1% MORTGAGE BANKING-0.1% Sovereign Capital Trust IV 4.375%, 3/01/34 (cost $200,000) 4,000 $ 195,000 ------------- YANKEE BOND-0.1% Petronas Capital Ltd. 7.00%, 5/22/12(c) (cost $149,804) $ 150 171,829 ------------- SHORT-TERM INVESTMENT-1.3% TIME DEPOSIT-1.3% The Bank of New York 1.50%, 1/03/05 (cost $3,213,000) 3,213 3,213,000 ------------- TOTAL INVESTMENTS-99.5% (cost $201,951,440) 237,543,987 Other assets less liabilities-0.5% 1,102,609 ------------- NET ASSETS-100% $ 238,646,596 ============= (a) Non-income producing security. (b) Variable rate coupon, rate shown as of December 31, 2004. (c) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2004, the aggregate market value of these securities amounted to $6,037,958 or 2.5% of net assets. Glossary of Terms: ADR - American Depositary Receipt Pfd. - Preferred Stock See Notes to Financial Statements. 13 TOTAL RETURN PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $201,951,440) $ 237,543,987 Dividends and interest receivable 1,377,386 Receivable for investment securities sold 439,002 Receivable for capital stock sold 217,509 ------------- Total assets 239,577,884 ------------- LIABILITIES Due to custodian 98,716 Payable for investment securities purchased 570,206 Advisory fee payable 110,428 Administrative fee payable 17,500 Payable for capital stock redeemed 14,835 Distribution fee payable 11,730 Transfer agent fee payable 56 Accrued expenses 107,817 ------------- Total liabilities 931,288 ------------- NET ASSETS $ 238,646,596 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 12,613 Additional paid-in capital 212,649,790 Undistributed net investment income 5,783,168 Accumulated net realized loss on investment transactions (15,391,522) Net unrealized appreciation of investments 35,592,547 ------------- $ 238,646,596 ============= CLASS A SHARES Net assets $ 193,600,017 ============= Shares of capital stock outstanding 10,220,850 ============= Net asset value per share $ 18.94 ============= CLASS B SHARES Net assets $ 45,046,579 ============= Shares of capital stock outstanding 2,392,268 ============= Net asset value per share $ 18.83 ============= See Notes to Financial Statements. 14 TOTAL RETURN PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ INVESTMENT INCOME Interest $ 4,599,444 Dividends (net of foreign taxes withheld of $3,623) 2,925,113 ------------- Total investment income 7,524,557 ------------- EXPENSES Advisory fee 1,375,159 Distribution fee -- Class B 92,987 Custodian 163,735 Administrative 69,000 Printing 66,774 Audit 41,750 Legal 5,000 Directors' fees 1,000 Transfer agency 859 Miscellaneous 19,298 ------------- Total expenses 1,835,562 Less: expenses waived and reimbursed by the Adviser (see Note B) (116,078) ------------- Net expenses 1,719,484 ------------- Net investment income 5,805,073 ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 4,604,488 Net change in unrealized appreciation/depreciation of investments 9,537,757 ------------- Net gain on investment transactions 14,142,245 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 19,947,318 ============= See Notes to Financial Statements. 15 TOTAL RETURN PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============== ============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 5,805,073 $ 5,005,227 Net realized gain (loss) on investment transactions 4,604,488 (989,573) Net change in unrealized appreciation/ depreciation of investments 9,537,757 30,153,121 -------------- -------------- Net increase in net assets from operations 19,947,318 34,168,775 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A(4,209,896)(4,737,202) Class B(804,109)(245,968) CAPITAL STOCK TRANSACTIONS Net increase 2,962,939 16,592,502 -------------- -------------- Total increase 17,896,252 45,778,107 NET ASSETS Beginning of period 220,750,344 174,972,237 -------------- -------------- End of period (including undistributed net investment income of $5,783,168 and $4,992,100, respectively) $ 238,646,596 $ 220,750,344 ============== ============== See Notes to Financial Statements. 16 TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Total Return Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 17 TOTAL RETURN 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 Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .625% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $116,078. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 18 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $103,358, 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ============== ============== Investment securities (excluding U.S. government securities) $ 57,034,812 $ 61,897,476 U.S. government securities 85,217,084 69,973,655 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $ 202,438,613 ============== Gross unrealized appreciation $ 36,948,169 Gross unrealized depreciation (1,842,795) -------------- Net unrealized appreciation $ 35,105,374 ============== 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. 19 TOTAL RETURN 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 20 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 531,722 1,150,300 $ 9,591,065 $ 18,599,550 Shares issued in reinvestment of dividends 240,428 281,808 4,209,896 4,737,202 Shares redeemed (1,661,415) (1,543,162) (29,948,111) (24,808,763) ----------- ----------- ------------- ------------- Net decrease (889,265) (111,054) $ (16,147,150) $ (1,472,011) =========== =========== ============= ============= CLASS B Shares sold 1,218,508 1,612,646 $ 21,798,149 $ 26,328,138 Shares issued in reinvestment of dividends 46,134 14,676 804,109 245,968 Shares redeemed (196,051) (519,958) (3,492,169) (8,509,593) ----------- ----------- ------------- ------------- Net increase 1,068,591 1,107,364 $ 19,110,089 $ 18,064,513 =========== =========== ============= ============= NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ============= ============= Distributions paid from: Ordinary income $ 5,014,005 $ 4,983,170 ------------- ------------- Total taxable distributions 5,014,005 4,983,170 ------------- ------------- Total distributions paid $ 5,014,005 $ 4,983,170 ============= ============= 21 TOTAL RETURN PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 5,783,168 Accumulated capital and other losses (14,904,349)(a) Unrealized appreciation/(depreciation) 35,105,374(b) ------------ Total accumulated earnings/(deficit) $ 25,984,193 ============ (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $14,904,349 of which $11,906,542 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. During the current fiscal year the Portfolio utilized capital loss carry forward of $4,383,881. (b) The differences 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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants 22 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 23 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, --------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $17.76 $15.30 $17.65 $18.01 $17.49 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .46(c) .42 .45 .44 .48 Net realized and unrealized gain (loss) on investment transactions 1.12 2.47 (2.29) (.01) 1.63 Net increase (decrease) in net asset value from operations 1.58 2.89 (1.84) .43 2.11 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.40) (.43) (.32) (.28) (.39) Distributions from net realized gain on investment transactions -0- -0- (.19) (.42) (1.20) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (.09) -0- Total dividends and distributions (.40) (.43) (.51) (.79) (1.59) Net asset value, end of period $18.94 $17.76 $15.30 $17.65 $18.01 TOTAL RETURN Total investment return based on net asset value (d) 9.07% 19.05% (10.58)% 2.27% 12.52% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $193,600 $197,334 $171,670 $183,098 $90,736 Ratio to average net assets of: Expenses, net of waivers and reimbursements .71% .79% .79% .78% .87% Expenses, before waivers and reimbursements .76% .79% .79% .78% .87% Net investment income 2.57%(c) 2.60% 2.76% 2.50% 2.77% Portfolio turnover rate 60% 81% 57% 71% 102%
See footnote summary on page 25. 24 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B -------------------------------------------------- OCTOBER 26, YEAR ENDED DECEMBER 31, 2001(e) TO ------------------------------------- DECEMBER 31, 2004 2003 2002 2001(a) ----------- ----------- ----------- ----------- Net asset value, beginning of period $17.69 $15.27 $17.65 $17.56 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .43(c) .36 .39 .06 Net realized and unrealized gain (loss) on investment transactions 1.10 2.48 (2.27) .03 Net increase (decrease) in net asset value from operations 1.53 2.84 (1.88) .09 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.39) (.42) (.31) -0- Distributions from net realized gain on investment transactions -0- -0- (.19) -0- Total dividends and distributions (.39) (.42) (.50) -0- Net asset value, end of period $18.83 $17.69 $15.27 $17.65 TOTAL RETURN Total investment return based on net asset value (d) 8.79% 18.78% (10.80)% .51% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $45,047 $23,417 $3,302 $1,570 Ratio to average net assets of: Expenses, net of waivers and reimbursements .96% 1.05% 1.05% 1.00%(f) Expenses, before waivers and reimbursements 1.01% 1.05% 1.05% 1.00%(f) Net investment income 2.35%(c) 2.29% 2.51% 1.80%(f) Portfolio turnover rate 60% 81% 57% 71%
(a) As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities. For the year ended December 31, 2001, the effect of this change to Class A and B shares was to decrease net investment income per share by $.02 and $.02, respectively, increase net realized and unrealized gain (loss) on investments per share by $.02 and $.02, respectively, and decrease the ratio of net investment income to average net assets from 2.61% to 2.50% for Class A and from 2.41% to 1.80% for Class B. 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. 25 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN TOTAL RETURN PORTFOLIO: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Total Return Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 TAX INFORMATION (UNAUDITED) _______________________________________________________________________________ For corporate shareholders, 41% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2004 qualifies for the corporate dividends received deduction. 26 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Goverance and Nominating Committee. 27 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 28 TOTAL RETURN PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------ Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent 5/29/45 President and Independent Compliance Officer--Mutual Funds of Compliance Officer ACMC,** with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with 4/28/45 which he has been associated since prior to 2000. Frank Caruso Vice President Senior Vice President of Shields/ACMC**, 10/28/56 with which he has been associated since prior to 2000. Susanne M. Lent(1) Vice President Senior Vice President of ACMC** with which 8/29/69 she has been associated since prior to 2000. Paul C. Rissman Vice President Executive Vice President of ACMC**, with 11/10/56 which he has been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President Deputy General 10/23/62 Counsel and Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he 8/3/51 has been associated since prior to 2000.
(1) Ms. Lent 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. 29 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ------------------------------------------------------------------------------- ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. ------------------------------------------------------------------------------- Investment Products Offered o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2005 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, 2004. 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 research 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 The table on page 4 shows the Portfolio's performance compared to its benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, for the one-year period ended December 31, 2004, and since inception of the Portfolio's Class A shares on May 10, 2001. The Portfolio outperformed the MSCI EAFE Index for the annual reporting period ended December 31, 2004 and is meaningfully ahead since its inception. The Portfolio is managed using a research-driven, bottom-up stock selection process, so its performance was a function of individual stock selection rather than sector and country over- and underweights. Many of the Portfolio's stock selections in the finance, industrial commodities, consumer staples and energy sectors outperformed the market and their sector peers, contributing to this year's relative return. Many holdings in the financial sector rose as improved economic conditions led to an amelioration in credit quality, particularly in South Korea and Japan. Many of the Portfolio's energy stocks benefited from the high price of crude oil and from healthy refining margins, especially energy holdings in emerging markets. Among the Portfolio's industrial commodities holdings, picks within the steel industry performed especially well as stronger-than-expected demand, particularly from China, led to a near-doubling of the price of steel. There were also a few disappointments during the year. A few technology holdings fared poorly during the annual reporting period as investors fretted about the lackluster growth of information technology (IT) spending. In addition, a couple of the Portfolio's Japanese automobile holdings lagged the market as investors worried that the falling U.S. dollar and rising steel costs would erode profits. In both cases, the Portfolio's management team felt that investors have over reacted to recent bad news, and believed that the earnings prospects for these companies was better than their share price implied. MARKET REVIEW AND INVESTMENT STRATEGY International stocks continued their rally during the annual reporting period ended December 31, 2004 even though the rise was more muted than that of the previous year. Investors spent much of the year worrying about potential obstacles to continued economic expansion, including record high oil prices, policy changes in China, restrained capital spending, and a falling U.S. dollar. However, in the end, economic and corporate earnings growth proved quite resilient. In fact, profit growth surpassed analysts' expectations in every region of the world, providing a firm foundation for higher market values. Energy stocks were among the year's strongest performers because of high oil prices and expanded refining margins. Other industrial commodities such as steel, coal, and copper all rose markedly in price because of very high demand, and the companies that provide these commodities recorded sharply higher profits. On the other hand, medical stocks performed poorly, reflecting investor fears about litigation threats and the downward pressure on drug prices. The technology sector also trailed the market because of disappointment about the slow upswing in IT spending. Moreover, from a U.S. perspective, international markets got a further boost from the fall in the U.S. dollar. All else being equal, a cheaper U.S. dollar makes assets denominated in other currencies more valuable, adding to international stock returns. The Portfolio maintained and benefited from a cyclical tilt in its positioning during the annual reporting period. This tilt was not the result of any broad macroeconomic call; rather, fundamental research showed that the prospective profitability of many cyclical companies (e.g. energy, construction and housing, industrial commodity, and financial stocks--all sectors where the Portfolio's 1 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ selections did very well) was not reflected in these companies' share prices. Over the course of the year, many of the Portfolio's holdings that had risen to their fair value were sold, specifically several commodity, banking and automobile-related names. Their proceeds were then invested in areas that the management team found more attractive, including undervalued holdings in insurance, oil, and technology. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund International Value Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 2 INTERNATIONAL VALUE PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure 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 any specific investment, including AllianceBernstein International Value Portfolio. A Word About Risk Substantially all of the Portfolio's assets will be invested in foreign securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments. In addition, because the Portfolio will invest in foreign currency denominated securities, fluctuations in the value of the Portfolio's investments may be magnified by changes in foreign exchange rates. The Portfolio may at times buy and sell foreign currencies or enter into forward foreign currency exchange contracts and can invest up to 50% of its assets in such financial instruments. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. Also, at the discretion of the Investment Manager, the Portfolio can invest up to 10% of its total assets in illiquid securities or make loans of portfolio securities of up to 30% of its total assets. In addition, the Portfolio may also enter into repurchase agreements of up to seven days' duration for up to 10% of the Portfolio's total assets. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. ------------------------------------------------------------------------------- (Historical Performance continued on next page) 3 INTERNATIONAL VALUE PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ THE PORTFOLIO VS. ITS BENCHMARK PERIODS ENDED DECEMBER 31, 2004 RETURNS ----------------------------- SINCE 1 YEAR INCEPTION* ------------------------------------------------------------------------------- AllianceBernstein International Value Portfolio Class A 25.12% 15.51% MSCI EAFE Index 20.70% 5.27% * Since inception of the Portfolio's Class A shares on 5/10/01. ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 5/10/01*-12/31/04 ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO CLASS A: $16,909 MSCI EAFE INDEX: $12,061 [Graphic ommitted, data below] AllianceBernstein International Value Portfolio Class A MSCI EAFE Index ------------------------------------------------------------------------------- 5/10/01* 10000 10000 12/31/01 9870 8513 12/31/02 9362 7180 12/31/03 13515 9992 12/31/04 16909 12061 * Since inception of the portfolio's class a shares on 5/10/01. 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 12/31/04) as compared to the performance of the portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. ------------------------------------------------------------------------------- See Historical Performance and Benchmark disclosures on previous page. 4 INTERNATIONAL VALUE PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning Ending Expenses Annualized International Value Account Value Account Value Paid During Expense Portfolio July 1, 2004 December 31, 2004 Period* Ratio* ------------------------------------------------------------------------------- Class A Actual $1,000 $1,201.30 $5.20 0.94% Hypothetical (5% return before expenses) $1,000 $1,020.41 $5.23 0.94% Class B Actual $1,000 $1,199.28 $6.63 1.20% Hypothetical (5% return before expenses) $1,000 $1,019.10 $6.09 1.20% ------------------------------------------------------------------------------- * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 5 INTERNATIONAL VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- Canon, Inc. $ 11,512,351 3.5% Assurance Generales de France 10,175,011 3.1 Arcelor 10,017,702 3.0 ING Groep N.V. 9,806,495 3.0 Sanofi-Aventis 8,908,746 2.7 Sumitomo Mitsui Financial Group, Inc. 8,777,882 2.6 Honda Motor Co., Ltd. 8,731,063 2.6 Continental AG 8,325,003 2.5 BP p.l.c. 8,207,654 2.5 Royal Bank of Scotland Group Plc 8,147,667 2.4 $ 92,609,574 27.9% SECTOR DIVERSIFICATION December 31, 2004 _______________________________________________________________________________ PERCENT OF SECTOR U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- Finance $119,082,827 35.9% Industrial Commodities 41,547,483 12.5 Capital Equipment 37,011,589 11.2 Energy 35,057,896 10.6 Technology / Electronics 26,046,525 7.8 Construction & Housing 20,798,710 6.3 Medical 13,923,748 4.2 Telecommunications 13,640,870 4.1 Consumer Staples 8,809,241 2.7 Consumer Cyclical 4,473,344 1.3 Total Investments* 320,392,233 96.6 Cash and receivables, net of liabilities 11,145,518 3.4 Net Assets $331,537,751 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 6 INTERNATIONAL VALUE PORTFOLIO COUNTRY BREAKDOWN December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COUNTRY U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- United Kingdom $ 66,376,427 20.0% Japan 59,805,537 18.0 France 50,410,355 15.2 Canada 22,535,585 6.8 Germany 19,182,054 5.8 Korea 17,835,376 5.4 Taiwan 11,269,890 3.4 Singapore 10,322,285 3.1 Spain 9,880,818 3.0 Netherlands 9,806,495 2.9 Belgium 7,196,620 2.2 Brazil 6,680,100 2.0 Italy 6,642,578 2.0 Switzerland 6,515,890 2.0 Sweden 4,898,984 1.5 Peoples Republic of China 3,401,504 1.0 Israel 3,343,818 1.0 Other* 4,287,917 1.3 Total Investments 320,392,233 96.6 Cash and receivables, net of liabilities 11,145,518 3.4 Net Assets $331,537,751 100.0% ------------------------------------------------------------------------------- * The Fund's country breakdowns are expressed as a percentage of net assets and may vary over time. "Other" represents less than 1% weightings in the following countries: Hungary and Thailand. 7 INTERNATIONAL VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value ------------------------------------------------------------------------------- COMMON STOCKS-96.6% BELGIUM-2.2% Delhaize Group 94,589 $ 7,196,620 BRAZIL-2.0% Petroleo Brasilerio, SA (ADR) 145,000 5,250,450 Votorantim Celulose e Papel, SA 88,250 1,429,650 ------------ 6,680,100 CANADA-6.8% Alcan, Inc. 130,500 6,404,373 Bank of Nova Scotia 213,668 7,258,096 Magna International, Inc. Cl.A 23,550 1,937,423 Manulife Financial Corp. 150,000 6,935,693 ------------ 22,535,585 FRANCE-15.2% Arcelor 434,360 10,017,702 Assurance Generales de France 136,300 10,175,011 BNP Paribas, SA 36,200 2,623,761 Compagnie de Saint Gobain 43,200 2,602,514 Credit Agricole, SA 172,400 5,204,064 Renault, SA 73,900 6,189,595 Sanofi-Aventis 111,427 8,908,746 Societe Generale 46,320 4,688,962 ------------ 50,410,355 GERMANY-5.8% Continental AG 130,900 8,325,003 Depfa Bank Plc 216,300 3,643,418 Heidelberger Zement AG 65,150 3,947,787 MAN AG 85,100 3,265,846 ------------ 19,182,054 HUNGARY-0.7% MOL Magyar Olaj-es Gazipari Rt. (GDR) 34,630 2,435,459 ISRAEL-1.0% Bank Hapoalim Ltd. 990,700 3,343,818 ITALY-2.0% Eni S.p.A. 265,000 6,642,578 JAPAN-18.0% Aiful Corp. 67,600 7,473,367 Canon, Inc. 212,000 11,512,351 Honda Motor Co., Ltd. 167,000 8,731,063 JFE Holdings, Inc. 208,500 5,957,313 Nippon Meat Packer, Inc. 119,000 1,612,621 Nissan Motor Co., Ltd. 461,400 5,078,969 Promise Co., Ltd. 92,200 6,602,060 Sumitomo Mitsui Financial Group, Inc. 1,201 8,777,882 UFJ Holdings, Inc. (a) 663 4,059,911 ------------ 59,805,537 KOREA-5.4% Hyundai Motor Co., Ltd. 65,200 3,483,690 Kookmin Bank (a) 100,000 3,912,769 POSCO 38,600 6,946,483 Shinhan Financial Group Co., Ltd. 155,600 3,492,434 ------------ 17,835,376 NETHERLANDS-2.9% ING Groep N.V. 324,271 9,806,495 PEOPLES REPUBLIC OF CHINA-1.0% China Petroleum Chemical Corp. (Sinopec) 8,312,000 3,401,504 SINGAPORE-3.1% Flextronics International Ltd. (a) 236,200 3,264,284 Singapore Telecommunications Ltd. 4,842,643 7,058,001 ------------ 10,322,285 SPAIN-3.0% ACS, Actividades de Construccion y Servicios, SA 114,717 2,613,025 Repsol YPF, SA 279,400 7,267,793 ------------ 9,880,818 SWEDEN-1.5% Svenska Cellulosa AB Cl.B 114,800 4,898,984 SWITZERLAND-2.0% Credit Suisse Group (a) 155,000 6,515,890 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Shares or Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------------- TAIWAN-3.4% Compal Electronics, Inc. (GDR) 1,195,042 $5,977,122 TAIWAN SEMICONDUCTOR Manufacturing Co., Ltd. (ADR) 623,412 5,292,768 ------------ 11,269,890 THAILAND-0.6% PTT Public Co., Ltd. 416,000 1,852,458 UNITED KINGDOM-20.0% Aviva Plc 636,497 7,653,283 BP Plc 843,500 8,207,654 George Wimpey Plc 336,800 2,615,590 GlaxoSmithKline Plc 213,600 5,015,002 HBOS Plc 464,310 7,546,688 InterContinental Hotels Group Plc 113,271 1,408,113 Persimmon Plc 79,131 1,048,844 RMC Group Plc 304,900 4,969,859 Royal & Sun Alliance Insurance Group Plc 819,150 1,221,558 Royal Bank of Scotland Group Plc 242,600 8,147,667 Taylor Woodrow Plc 574,800 3,001,091 Vodafone Group Plc 2,419,500 6,582,869 Whitbread Plc 188,900 3,065,231 Xstrata Plc 330,000 5,892,978 ------------ 66,376,427 Total Common Stocks (cost $243,947,301) 320,392,233 SHORT-TERM INVESTMENT-3.4% TIME DEPOSIT-3.4% The Bank of New York 1.50%, 1/03/05 (cost $11,376,000) $11,376 $ 11,376,000 TOTAL INVESTMENTS-100.0% (cost $255,323,301) 331,768,233 Other assets less liabilities-(0.0%) (230,482) NET ASSETS-100% $ 331,537,751 FINANCIAL FUTURES CONTRACTS PURCHASED (see Note D)
Value at Number of Expiration Original December 31, Unrealized Type Contracts Month Value 2004 Appreciation -------------------------------------------------------------------------------------------- EURO STOXX 50 135 Mar 2005 $5,363,663 $5,409,542 $ 45,879 FTSE 100 IDX FUT 22 Mar 2005 2,006,105 2,026,360 20,255 -------- $ 66,134
------------------------------------------------------------------------------- (a) Non-income producing security. Glossary of Terms: ADR - American Depositary Receipt GDR - Global Depositary Receipt See Notes to Financial Statements. 9 INTERNATIONAL VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
ASSETS Investments in securities, at value (cost $255,323,301) $331,768,233 Cash 702 Foreign cash, at value (cost $1,255,233) 1,287,802(a) Receivable for foreign currency contracts 1,651,116 Dividends and interest receivable 479,511 Receivable for capital stock sold 431,546 ------------ Total assets 335,618,910 ------------ LIABILITIES Payable for investment securities purchased and foreign currency contracts 3,332,597 Payable for capital stock redeemed 210,453 Advisory fee payable 160,689 Foreign capital gain tax payable 113,070 Distribution fee payable 55,517 Payable for variation margin on futures contracts 30,402 Transfer agent fee payable 68 Accrued expenses 178,363 ------------ Total liabilities 4,081,159 ------------ NET ASSETS $331,537,751 ============ COMPOSITION OF NET ASSETS Capital stock, at par $ 19,948 Additional paid-in capital 244,681,608 Undistributed net investment income 2,459,321 Accumulated net realized gain on investment and foreign currency transactions 7,897,162 Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 76,479,712 ------------ $331,537,751 ============ Class A Shares Net assets $ 47,094,918 ============ Shares of capital stock outstanding 2,819,895 ============ Net asset value per share $ 16.70 ============ Class B Shares Net assets $284,442,833 ============ Shares of capital stock outstanding 17,127,805 ============ Net asset value per share $ 16.61 ============
(a) An amount of U.S. $458,695 has been segregated as collateral for the financial futures contracts outstanding at December 31, 2004. See Notes to Financial Statements. 10 INTERNATIONAL VALUE PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $751,903) $ 4,773,074 Interest 70,890 ------------ Total investment income 4,843,964 ------------ EXPENSES Advisory fee 1,897,186 Distribution fee--Class B 435,830 Custodian 290,372 Printing 76,169 Administrative 69,000 Audit 41,750 Legal 14,464 Directors' fees 1,000 Transfer agency 859 Miscellaneous 5,088 ------------ Total expenses 2,831,718 Less: expenses waived and reimbursed by the Adviser (see Note B) (380,760) ------------ Net expenses 2,450,958 ------------ Net investment income 2,393,006 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions 8,166,804 Futures 764,069 Foreign currency transactions 93,235 Net change in unrealized appreciation/depreciation of: Investments 44,481,262 Futures (50,169) Foreign currency denominated assets and liabilities 256,187 ------------ Net gain on investment and foreign currency transactions 53,711,388 ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 56,104,394 ============ See Notes to Financial Statements. 11 INTERNATIONAL VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Year Ended Year Ended December 31, December 31, 2004 2003 ============ ============ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 2,393,006 $ 680,489 Net realized gain on investment and foreign currency transactions 9,024,108 10,435 Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 44,687,280 33,356,129 ------------ ------------ Net increase in net assets from operations 56,104,394 34,047,053 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (191,011) (88,130) Class B (705,496) (155,555) Net realized gain on investment transactions Class A (78,951) -0- Class B (352,748) -0- CAPITAL STOCK TRANSACTIONS Net increase 132,797,869 69,636,068 ------------ ------------ Total increase 187,574,057 103,439,436 NET ASSETS Beginning of period 143,963,694 40,524,258 ------------ ------------ End of period (including undistributed net investment income of $2,459,321 and $869,587, respectively) $331,537,751 $143,963,694 ============ ============ See Notes to Financial Statements. 12 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein International Value Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term growth of capital. The Portfolio commenced operations on May 10, 2001. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 13 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2004, there were no expenses waived by the Adviser. 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Effective January 1, 2004 through September 6, 2004, in connection with the Adviser's settlement with the New York Attorney General's Office ("NYAG") the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $311,760. 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 voluntarily 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 $69,000 for the year ended December 31, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $540,696, of which $62,440 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: Purchases Sales ============ =========== Investment securities (excluding U.S. government securities) $179,242,251 $47,364,423 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 $255,363,550 ============ Gross unrealized appreciation $ 77,130,002 Gross unrealized depreciation (725,319) ------------ Net unrealized appreciation $ 76,404,683 ============ 15 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 1. Financial Futures Contracts The Portfolio may buy or sell financial futures contracts for the purpose of hedging its portfolio against adverse effects of anticipated movements in the market. The Portfolio bears the market risk that arises from changes in the value of these financial instruments and the imperfect correlation between movements in the price of the futures contracts and movements in the price of the securities hedged or used for cover. At the time the Portfolio enters into a futures contract, the Portfolio deposits and maintains as collateral an initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. 2. Forward Exchange Currency Contracts The Portfolio may enter into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency on a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as 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. 16 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- Class A Shares sold 738,827 1,698,934 $ 10,579,597 $ 17,079,554 Shares issued in reinvestment of dividends and distributions 19,619 8,034 269,962 88,130 Shares redeemed (290,296) (894,222) (4,116,268) (9,125,866) ---------- ---------- ----------- ----------- Net increase 468,150 812,746 $ 6,733,291 $ 8,041,818 =========== ========== ============= ============= Class B Shares sold 9,118,920 10,300,772 $131,486,643 $109,827,156 Shares issued in reinvestment of dividends and distributions 77,188 14,219 1,058,244 155,555 Shares redeemed (455,690) (4,729,080) (6,480,309) (48,388,461) --------- --------- ---------- ---------- Net increase 8,740,418 5,585,911 $126,064,578 $ 61,594,250 ========== ========= ============ ============ NOTE F: Risks Involved in Investing in the Portfolio Concentration of Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $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, 2004. NOTE H: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ========== =========== Distributions paid from: Ordinary income $1,328,206 $243,685 ---------- -------- Total distributions paid $1,328,206 $243,685 ========== ======== 17 INTERNATIONAL VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $5,035,013 Undistributed long-term capital gains 5,361,719 Unrealized appreciation/(depreciation) 76,439,463(a) ----------- Total accumulated earnings/(deficit) $86,836,195 =========== (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 tax treatment of foreign currency gains and losses, resulted in a net increase in undistributed net investment income, and a decrease in accumulated net realized gain on investment and foreign currency transactions. The reclassification had no effect on net assets. NOTE I: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. The Hindo Complaint was filed in the United States District Court for the Southern District of 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 19 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, 2004 2003 2002 2001 ------------ ----------- ----------- ----------- Net asset value, beginning of period $13.45 $9.35 $9.87 $10.00 --------- --------- --------- --------- Income From Investment Operations Net investment income (b)(c) .20 .13 .13 .04 Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.16 4.01 (.64) (.17) --------- --------- --------- --------- Net increase (decrease) in net asset value from operations 3.36 4.14 (.51) (.13) --------- --------- --------- --------- Less: Dividends and Distributions Dividends from net investment income (.08) (.04) (.01) -0- Distributions from net realized gain on investment transactions (.03) -0- -0- -0- --------- --------- --------- --------- Total dividends and distributions (.11) (.04) (.01) -0- --------- --------- --------- --------- Net asset value, end of period $16.70 $13.45 $9.35 $9.87 ========= ========= ========= ========= Total Return Total investment return based on net asset value (d) 25.12% 44.36% (5.15)% (1.30)% Ratios/Supplemental Data Net assets, end of period (000's omitted) $47,095 $31,628 $14,391 $3,913 Ratio to average net assets of: Expenses, net of waivers and reimbursements .95% 1.20% 1.17% .95%(e) Expenses, before waivers and reimbursements 1.13% 1.49% 2.20% 8.41%(e) Net investment income (c) 1.42% 1.16% 1.30% .59%(e) Portfolio turnover rate 23% 14% 19% 22%
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 --------------------------------------------------- May 10, Year Ended December 31, 2001(f) to -------------------------------------- December 31, 2004 2003 2002 2001 ------------ ----------- ----------- ----------- Net asset value, beginning of period $13.39 $9.33 $9.87 $10.25 --------- --------- --------- --------- Income From Investment Operations Net investment income (b)(c) .15 .08 .08 .01 Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.16 4.01 (.61) (.39) --------- --------- --------- --------- Net increase (decrease) in net asset value from operations 3.31 4.09 (.53) (.38) --------- --------- --------- --------- Less: Dividends and Distributions Dividends from net investment income (.06) (.03) (.01) -0- Distributions from net realized gain on investment transactions (.03) -0- -0- -0- --------- --------- --------- --------- Total dividends and distributions (.09) (.03) (.01) -0- --------- --------- --------- --------- Net asset value, end of period $16.61 $13.39 $9.33 $9.87 ========= ========= ========= ========= Total Return Total investment return based on net asset value (d) 24.86% 43.95% (5.36)% (3.71)% Ratios/Supplemental Data Net assets, end of period (000's omitted) $284,443 $112,336 $26,133 $1,828 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.20% 1.45% 1.44% 1.20%(e) Expenses, before waivers and reimbursements 1.38% 1.74% 2.47% 9.31%(e) Net investment income (c) 1.07% .38% .86% .17%(e) Portfolio turnover rate 23% 14% 19% 22%
(a) Commencement of operations. (b) Based on average shares outstanding. (c) Net of expenses reimbursed or waived by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. (f) Commencement of distribution. 21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein International Value Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein International Value Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 22 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 23 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR -------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of thE Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 24 INTERNATIONAL VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer - Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Kevin F. Simms(1) Vice President Senior Vice President of ACMC** and a co-Chief 3/23/66 Investment Officer of International Value Equities since 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 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(1) Ms Sharon Fay and Messrs. Simms, Giulio A. Martini and Henry D'Auria 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. 25 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 -------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. -------------------------------------------------------------------------------- ---------------------------- INVESTMENT PRODUCTS OFFERED > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED ---------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. REAL ESTATE INVESTMENT PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ LETTER TO INVESTORS February 10, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Standard and Poor's (S&P) 500 Stock Index and the National Association of Real Estate Investment Trusts (NAREIT) Equity Index, for the one- and five-year periods ended December 31, 2004, and since the Portfolio's Class A shares on January 9, 1997. During the annual reporting period ended December 31, 2004, the Portfolio outperformed both the NAREIT Equity Index and the S&P 500 Stock Index. The portfolio's strong security selection drove positive relative performance. Sector selection was a minor detractor of overall performance for the year. During the annual reporting period, the Portfolio maintained an above market-weight position in retail, lodging and industrial/office properties and below market-weight positions in health care, diversified and residential properties. During the annual period, performance was strong across all sectors with retail outperforming other property types. Stock selection contributed to relative performance in all of the sectors where the Portfolio maintained an above market-weight position. Security selection was particularly strong in the office/industrial properties where the Portfolio's investments were focused on companies exposed to markets that displayed fundamental improvement ahead of other geographical regions. In the retail sector, the Portfolio benefited from a trend in regional mall consolidation when a key holding was acquired by a larger competitor for an attractive premium. In the lodging sector, most of the Portfolio's holdings performed well. In this sector, the Portfolio also benefited from having invested in a resort operator which was acquired by a private equity group for a 25% premium. Both of these takeovers occurred in the second half of the year. MARKET REVIEW AND INVESTMENT STRATEGY In general, REIT fundamentals progressed positively as a result of an improved economic climate. Occupancy rates for industrial space increased meaningfully, companies continued to experience strong traffic at retail centers, and hotels benefited from a pick-up in business and tourist travelers. However, the recovery in fundamentals for office and residential properties lagged other sectors. Disappointing job growth and the resulting weak office space demand in most regions of the country continued to impact earnings prospects for office properties. Apartment properties also experienced poor fundamentals as record low mortgage rates continued to discourage renters and favor home ownership. In addition, slow job growth negatively impacted the absorption of vacant apartments and rent levels throughout most regions. Despite differing fundamental outlooks, stock prices for REITs in all sectors were lifted by an ongoing investor appetite for the yield and stability that was provided by property compared to other investment alternatives. During the annual period ended December 31, 2004, the Portfolio maintained an overweighted position in lodging/resorts properties. Lodging fundamentals improved throughout the year and towards year-end; lodging revenues per average room (RevPAR) were approximately 8% higher than the prior year. This increase was the result of both occupancy and average daily rate increases. Healthy demand for lodging has been driven by rebounding business travel and a weak dollar that is both attracting tourism and encouraging U.S. travelers to travel domestically. The Portfolio also maintained an overweighted position in retail, a sector that continued to benefit from strong consumer spending. Finally, the Portfolio's overweighted position in office properties focused on select geographical locations where fundamental improvement was increasingly evident. Apartments continued to be underweighted due to the weak fundamentals of this property type in a low mortgage rate environment that favors ownership. The Portfolio held below market-weight positions in health care because valuations of most REITs in this sector did not properly reflect tenant risk associated with these properties. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Real Estate Investment Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 REAL ESTATE INVESTMENT PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE 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. A WORD ABOUT RISK While the Portfolio invests principally in the equity securities of real estate investment trusts, in order to achieve its investment objectives, the Portfolio may invest up to 20% of its total assets in mortgage-backed securities which involve risks described in the prospectus. The Portfolio will invest substantially all of its assets in REITs and real estate companies and is subject to greater risk than would a fund with a more diversified portfolio. 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, including declines in the value of real estate, general and local economic conditions and interest rates. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 REAL ESTATE INVESTMENT PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ RETURNS THE PORTFOLIO VS. ITS BENCHMARKS -------------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS SINCE INCEPTION* -------------------------------------- AllianceBernstein Real Estate Investment Portfolio Class A 35.63% 22.16% 12.61% S&P 500 Stock Index 10.87% -2.30% 7.74% NAREIT Equity Index 31.58% 21.95% 12.43% * Since Inception of the Portfolio's Class A shares on 1/9/97. ALLIANCEBERNSTEIN REAL ESATE INVESTMENT PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 1/9/97*-12/31/04 ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT PORTFOLIO CLASS A: $25,784 NAREIT EQUITY INDEX: $25,523 S&P 500 STOCK INDEX: $18,127 AllianceBernstein Real Estate Investment Portfolio S&P 500 NAREIT Class A Stock Index Equity Index ------------------------------------------------------------------- 1/9/97* $ 10,000 $ 10,000 $ 10,000 12/31/97 $ 12,340 $ 13,082 $ 12,026 12/31/98 $ 9,987 $ 16,823 $ 9,921 12/31/99 $ 9,476 $ 20,361 $ 9,463 12/31/00 $ 12,006 $ 18,509 $ 11,958 12/31/01 $ 13,301 $ 16,310 $ 13,624 12/31/02 $ 13,647 $ 12,707 $ 14,145 12/31/03 $ 19,010 $ 16,350 $ 19,397 12/31/04 $ 25,784 $ 18,127 $ 25,523 * Since Inception of the Fund's Class A shares on 1/9/97. Daily data is not available for the NAREIT Equity Index until 12/31/98. The first plot point for the NAREIT Equity Index is measured from 12/31/96 to 12/31/97. 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 12/31/04) as compared to the performance of the Portfolio's benchmarks. The chart assumes the reinvestment of dividends and capital gains. SEE HISTORICAL PERFORMANCE AND BENCHMARK DISCLOSURES ON PREVIOUS PAGE. 3 REAL ESTATE INVESTMENT PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED REAL ESTATE INVESTMENT PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------ CLASS A Actual $1,000 $1,270.61 $4.39 0.77% Hypothetical (5% return before expenses) $1,000 $1,021.27 $3.91 0.77% CLASS B Actual $1,000 $1,269.47 $5.82 1.02% Hypothetical (5% return before expenses) $1,000 $1,020.01 $5.18 1.02%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 REAL ESTATE INVESTMENT PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- ProLogis $11,075,148 7.1% Simon Property Group, Inc. 10,431,271 6.7 Developers Diversified Realty Corp. 8,550,099 5.5 Host Marriott Corp. 8,065,260 5.2 Equity Residential 7,268,562 4.7 General Growth Properties, Inc. 6,942,720 4.4 Alexandria Real Estate Equities, Inc. 6,429,888 4.1 Vornado Realty Trust 5,938,140 3.8 Duke Realty Corp. 5,622,858 3.6 Archstone-Smith Trust 5,078,580 3.3 ------------ ------ $75,402,526 48.4% INDUSTRY DIVERSIFICATION December 31, 2004 INDUSTRY U.S. $ VALUE PERCENT OF NET ASSETS -------------------------------------------------------------------------------- Office $28,749,034 18.4% Apartments 24,075,662 15.4 Regional Malls 22,704,527 14.6 Shopping Centers 19,220,716 12.3 Industrial 18,654,467 12.0 Lodging 15,272,388 9.8 Diversified 10,815,518 6.9 Office - Industrial Mix 6,587,472 4.2 Storage 3,529,602 2.3 Healthcare 749,320 0.5 ------------ ------ Total Investments* 150,358,706 96.4 Cash and receivables, net of liabilities 5,539,053 3.6 ------------ ------ Net Assets $155,897,759 100.0% * Excludes short-term investments. 5 REAL ESTATE INVESTMENT PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE -------------------------------------------------------------------------------- COMMON STOCKS-96.4% REAL ESTATE INVESTMENT TRUSTS-96.4% OFFICE-18.4% Alexandria Real Estate Equities, Inc. 86,400 $ 6,429,888 Boston Properties, Inc. 77,500 5,011,925 Corporate Office Properties Trust 164,000 4,813,400 Equity Office Properties Trust 51,500 1,499,680 Glenborough Realty Trust, Inc. 67,700 1,440,656 Mack-Cali Realty Corp. 77,000 3,544,310 Prentiss Properties Trust 81,700 3,120,940 SL Green Realty Corp. 47,700 2,888,235 ----------- 28,749,034 ----------- APARTMENTS-15.4% Archstone-Smith Trust 132,600 5,078,580 Camden Property Trust 97,500 4,972,500 Equity Residential 200,900 7,268,562 Essex Property Trust, Inc. 26,700 2,237,460 United Dominion Realty Trust, Inc. 182,200 4,518,560 ----------- 24,075,662 ----------- REGIONAL MALLS-14.6% General Growth Properties, Inc. 192,000 6,942,720 Simon Property Group, Inc. 161,300 10,431,271 The Macerich Co. 33,000 2,072,400 The Mills Corp. 51,100 3,258,136 ----------- 22,704,527 ----------- SHOPPING CENTERS-12.3% Developers Diversified Realty Corp. 192,700 8,550,099 Equity One, Inc. 59,200 1,404,816 Kimco Realty Corp. 12,900 748,071 Pan Pacific Retail Properties, Inc. 46,100 2,890,470 Regency Centers Corp. 60,500 3,351,700 Tanger Factory Outlet Centers, Inc. 86,000 2,275,560 ----------- 19,220,716 ----------- INDUSTRIAL-12.0% AMB Property Corp. 95,300 3,849,167 EastGroup Properties, Inc. 78,600 3,011,952 First Potomac Realty Trust 31,500 718,200 ProLogis 255,600 11,075,148 ----------- 18,654,467 ----------- LODGING-9.8% Hilton Hotels Corp. 71,000 1,614,540 Host Marriott Corp. 466,200 8,065,260 LaSalle Hotel Properties 43,600 1,387,788 Starwood Hotels & Resorts Worldwide, Inc. 72,000 4,204,800 ----------- 15,272,388 ----------- DIVERSIFIED-6.9% iStar Financial, Inc. 91,300 4,132,238 Vornado Realty Trust 78,000 5,938,140 Washington Real Estate Investment Trust 22,000 745,140 ----------- 10,815,518 ----------- OFFICE - INDUSTRIAL MIX-4.2% Duke Realty Corp. 164,700 5,622,858 Reckson Associates Realty Corp. 29,400 964,614 ----------- 6,587,472 ----------- STORAGE-2.3% Shurgard Storage Centers, Inc. Cl.A 80,200 3,529,602 ----------- HEALTHCARE-0.5% Windrose Medical Properties Trust 52,000 749,320 ----------- Total Common Stocks (cost $96,036,020) 150,358,706 ----------- SHORT-TERM INVESTMENT-1.5% TIME DEPOSIT-1.5% The Bank of New York 1.50%, 1/03/05 (cost $2,363,000) $ 2,363 2,363,000 ----------- TOTAL INVESTMENTS-97.9% (cost $98,399,020) 152,721,706 Other assets less liabilities-2.1% 3,176,053 ----------- NET ASSETS-100% $155,897,759 ----------- See Notes to Financial Statements. 6 REAL ESTATE INVESTMENT PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $98,399,020) $152,721,706 Cash 292 Receivable for investment securities sold 3,923,367 Dividends and interest receivable 667,721 Receivable for capital stock sold 18,803 ------------ Total assets 157,331,889 ------------ LIABILITIES Payable for investment securities purchased 1,029,821 Payable for capital stock redeemed 218,348 Advisory fee payable 90,878 Administrative fee payable 17,500 Distribution fee payable 13,906 Transfer agent fee payable 60 Accrued expenses 63,617 ------------ Total liabilities 1,434,130 ------------ NET ASSETS $155,897,759 ============ COMPOSITION OF NET ASSETS Capital stock, at par $ 7,565 Additional paid-in capital 89,957,429 Undistributed net investment income 2,742,103 Accumulated net realized gain on investment transactions 8,867,976 Net unrealized appreciation of investments 54,322,686 ------------ $155,897,759 ============ CLASS A SHARES Net assets $ 88,441,048 ============ Shares of capital stock outstanding 4,280,450 ============ Net asset value per share $ 20.66 ============ CLASS B SHARES Net assets $ 67,456,711 ============ Shares of capital stock outstanding 3,284,549 ============ Net asset value per share $ 20.54 ============ See Notes to Financial Statements. 7 REAL ESTATE INVESTMENT PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ______________________________________________________________________________ INVESTMENT INCOME Dividends $ 3,854,924 Interest 16,032 ----------- Total investment income 3,870,956 ----------- EXPENSES Advisory fee 989,685 Distribution fee--Class B 135,416 Custodian 113,196 Administrative 69,000 Audit 41,750 Printing 39,379 Legal 8,887 Directors' fees 1,000 Transfer agency 859 Miscellaneous 4,705 ----------- Total expenses 1,403,877 Less: expenses waived and reimbursed by the Adviser (see Note B) (288,189) ----------- Net expenses 1,115,688 ----------- Net investment income 2,755,268 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 9,975,335 Net change in unrealized appreciation/depreciation of investments 27,859,871 ----------- Net gain on investment transactions 37,835,206 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $40,590,474 =========== See Notes to Financial Statements. 8 REAL ESTATE INVESTMENT PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 2,755,268 $ 2,888,091 Net realized gain on investment transactions 9,975,335 1,406,199 Net change in unrealized appreciation/ depreciation of investments 27,859,871 24,701,512 ------------- ------------- Net increase in net assets from operations 40,590,474 28,995,802 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (1,670,715) (1,491,301) Class B (1,210,837) (676,451) CAPITAL STOCK TRANSACTIONS Net increase 5,553,162 19,119,814 ------------- ------------- Total increase 43,262,084 45,947,864 NET ASSETS Beginning of period 112,635,675 66,687,811 ------------- ------------- End of period (including undistributed net investment income of $2,742,103 and $2,868,387, respectively) $155,897,759 $112,635,675 ============= ============= See Notes to Financial Statements. 9 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Real Estate Investment Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the 10 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .90% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. 11 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $288,189. 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 $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $134,533, of which $39,150 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ----------- ----------- Investment securities (excluding U. S. government securities) $49,552,336 $44,633,834 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 $98,709,944 ----------- Gross unrealized appreciation $54,011,762 Gross unrealized depreciation -0- ----------- Net unrealized appreciation $54,011,762 ----------- 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 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 13 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 892,997 929,384 $ 15,537,262 $ 12,364,972 Shares issued in reinvestment of dividends 105,875 115,158 1,670,715 1,491,301 Shares redeemed (1,116,458) (991,714) (18,939,018) (12,805,746) ------------ ------------ -------------- -------------- Net increase (decrease) (117,586) 52,828 $ (1,731,041) $ 1,050,527 ------------ ------------ -------------- -------------- CLASS B Shares sold 980,923 1,417,075 $ 16,451,716 $ 18,602,093 Shares issued in reinvestment of dividends 77,074 52,439 1,210,837 676,451 Shares redeemed (597,834) (92,900) (10,378,350) (1,209,257) ------------ ------------ -------------- -------------- Net increase 460,163 1,376,614 $ 7,284,203 $ 18,069,287 =========== =========== ============= ============= NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Concentration of Risk--Although the Portfolio does not invest directly in real estate, it invests primarily in Real Estate Equity Securities and has a policy of concentration of its investments in the real estate industry. Therefore, an investment in the Portfolio is subject to certain risks associated with the direct ownership of real estate and with the real estate industry in general. To the extent that assets underlying the Portfolio's investments are concentrated geographically, by property type or in certain other respects, the Portfolio may be subject to additional risks. In addition, investing in Real Estate Investment Trusts ("REITs") involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs are dependent upon management skills, are not diversified, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax-free pass-through of income under the Code and failing to maintain their exemptions from registration under the 1940 Act. REITs (especially mortgage REITs) also are subject to interest rate risks. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims of losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ---------- ---------- Distributions paid from: Ordinary income $2,881,552 $2,167,752 ---------- ---------- Total taxable distributions 2,881,552 2,167,752 ---------- ---------- Total distributions paid $2,881,552 $2,167,752 ========== ========== 14 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 6,153,120 Undistributed long term capital gain 5,767,883(a) Unrealized appreciation/(depreciation) 54,011,762(b) ----------- Total accumulated earnings/(deficit) $65,932,765 =========== (a) During the fiscal year, the Portfolio utilized capital loss carryforwards of $660,047. (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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. The Hindo Complaint was filed in the United States District Court for the Southern District of 15 REAL ESTATE INVESTMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 16 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, -------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $15.62 $11.52 $11.50 $10.75 $8.87 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .39(b) .46 .44(b) .47(b) .48(b) Net realized and unrealized gain (loss) on investment transactions 5.05 3.99 (.12) .67 1.84 ----------- ----------- ----------- ----------- ----------- Net increase in net asset value from operations 5.44 4.45 .32 1.14 2.32 ----------- ----------- ----------- ----------- ----------- LESS: DIVIDENDS Dividends from net investment income (.40) (.35) (.30) (.39) (.44) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $20.66 $15.62 $11.52 $11.50 $10.75 =========== =========== =========== =========== =========== TOTAL RETURN Total investment return based on net asset value (c) 35.63% 39.30% 2.60% 10.79% 26.69% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $88,441 $68,717 $50,062 $39,417 $29,124 Ratio to average net assets of: Expenses, net of waivers and reimbursements .77% 1.24% 1.06% .95% .95% Expenses, before waivers and reimbursements .99% 1.24% 1.29% 1.39% 1.67% Net investment income 2.26%(b) 3.50% 3.70%(b) 4.32%(b) 4.87%(b) Portfolio turnover rate 35% 23% 31% 33% 25%
See footnote summary on page 18. 17 REAL ESTATE INVESTMENT PORTFOLIO FINANCIAL HIGHLIGHTS (continued) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B ------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------------ April 24, 2001(d) to 2004 2003 2002 December 31, 2001 ----------- ----------- ----------- ------------------ Net asset value, beginning of period $15.55 $11.48 $11.49 $10.46 ----------- ----------- ----------- ---------- INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .34(b) .43 .40(b) .31(b) Net realized and unrealized gain (loss) on investment transactions 5.03 3.98 (.11) 1.11 ----------- ----------- ----------- ---------- Net increase in net asset value from operations 5.37 4.41 .29 1.42 ----------- ----------- ----------- ---------- LESS: DIVIDENDS Dividends from net investment income (.38) (.34) (.30) (.39) ----------- ----------- ----------- ---------- Net asset value, end of period $20.54 $15.55 $11.48 $11.49 =========== =========== =========== =========== TOTAL RETURN Total investment return based on net asset value (c) 35.28% 39.02% 2.31% 13.77% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $67,457 $43,919 $16,626 $5,603 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.02% 1.49% 1.31% 1.20%(e) Expenses, before waivers and reimbursements 1.24% 1.49% 1.52% 1.84%(e) Net investment income 2.02%(b) 3.22% 3.43%(b) 4.40%(b)(e) Portfolio turnover rate 35% 23% 31% 33%
(a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (d) Commencement of distribution. (e) Annualized. 18 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT PORTFOLIO: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Real Estate Investment Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 19 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 20 REAL ESTATE INVESTMENT 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 CHAIRMAN OF THE BOARD associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State Of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
------------------------------------------------------------------------------ * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 21 REAL ESTATE INVESTMENT PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ________________________________________________________________________________ OFFICER INFORMATION (1) Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Teresa Marziano Vice President Senior Vice President of ACMC since October 2000 9/1/54 and co-Chief Investment Officer of Real Estate Investments since July 2004. Prior thereto, she was a Senior Analyst of investment research at Sanford C. Bernstein & Co., Inc. ("Bernstein") since prior to 2000. Joseph G. Paul Vice President Senior Vice President of ACMC, co-Chief Investment 2/6/60 Officer of Real Estate Investments since July 2004; and Chief Investment Officer of Small and Mid Capitalization Value Equities since 2002. He is also Chief Investment Officer of Advanced Value at ACMC since October 2000, and held the same position at SCB since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and Chief 10/23/62 Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
------------------------------------------------------------------------------ (1) The day-to-day management of and investment decisions for the AllianceBernstein Real Estate Investment Portfolio are made by the REIT Investment Policy Group, comprised of senior Value Team members. * 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.) ALLIANCEBERNSTEIN ---------------------------------------------------------- VARIABLE PRODUCTS ---------------------------------------------------------- SERIES FUND ---------------------------------------------------------- ALLIANCEBERNSTEIN ---------------------------------------------------------- SMALL CAP VALUE ---------------------------------------------------------- PORTFOLIO ---------------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2004 ================================================================================ The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. ================================================================================ Investment Products Offered ============================= o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed ============================= You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 10, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its new benchmark, the Russell 2500 Value Index, for the 1-year period ended December 31, 2004 and since inception of the Portfolio's Class A shares on May 2, 2001. We have also included the Portfolio's performance versus its prior benchmark, the Russell 2500 Index. The Portfolio is now using the Russell 2500 Value Index as its benchmark, as it is more reflective of the Portfolio's investment strategy than its previous benchmark, the Russell 2500 Index. The Portfolio outperformed the style-neutral Russell 2500 Index for the annual reporting period ended December 31, 2004, but slightly underperformed its new benchmark, the Russell 2500 Value Index. The Portfolio's underperformance versus the benchmark during the annual reporting period can be attributed to two broad issues: an underweighted position in financial stocks, especially real estate investment trusts (REITs), and an overweighted position in consumer cyclicals, specifically retailers. REITs enjoyed a period of dramatic outperformance during the reporting period, as yield-starved investors allocated increasing weights of their portfolios towards these stocks. The Portfolio's overweighted position in retailers also detracted from performance, as investors were concerned that the 2004 holiday season may have resulted in lackluster sales. Contributors to performance included holdings in other pro-cyclical sectors, including materials and processing and producer durables stocks. Recent dramatic commodity price inflation, driven by robust global economic growth, especially in China, has provided a strong tailwind for these stocks. Security selection was essentially neutral during the annual period under review. Stocks in the Portfolio's producer durables and materials and processing holdings contributed positively to performance, while holdings in financials (primarily REITs) and autos & transportation detracted from performance. MARKET REVIEW AND INVESTMENT STRATEGY 2004 has gone into the books as another great year for small- and mid-capitalization stocks. For the sixth consecutive year, the Russell 2500 Index outperformed the Standard & Poor's (S&P) 500 Stock Index. This strong performance for these stocks helped the Portfolio's absolute returns but created some relative underperformance as the smallest companies, which lie below the Portfolio's purchase threshold, had strong returns. Within the small- and mid-cap universe, larger stocks are now much cheaper than smaller stocks and the Portfolio has been positioned to take advantage of this valuation disparity, leaving it with an average market cap that is 46% larger than that of the Russell 2500 Value Index. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Small Cap Value Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 SMALL CAP VALUE PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund ================================================================================ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure Neither the unmanaged Russell 2500 Value Index nor the unmanaged Russell 2500 Index reflects fees and expenses associated with the active management of a mutual fund portfolio. The Russell 2500 Value Index contains those securities in the Russell 2500 Index with a less-than-average growth orientation. The Russell 2500 Index is a capitalization-weighted index that includes 2,500 small- and mid-cap U.S. stocks. An investor cannot invest directly in indices, and their results are not indicative of the performance for any specific investment, including AllianceBernstein Small Cap Value Portfolio. A Word About Risk Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ corrective strategies which would result in stock prices that rise as initially expected. The Portfolio concentrates its investments in the stocks of small-capitalization companies, which tend to be more volatile than large-cap companies. Small-cap stocks may have additional risks because these companies tend to have limited product lines, markets or financial resources. The Portfolio can invest in foreign securities which may magnify fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. Because the Portfolio may invest in emerging markets and in developing countries, an investment also has the risk that market changes or other factors affecting emerging markets and developing countries, including political instability and unpredictable economic conditions, may have a significant effect on the Portfolio's net asset value. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. -------------------------------------------------------------------------------- (Historical Performance continued on next page) 2 SMALL CAP VALUE PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund ================================================================================ Returns THE PORTFOLIO VS. ITS BENCHMARK ---------------------------- PERIODS ENDED DECEMBER 31, 2004 1 Year Since Inception* -------------------------------------------------------------------------------- AllianceBernstein Small Cap Value Portfolio Class A 19.30% 16.81% -------------------------------------------------------------------------------- Russell 2500 Value Index 21.58% 15.03% -------------------------------------------------------------------------------- Russell 2500 Index 18.29% 10.21% -------------------------------------------------------------------------------- * Inception Date: 5/2/01 for Class A shares. ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 5/2/01* - 12/31/04 AllianceBernstein Small Cap Value Portfolio Class A: $17,673 Russell 2500 Value Index: $16,715 Russell 2500 Index: $14,285 [TABLE BELOW REPRESENT MOUNTAIN CHART] AllianceBernstein Small Cap Value Russell 2500 Russell 2500 Portfolio Class A Value Index Index -------------------------------------------------------------------------------- 5/2/01* $10,000 $10,000 $10,000 12/31/01 $11,180 $10,525 $10,097 12/31/02 $10,487 $ 9,486 $ 8,299 12/31/03 $14,814 $13,748 $12,076 12/31/04 $17,673 $16,715 $14,285 * Since inception of the Portfolio's Class A shares on 5/2/01. 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 12/31/04) as compared to the performance of the Portfolio's new benchmark, the Russell 2500 Value Index, and its prior benchmark, the Russell 2500 Index. The chart assumes the reinvestment of dividends and capital gains. -------------------------------------------------------------------------------- See Historical Performance and Benchmark disclosures on previous page. 3 SMALL CAP VALUE PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund ================================================================================ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized Small Cap Value Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* ------------------------- ---------------- ---------------- ---------------- ---------------- Class A Actual................................. $ 1,000 $ 1,111.56 $ 4.67 0.88% Hypothetical (5% return before expenses) ........ $ 1,000 $ 1,020.71 $ 4.47 0.88% Class B Actual................................. $ 1,000 $ 1,110.46 $ 6.05 1.14% Hypothetical (5% return before expenses)......... $ 1,000 $ 1,019.41 $ 5.79 1.14%
-------------------------------------------------------------------------------- * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 SMALL CAP VALUE PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
============================================================================================================ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ============================================================================================================ A.G.Edwards, Inc. $ 4,830,878 1.9% ----------------------------------------------------------------------------------------------------------- Jones Apparel Group, Inc. 4,743,129 1.8 ----------------------------------------------------------------------------------------------------------- MAF Bancorp, Inc. 4,719,322 1.8 ----------------------------------------------------------------------------------------------------------- PacifiCare Health Systems, Inc. 4,566,816 1.8 ----------------------------------------------------------------------------------------------------------- Liz Claiborne, Inc. 4,562,901 1.7 ----------------------------------------------------------------------------------------------------------- Cytec Industries, Inc. 4,555,812 1.7 ----------------------------------------------------------------------------------------------------------- Radian Group, Inc. 4,504,104 1.7 ----------------------------------------------------------------------------------------------------------- Constellation Brands, Inc. Cl.A 4,502,168 1.7 ----------------------------------------------------------------------------------------------------------- Moog, Inc. Cl.A 4,453,370 1.7 ----------------------------------------------------------------------------------------------------------- BJ's Wholesale Club, Inc. 4,352,022 1.7 -------------- ----- $ 45,790,522 17.5%
SECTOR DIVERSIFICATION December 31, 2004
============================================================================================================ SECTOR U.S. $ VALUE PERCENT OF NET ASSETS ============================================================================================================ Financial $ 54,164,004 20.7% ------------------------------------------------------------------------------------------------------------ Consumer Cyclicals 52,162,641 20.0 ------------------------------------------------------------------------------------------------------------ Capital Equipment 29,231,239 11.2 ------------------------------------------------------------------------------------------------------------ Commodities 19,936,093 7.6 ------------------------------------------------------------------------------------------------------------ Non-Financial 17,874,507 6.8 ------------------------------------------------------------------------------------------------------------ Technology 16,038,954 6.1 ------------------------------------------------------------------------------------------------------------ Consumer Growth 15,947,434 6.1 ------------------------------------------------------------------------------------------------------------ Consumer Staples 14,697,068 5.6 ------------------------------------------------------------------------------------------------------------ Utilities 10,745,837 4.1 ------------------------------------------------------------------------------------------------------------ Services 6,317,190 2.4 ------------------------------------------------------------------------------------------------------------ Industrial Resources 5,733,399 2.2 ------------------------------------------------------------------------------------------------------------ Energy 4,284,677 1.7 ----------- ----- Total Investments* 247,133,043 94.5 ------------------------------------------------------------------------------------------------------------ Cash and receivables, net of liabilities 14,363,474 5.5 ----------- ----- Net Assets $ 261,496,517 100.0%
-------------------------------------------------------------------------------- *Excludes short-term investments. 5 SMALL CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMON STOCKS-94.5% FINANCIAL-20.7% MAJOR REGIONAL BANKS-4.8% Banknorth Group, Inc. .............................. 34,000 $ 1,244,400 Central Pacific Financial Corp. .................... 27,500 994,675 Hibernia Corp. Cl. A ............................... 86,300 2,546,713 Popular, Inc. ...................................... 92,000 2,652,360 UnionBanCal Corp. .................................. 45,900 2,959,632 Whitney Holding Corp. .............................. 48,000 2,159,520 ----------- 12,557,300 ----------- MULTI-LINE INSURANCE-3.1% PacifiCare Health Systems, Inc. (a) ........................................ 80,800 4,566,816 StanCorp Financial Group, Inc. ............................................ 41,500 3,423,750 ----------- 7,990,566 ----------- PROPERTY-CASUALTY INSURANCE-4.0% Fidelity National Financial, Inc. ............................................ 25,100 1,146,317 Old Republic International Corp. .............................................. 148,700 3,762,110 PartnerRe Ltd. (Bermuda) ........................... 17,700 1,096,338 Radian Group, Inc. ................................. 84,600 4,504,104 ----------- 10,508,869 ----------- REAL ESTATE INVESTMENT TRUST-0.4% FelCor Lodging Trust, Inc. (a) ........................................ 70,000 1,025,500 ----------- SAVINGS AND LOAN-6.6% Astoria Financial Corp. ............................ 90,600 3,621,282 Commercial Federal Corp. ........................... 110,700 3,288,897 MAF Bancorp, Inc. .................................. 105,295 4,719,322 Sovereign Bancorp, Inc. ............................ 135,000 3,044,250 Washington Federal, Inc. ........................... 97,104 2,577,140 ----------- 17,250,891 ----------- MISCELLANEOUS FINANCIAL-1.8% A.G. Edwards, Inc. ................................. 111,800 4,830,878 ----------- 54,164,004 ----------- CONSUMER CYCLICALS-20.0% AUTOS & AUTO PARTS-4.1% American Axle & Manufacturing Holdings, Inc. ..................................... 82,000 2,514,120 BorgWarner, Inc. ................................... 42,000 2,275,140 Dana Corp. ......................................... 175,300 3,037,949 Group 1 Automotive, Inc. (a) ....................... 89,400 2,816,100 ----------- 10,643,309 ----------- RETAILERS-10.5% AutoNation, Inc. (a) ............................... 163,400 3,138,914 BJ's Wholesale Club, Inc. (a) ...................... 149,400 4,352,022 Borders Group, Inc. ................................ 156,100 3,964,940 Federated Department Stores, Inc. ............................................ 23,800 1,375,402 Foot Locker, Inc. .................................. 36,000 969,480 Neiman Marcus Group, Inc. Cl. A ........................................... 55,800 3,991,932 Office Depot, Inc. (a) ............................. 191,800 3,329,648 Payless ShoeSource, Inc. (a) ....................... 288,700 3,551,010 RadioShack Corp. ................................... 81,300 2,673,144 ----------- 27,346,492 ----------- TEXTILES/SHOES - APPAREL MFG.-4.7% Jones Apparel Group, Inc. .......................... 129,700 4,743,129 Liz Claiborne, Inc. ................................ 108,100 4,562,901 Reebok International Ltd. .......................... 15,000 660,000 V.F. Corp. ......................................... 44,500 2,464,410 ----------- 12,430,440 ----------- MISCELLANEOUS CONSUMER CYCLICALS-0.7% Brunswick Corp. .................................... 35,200 1,742,400 ----------- 52,162,641 ----------- CAPITAL EQUIPMENT-11.2% AUTO TRUCKS-PARTS-3.9% ArvinMeritor, Inc. ................................. 191,600 4,286,092 Modine Manufacturing Co. ........................... 89,500 3,022,415 PACCAR, Inc. ....................................... 34,500 2,776,560 ----------- 10,085,067 ----------- ELECTRICAL EQUIPMENT-1.8% Anixter International, Inc. ........................ 51,600 1,857,084 Cooper Industries Ltd. Cl. A ....................... 42,200 2,864,958 ----------- 4,722,042 ----------- MACHINERY-3.2% Lincoln Electric Holdings, Inc. .................... 62,000 2,141,480 Moog, Inc. Cl. A (a) ............................... 98,200 4,453,370 Terex Corp. (a) .................................... 39,000 1,858,350 ----------- 8,453,200 ----------- MISCELLANEOUS CAPITAL GOODS-2.3% Parker-Hannifin Corp. .............................. 34,500 2,613,030 Textron, Inc. ...................................... 45,500 3,357,900 ----------- 5,970,930 ----------- 29,231,239 ----------- 6 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMODITIES-7.6% CHEMICALS-3.6% Albemarle Corp. .................................... 88,300 $ 3,418,093 Crompton Corp. ..................................... 133,200 1,571,760 Cytec Industries, Inc. ............................. 88,600 4,555,812 ----------- 9,545,665 ----------- CONTAINERS - METAL/GLASS/PAPER-0.7% Ball Corp. ......................................... 43,000 1,891,140 ----------- PAPER-0.8% MeadWestvaco Corp. ................................. 60,660 2,055,767 ----------- MISCELLANEOUS INDUSTRIAL COMMODITIES-1.3% United Stationers, Inc. (a) ........................ 70,995 3,279,969 ----------- MISCELLANEOUS METALS-1.2% Reliance Steel & Aluminum Co. ............................................ 81,200 3,163,552 ----------- 19,936,093 ----------- NON-FINANCIAL-6.8% BUILDING MATERIALS - CEMENT-1.0% Texas Industries, Inc. ............................. 41,500 2,588,770 ----------- BUILDING MATERIALS - HEAT/PLUMBING/AIR-1.1% Hughes Supply, Inc. ................................ 94,000 3,040,900 ----------- HOME BUILDING-1.6% Pulte Homes, Inc. .................................. 66,200 4,223,560 ----------- MISCELLANEOUS BUILDING-3.1% Beazer Homes USA, Inc. ............................. 29,700 4,342,437 Harsco Corp. ....................................... 66,000 3,678,840 ----------- 8,021,277 ----------- 17,874,507 ----------- TECHNOLOGY-6.1% COMMUNICATION - EQUIP. MFRS.-2.7% ADC Telecommunications, Inc. (a) ........................................ 636,000 1,704,480 Andrew Corp. (a) ................................... 218,100 2,972,703 Nortel Networks Corp. (a) .......................... 316,100 1,103,189 Tellabs, Inc. (a) .................................. 157,000 1,348,630 ----------- 7,129,002 ----------- COMPUTER-0.5% Western Digital Corp. (a) .......................... 115,700 1,254,188 ----------- SEMICONDUCTORS-1.3% Vishay Intertechnology, Inc. (a) ........................................ 237,100 3,561,242 MISCELLANEOUS INDUSTRIAL TECHNOLOGY-1.6% Arrow Electronics, Inc. (a) ........................ 21,000 510,300 Avnet, Inc. (a) .................................... 22,000 401,280 Solectron Corp. (a) ................................ 107,400 572,442 Tech Data Corp. (a) ................................ 57,500 2,610,500 ----------- 4,094,522 ----------- 16,038,954 ----------- CONSUMER GROWTH-6.1% HOSPITAL MANAGEMENT-1.0% Universal Health Services, Inc. Cl. B ...................................... 56,000 2,492,000 HOSPITAL SUPPLIES-1.6% Owens & Minor, Inc. ................................ 152,000 4,281,840 ----------- PHOTOGRAPHY-1.3% IKON Office Solutions, Inc. ........................ 302,900 3,501,524 ----------- PUBLISHING-0.6% The Readers Digest Association, Inc. ............................................ 105,000 1,460,550 ----------- MISCELLANEOUS CONSUMER GROWTH-1.6% URS Corp. (a) ...................................... 131,200 4,211,520 ----------- 15,947,434 ----------- CONSUMER STAPLES-5.6% BEVERAGES-1.7% Constellation Brands, Inc. Cl. A (a) ....................................... 96,800 4,502,168 ----------- FOODS-3.5% Corn Products International, Inc. ............................................ 33,000 1,767,480 Del Monte Foods Co. (a) ............................ 322,600 3,555,052 Universal Corp. .................................... 80,200 3,836,768 ----------- 9,159,300 ----------- RETAIL STORES - FOOD-0.4% SUPERVALU, Inc. .................................... 30,000 1,035,600 ----------- 14,697,068 ----------- 7 SMALL CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- UTILITIES-4.1% ELECTRIC COMPANIES-4.1% Constellation Energy Group, Inc. ....................................... 41,000 $ 1,792,110 Northeast Utilities ........................... 129,200 2,435,420 PNM Resources, Inc. ........................... 96,300 2,435,427 Puget Energy, Inc. ............................ 120,800 2,983,760 WPS Resources Corp. ........................... 22,000 1,099,120 ------------- 10,745,837 ------------- SERVICES-2.4% TRUCKERS-1.5% USF Corp. ..................................... 103,000 3,908,850 ------------- MISCELLANEOUS INDUSTRIAL TRANSPORTATION-0.9% SEACOR Holdings, Inc. (a) ..................... 45,100 2,408,340 ------------- 6,317,190 ------------- INDUSTRIAL RESOURCES-2.2% ALUMINUM-0.9% Mueller Industries, Inc. ...................... 75,000 2,415,000 ------------- STEEL-0.8% United States Steel Corp. ..................... 38,700 1,983,375 ------------- MISCELLANEOUS METALS-0.5% Silgan Holdings, Inc. ......................... 21,900 1,335,024 ------------- 5,733,399 ------------- ENERGY-1.7% OILS-INTEGRATED DOMESTIC-1.7% Amerada Hess Corp. ............................ 16,400 1,351,032 Pogo Producing Co. ............................ 60,500 2,933,645 ------------- 4,284,677 ------------- Total Common Stocks (cost $194,627,999) ........................ 247,133,043 ------------- SHORT-TERM INVESTMENT-5.8% TIME DEPOSIT-5.8% The Bank of New York 1.50%, 1/03/05 (cost $15,197,000) ......................... $ 15,197 15,197,000 ------------- TOTAL INVESTMENTS-100.3% (cost $209,824,999) ........................ 262,330,043 Other assets less liabilities-(0.3%) ............................ (833,526) ------------- NET ASSETS-100% ............................... $ 261,496,517 ============= -------------------------------------------------------------------------------- (a) Non-income producing security. See Notes to Financial Statements. 8 SMALL CAP VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
ASSETS Investments in securities, at value (cost $209,824,999)............... $ 262,330,043 Cash ................................................................. 885 Dividends and interest receivable..................................... 290,450 Receivable for investment securities sold............................. 132,525 Receivable for capital stock sold..................................... 52,623 -------------- Total assets.......................................................... 262,806,526 -------------- LIABILITIES Payable for investment securities purchased........................... 845,898 Payable for capital stock redeemed.................................... 177,025 Advisory fee payable.................................................. 158,721 Distribution fee payable.............................................. 29,175 Transfer agent fee payable............................................ 68 Accrued expenses...................................................... 99,122 -------------- Total liabilities..................................................... 1,310,009 -------------- NET ASSETS............................................................... $ 261,496,517 ============== COMPOSITION OF NET ASSETS Capital stock, at par................................................. $ 15,555 Additional paid-in capital............................................ 195,100,782 Undistributed net investment income................................... 1,735,313 Accumulated net realized gain on investment transactions.............. 12,139,823 Net unrealized appreciation of investments............................ 52,505,044 -------------- $ 261,496,517 ============== Class A Shares Net assets............................................................ $ 118,980,848 ============== Shares of capital stock outstanding................................... 7,065,085 ============== Net asset value per share............................................. $ 16.84 ============== Class B Shares Net assets............................................................ $ 142,515,669 ============== Shares of capital stock outstanding................................... 8,490,373 ============== Net asset value per share............................................. $ 16.79 ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 9 SMALL CAP VALUE PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Dividends (net of foreign taxes withheld of $1,242).......................... $ 3,723,958 Interest..................................................................... 96,623 -------------- Total investment income...................................................... 3,820,581 -------------- EXPENSES Advisory fee................................................................. 1,885,238 Distribution fee--Class B.................................................... 266,143 Custodian.................................................................... 123,893 Administrative............................................................... 69,000 Printing..................................................................... 65,866 Audit........................................................................ 41,750 Legal........................................................................ 2,340 Directors' fees.............................................................. 1,000 Transfer agency.............................................................. 859 Miscellaneous................................................................ 3,980 -------------- Total expenses............................................................... 2,460,069 Less: expenses waived and reimbursed by the Adviser (see Note B)............. (400,458) -------------- Net expenses................................................................. 2,059,611 -------------- Net investment income........................................................ 1,760,970 -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions................................. 12,197,879 Net change in unrealized appreciation/depreciation of investments............ 25,133,503 -------------- Net gain on investment transactions.......................................... 37,331,382 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS...................................... $ 39,092,352 ==============
------------------------------------------------------------------------------- See Notes to Financial Statements. 10 SMALL CAP VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2004 2003 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 1,760,970 $ 247,937 Net realized gain on investment transactions......................... 12,197,879 4,696,947 Net change in unrealized appreciation/depreciation of investments.... 25,133,503 36,071,777 -------------- -------------- Net increase in net assets from operations........................... 39,092,352 41,016,661 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (181,706) (375,698) Class B............................................................ (80,321) (199,672) Net realized gain on investment transactions Class A............................................................ (2,336,222) (896,307) Class B............................................................ (2,409,632) (529,290) CAPITAL STOCK TRANSACTIONS Net increase......................................................... 53,508,942 56,463,493 -------------- -------------- Total increase....................................................... 87,593,413 95,479,187 NET ASSETS Beginning of period.................................................. 173,903,104 78,423,917 -------------- -------------- End of period (including undistributed net investment income of $1,735,313 and $236,370, respectively)............................. $ 261,496,517 $ 173,903,104 ============== ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 11 SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 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"). 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio commenced operations on May 1, 2001. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 12 AllianceBernstein Variable Products Series Fund ================================================================================ 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2004, there were no expenses waived by the Adviser. 13 SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Effective January 1, 2004 through September 6, 2004, in connection with the Adviser's settlement with the New York Attorney General's Office ("NYAG") the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $331,458. 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 $69,000 for the year ended December 31, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $275,109, of which $147,039 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $ 109,065,779 $ 59,503,711 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........................................................................................ $ 209,824,999 ============== Gross unrealized appreciation............................................................... $ 54,463,055 Gross unrealized depreciation............................................................... (1,958,011) -------------- Net unrealized appreciation................................................................. $ 52,505,044 ==============
14 AllianceBernstein Variable Products Series Fund ================================================================================ 1. Forward Exchange Currency Contracts The Portfolio may enter into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency on a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as net unrealized appreciation or depreciation by the Portfolio. The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having a value at least equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, reflects the total exposure the Portfolio has in that particular currency contract. 2. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Portfolio. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio 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, 2004 2003 2004 2003 ---------------- ---------------- ---------------- ---------------- Class A Shares sold.......................... 1,690,352 1,773,991 $ 25,588,665 $ 21,676,008 Shares issued in reinvestment of dividends and distributions.... 172,225 105,912 2,517,928 1,272,005 Shares redeemed...................... (1,075,133) (916,018) (16,276,570) (10,323,748) -------------- -------------- -------------- -------------- Net increase......................... 787,444 963,885 $ 11,830,023 $ 12,624,265 ============== ============== ============== ==============
15 SMALL CAP VALUE 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, 2004 2003 2004 2003 ---------------- ---------------- ---------------- ---------------- Class B Shares sold....................... 3,830,995 4,982,506 $ 57,835,750 $ 60,285,362 Shares issued in reinvestment of dividends and distributions. 170,661 60,747 2,489,953 728,963 Shares redeemed................... (1,247,227) (1,489,294) (18,646,784) (17,175,097) -------------- -------------- -------------- -------------- Net increase...................... 2,754,429 3,553,959 $ 41,678,919 $ 43,839,228 ============== ============== ============== ==============
NOTE F: Risks Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $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, 2004. NOTE H: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows:
2004 2003 ---------------- ---------------- Distributions paid from: Ordinary income.................................................... $ 1,422,125 $ 1,591,215 Net long-term capital gains........................................ 3,585,756 409,752 --------------- --------------- Total taxable distributions........................................... 5,007,881 2,000,967 --------------- --------------- Total distributions paid.............................................. $ 5,007,881 $ 2,000,967 =============== =============== As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income............................................................ $ 5,161,210 Undistributed long-term capital gains.................................................... 8,760,273 Accumulated capital and other losses .................................................... (46,347)(a) Unrealized appreciation/(depreciation)................................................... 52,505,044(b) --------------- Total accumulated earnings/(deficit)..................................................... $ 66,380,180 ===============
(a) Net capital losses incurred after October 31, and within the taxable year, are deemed to arise on the first business day of the Portfolio's next taxable year. For the year ended December 31, 2004, the Portfolio deferred to January 1, 2005, post October capital losses of $46,347. (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 year there were no permanent differences. 16 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE I: Legal Proceedings As has been previously reported, the staff of the U.S. Securities and Exchange Commission ("SEC") and the NYAG have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 17 SMALL CAP VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 18 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 =================================================== May 2, 2001(a) to Year Ended December 31, December 31, ------------------------------------ 2004 2003 2002 2001 ----------- ----------- ----------- ----------- Net asset value, beginning of period....................... $14.49 $10.46 $11.18 $10.00 ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment income (b)(c)............................... .14 .04 .12 .14 Net realized and unrealized gain (loss) on investment transactions................................. 2.60 4.23 (.81) 1.04 ------ ------ ------ ------ Net increase (decrease) in net asset value from operations. 2.74 4.27 (.69) 1.18 ------ ------ ------ ------ Less: Dividends and Distributions --------------------------------- Dividends from net investment income....................... (.03) (.07) (.02) -0- Distributions from net realized gain on investment transactions............................................ (.36) (.17) (.01) -0- ------ ------ ------ ------ Total dividends and distributions.......................... (.39) (.24) (.03) -0- ------ ------ ------ ------ Net asset value, end of period............................. $16.84 $14.49 $10.46 $11.18 ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (d)....... 19.30% 41.26% (6.20)% 11.80% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted).................. $118,981 $90,949 $55,592 $21,076 Ratio to average net assets of: Expenses, net of waivers and reimbursements............. .86% 1.20% 1.13% .95%(e) Expenses, before waivers and reimbursements............. 1.09% 1.28% 1.41% 2.65%(e) Net investment income (c)............................... .96% .34% 1.04% 1.99%(e) Portfolio turnover rate.................................... 30% 21% 28% 12%
-------------------------------------------------------------------------------- See footnote summary on page 20. 19 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 =================================================== May 2, 2001(a) to Year Ended December 31, December 31, ------------------------------------ 2004 2003 2002 2001 ----------- ----------- ----------- ----------- Net asset value, beginning of period....................... $14.46 $10.46 $11.20 $10.00 ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment income (b)(c)............................... .11 .01 .08 .11 Net realized and unrealized gain (loss) on investment transactions................................. 2.59 4.22 (.79) 1.09 ------ ------ ------ ------ Net increase (decrease) in net asset value from operations......................................... 2.70 4.23 (.71) 1.20 ------ ------ ------ ------ Less: Dividends and Distributions --------------------------------- Dividends from net investment income....................... (.01) (.06) (.02) -0- Distributions from net realized gain on investment transactions............................................ (.36) (.17) (.01) -0- ------ ------ ------ ------ Total dividends and distributions.......................... (.37) (.23) (.03) -0- ------ ------ ------ ------ Net asset value, end of period............................. $16.79 $14.46 $10.46 $11.20 ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (d)....... 19.08% 40.89% (6.37)% 12.00% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted).................. $142,516 $82,954 $22,832 $346 Ratio to average net assets of: Expenses, net of waivers and reimbursements............. 1.12% 1.45% 1.43% 1.20%(e) Expenses, before waivers and reimbursements............. 1.34% 1.53% 1.70% 3.17%(e) Net investment income (c)............................... .75% .05% .74% 2.17%(e) Portfolio turnover rate.................................... 30% 21% 28% 12%
-------------------------------------------------------------------------------- (a) Commencement of distribution. (b) Based on average shares outstanding. (c) Net of expenses reimbursed or waived by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. (f) Commencement of operations. 20 AllianceBernstein Variable Products Series Fund ================================================================================ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein Small Cap Value Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Small Cap Value Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /S/ Ernst & Young LLP New York, New York February 4, 2005 TAX INFORMATION (unaudited) -------------------------------------------------------------------------------- For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2004 qualifies for the corporate dividends received deduction. 21 SMALL CAP 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 22 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and resident of Historic Hudson Valley (historic (1992) 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.
------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 23 SMALL CAP VALUE PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer--Mutual Funds of ACMC,** with which Compliance Officer he has been associated since October 2004.Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he 4/28/45 has been associated since prior to 2000. Joseph G. Paul(1) Vice President Senior Vice President of ACMC**, Co-Chief 2/8/60 Investment Officer of Real Estate Investment since July 2004and Chief Investment Officer - Small and Mid 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 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
-------------------------------------------------------------------------------- (1) Messrs. Paul, James W. MacGregor, David Pasquale and Andrew J. Weiner 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. 24 (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ------------------------------------------------------------------------------- ALLIANCEBERNSTEIN UTILITY INCOME PORTFOLIO ------------------------------------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. UTILITY INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ LETTER TO INVESTORS January 21, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Standard and Poor's (S&P) 500 GICS Utilities Composite, for the one-, five- and 10-year periods ended December 31, 2004. The Portfolio slightly outperformed its benchmark, the S&P 500 GICS Utilities Composite, for the annual reporting period ended December 31, 2004, due mainly to the Portfolio's focus on companies with strong fundamentals, above average growth in earnings, dividends and cash flow. The Portfolio's relative underperformance for the five year period was principally attributed to its overweighted position in high quality, more defensive electric names. The electric utilities with weaker fundamentals outperformed the electrics with stronger fundamentals. The reason for this was that most of these companies received refinancing from their banks, thus easing their short-term liquidity problems and eliminating the need to file for bankruptcy protection. Most of these fundamentally weak companies abandoned their growth business models and returned to "back-to-basic" strategies. As a result, these companies restored some credibility in management and have started to execute on fundamentals and cash flow improvement. MARKET REVIEW AND INVESTMENT STRATEGY 2004 was a continuation of a restructuring year for the utility sector, as most companies aggressively improved their balance 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 including the improved credit environment, rising gas and power prices, the reduction of tax rates on dividends, and very low long-term interest rates. On the other hand, utilities were negatively impacted by the expectation of rising interest rates, the increase of fuel cost, health care expenses and pension costs. To mitigate the impact of rising rates on the Portfolio, the Portfolio's holdings were moved into companies with higher beta but above-average growth in earnings, dividends and cash flow. During the annual reporting period ended December 31, 2004, the Portfolio's investments continued to be focused on high quality names with attractive valuations. Within the electric utilities, focus was on the regulated integrated utilities instead of the non-regulated electric power marketers and generators. The Portfolio's management team remained cautious of the telephone utilities, primarily because of their fundamental uncertainties and competitive pressures. On the electric side, the team remained cautious of the non-regulated generation and marketing sectors (given their improving balance sheets and easing liquidity concerns), but positive on the traditional regulated integrated utilities due to their earnings stability, increasing free cash flow and growing dividends. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Utility Income Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 UTILITY INCOME PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Standard & Poor's ("S&P") 500 GICS Utilities Composite does not reflect 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. 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. A Word About Risk The Portfolio can invest in foreign securities which may magnify fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. While the Portfolio invests principally in equity and other fixed-income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. ------------------------------------------------------------------------------- (Historical Performance continued on next page) 2 UTILITY INCOME PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ THE PORTFOLIO VS. ITS BENCHMARK Returns ------------------------------------ PERIODS ENDED DECEMBER 31, 2004 1 Year 5 Years 10 Years ------------------------------------------------------------------------------- AllianceBernstein Utility Income Portfolio Class A 24.33% 0.05% 9.34% S&P 500 GICS Utilities Composite 24.28% 3.73% 8.16% ALLIANCEBERNSTEIN UTILITY INCOME PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 ALLIANCEBERNSTEIN UTILITY INCOME PORTFOLIO CLASS A: $24,431 S&P 500 GICS UTILITIES COMPOSITE: $21,905 [Graphic ommitted, data below] AllianceBernstein Utility Income S&P 500 GICS Portfolio Class A Utilities Composite ------------------------------------------------------- 12/31/94 10000 10000 12/31/95 12145 13275 12/31/96 13102 14029 12/31/97 16471 17487 12/31/98 20409 20081 12/31/99 24368 18238 12/31/00 27158 28667 12/31/01 21048 19941 12/31/02 16392 13960 12/31/03 19650 17626 12/31/04 24431 21905 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Utility Income Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. ------------------------------------------------------------------------------- See Historical Performance and Benchmark disclosures on previous page. 3 UTILITY INCOME PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning Ending Account Value Account Value Expenses Paid Annualized Utility Income Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* -------------------------------------------------------------------------------------------------------------------------------- Class A Actual $ 1,000 $ 1,181.41 $ 5.26 0.96% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.31 $ 4.88 0.96% Class B Actual $ 1,000 $ 1,179.92 $ 6.58 1.20% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.10 $ 6.09 1.20%
------------------------------------------------------------------------------- * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 UTILITY INCOME PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund _____________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- TXU Corp. (Common & Preferred) $ 3,110,825 5.3% FPL Group, Inc. (Common & Preferred) 2,314,133 3.9 Exelon Corp. 2,287,233 3.9 Questar Corp. 1,911,000 3.3 Sprint Corp. (FON Group) 1,597,855 2.7 American Movil, S.A. de C.V. Series L (ADR) 1,549,560 2.6 Hong Kong & China Gas Co., Ltd. 1,478,017 2.5 Duke Energy Corp. 1,459,008 2.5 Equitable Resources, Inc. 1,437,642 2.4 Entergy Corp. 1,419,390 2.4 $18,564,663 31.5% SECTOR DIVERSIFICATION December 31, 2004 PERCENT OF SECTOR U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- Utilities $47,405,292 80.5% Energy 3,549,197 6.0 Consumer Services 3,005,650 5.1 Technology 1,594,552 2.7 Basic Industry 306,375 0.5 Total Investments* 55,861,066 94.8 Cash and receivables, net of liabilities 3,046,974 5.2 Net Assets $58,908,040 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 5 UTILITY INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _____________________________________________________________________________ Company Shares U.S. $ Value ----------------------------------------------------------------------------- COMMON & PREFERRED STOCKS-94.8% UNITED STATES INVESTMENTS-81.0% UTILITIES-71.8% ELECTRIC & GAS UTILITY-62.4% AES Corp. (a) 92,600 $ 1,265,842 AGL Resources, Inc. 24,700 821,028 Alliant Energy Corp. 21,000 600,600 Ameren Corp. 24,000 1,203,360 American Electric Power Co., Inc. pfd. 18,800 895,820 Cinergy Corp. 24,000 999,120 CMS Energy Corp. (a) 27,900 291,555 Consolidated Edison, Inc. 17,100 748,125 Dominion Resources, Inc. 16,700 1,131,258 DTE Energy Co. 23,000 991,990 DTE Energy Co. pfd. 16,800 437,976 Duke Energy Corp. 57,600 1,459,008 Entergy Corp. 21,000 1,419,390 Equitable Resources, Inc. 23,700 1,437,642 Exelon Corp. 51,900 2,287,233 FirstEnergy Corp. 21,600 853,416 FPL Group, Inc. 17,500 1,308,125 FPL Group, Inc. pfd. 16,700 1,006,008 Great Plains Energy, Inc. pfd. 28,000 751,800 KeySpan Corp. pfd. 17,000 886,890 New Jersey Resources Corp. 23,800 1,031,492 NSTAR 25,700 1,394,996 PG&E Corp. (a) 36,100 1,201,408 Piedmont Natural Gas Co., Inc. 10,200 237,048 PNM Resources, Inc. 19,500 493,155 PPL Corp. 25,800 1,374,624 Public Service Enterprise Group, Inc. pfd. 18,000 1,211,760 Questar Corp. 37,500 1,911,000 SCANA Corp. 20,000 788,000 Sempra Energy pfd. 35,500 1,104,760 Southern Co. 17,200 576,544 TXU Corp. 37,367 2,412,413 TXU Corp. pfd. 22,200 698,412 Westar Energy, Inc. 23,000 526,010 Wisconsin Energy Corp. 14,000 471,940 Xcel Energy, Inc. 28,000 509,600 ---------- 36,739,348 ---------- PUBLIC UTILITIES - ELECTRIC & GAS-0.9% Georgia Power Co. pfd. 20,000 522,800 ---------- TELEPHONE UTILITY-7.1% BellSouth Corp. 24,600 683,634 CenturyTel, Inc. 12,000 425,640 SBC Communications, Inc. 19,000 489,630 Sprint Corp. (FON Group) 64,300 1,597,855 Verizon Communications, Inc. 24,700 1,000,597 ---------- 4,197,356 ---------- MISCELLANEOUS-1.4% Aqua America, Inc. 33,900 833,601 ---------- 42,293,105 ---------- ENERGY-6.0% PIPELINES-5.5% Kinder Morgan, Inc. 11,500 840,995 ONEOK, Inc. 30,900 878,178 Southern Union Co. pfd. 6,900 503,010 The Williams Cos., Inc. 64,600 1,052,334 ---------- 3,274,517 ---------- OIL SERVICES-0.5% Halliburton Co. 7,000 274,680 ---------- 3,549,197 ---------- TECHNOLOGY-2.7% COMMUNICATION EQUIPMENT-2.7% Nextel Partners, Inc. Cl. A (a) 22,800 445,512 QUALCOMM, Inc. 27,100 1,149,040 ---------- 1,594,552 ---------- CONSUMER SERVICES-0.5% CELLULAR COMMUNICATIONS-0.5% Nextel Communications, Inc. Cl. A (a) 10,000 300,000 ---------- Total United States Investments (cost $36,059,487) 47,736,854 ---------- FOREIGN INVESTMENTS-13.8% BRAZIL-1.2% Companhia de Saneamento Basico do Estado de Sao Paulo (a) 34,000 508,980 CPFL Energia, SA (a) 10,700 212,502 ---------- 721,482 ---------- FRANCE-1.1% Veolia Environnement (ADR) 17,000 619,650 ---------- HONG KONG-2.5% Hong Kong & China Gas Co., Ltd. 715,000 1,478,017 ---------- 6 AllianceBernstein Variable Products Series Fund ___________________________________________________________________________ Shares or Principal Amount Company (000) U.S. $ Value --------------------------------------------------------------------------- MEXICO-3.5% America Movil, S.A. de C.V. Series L (ADR) 29,600 $ 1,549,560 Grupo Televisa, SA (GDR) 8,000 484,000 ---------- 2,033,560 ---------- PEOPLES REPUBLIC OF CHINA-1.1% Datang International Power Generation Co., Ltd. 470,000 353,554 Yanzhou Coal Mining Co., Ltd. (ADR) 4,300 306,375 ---------- 659,929 ---------- RUSSIA-0.4% Mobile Telesystems 1,800 249,318 ---------- SOUTH KOREA-0.7% SK Telecom Co., Ltd. (ADR) 19,001 422,772 ---------- SPAIN-1.3% Telefonica de Espana, SA (ADR) 13,126 741,619 ---------- VENEZUELA-2.0% Compania Anonima Nacional Telefonos de Venezuela (ADR) 53,500 $1,197,865 ---------- Total Foreign Investments (cost $5,660,099) 8,124,212 ---------- Total Common and Preferred Stocks (cost $41,719,586) 55,861,066 ---------- SHORT-TERM INVESTMENT-5.9% TIME DEPOSIT-5.9% The Bank of New York 1.50%, 1/03/05 (cost $3,459,000) $3,459 3,459,000 ---------- TOTAL INVESTMENTS-100.7% (cost $45,178,586) 59,320,066 Other assets less liabilities-(0.7%) (412,026) ----------- NET ASSETS-100% $58,908,040 =========== ------------------------------------------------------------------------------- (a) Non-income producing security. Glossary of Terms: ADR - American Depositary Receipt GDR - Global Depositary Receipt Pfd. - Preferred Stock See Notes to Financial Statements. 7 UTILITY INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund ___________________________________________________________________________ ASSETS Investments in securities, at value (cost $45,178,586) $ 59,320,066 Cash 663 Dividends and interest receivable 120,724 ---------- Total assets 59,441,453 ----------- LIABILITIES Payable for capital stock redeemed 207,846 Payable for investment securities purchased 204,830 Advisory fee payable 27,006 Administrative fee payable 17,500 Distribution fee payable 1,339 Transfer agent fee payable 56 Accrued expenses 74,836 ----------- Total liabilities 533,413 ----------- NET ASSETS $ 58,908,040 =========== COMPOSITION OF NET ASSETS Capital stock, at par $ 3,243 Additional paid-in capital 58,146,267 Undistributed net investment income 1,321,554 Accumulated net realized loss on investment and foreign currency transactions (14,704,504) Net unrealized appreciation of investments 14,141,480 ----------- $ 58,908,040 =========== Class A Shares Net assets $ 52,390,763 =========== Shares of capital stock outstanding 2,883,432 =========== Net asset value per share $ 18.17 =========== Class B Shares Net assets $ 6,517,277 =========== Shares of capital stock outstanding 359,978 =========== Net asset value per share $ 18.10 =========== ------------------------------------------------------------------------------- See Notes to Financial Statements. 8 UTILITY INCOME PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund ___________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $8,165) $1,674,786 Interest 200,315 ---------- Total investment income 1,875,101 ---------- EXPENSES Advisory fee 338,393 Distribution fee--Class B 11,108 Custodian 118,649 Administrative 69,000 Audit 41,750 Printing 16,251 Legal 8,549 Directors' fees 1,000 Transfer agency 859 Miscellaneous 5,229 ---------- Total expenses 610,788 Less: expenses waived and reimbursed by the Adviser (see Note B) (64,431) ---------- Net expenses 546,357 ---------- Net investment income 1,328,744 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions 3,927,177 Foreign currency transactions (876) Net change in unrealized appreciation/ depreciation of investments 6,117,898 ---------- Net gain on investment and foreign currency transactions 10,044,199 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $11,372,943 =========== ------------------------------------------------------------------------------- See Notes to Financial Statements. 9 UTILITY INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ___________________________________________________________________________ Year Ended Year Ended December 31, December 31, 2004 2003 --------------- -------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 1,328,744 $ 1,063,207 Net realized gain (loss) on investment and foreign currency transactions 3,926,301 (373,416) Net change in unrealized appreciation/ depreciation of investments 6,117,898 6,918,282 --------------- -------------- Net increase in net assets from operations 11,372,943 7,608,073 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (962,290) (1,261,672) Class B (85,051) (24,223) CAPITAL STOCK TRANSACTIONS Net increase (decrease) 2,457,294 (376,197) --------------- -------------- Total increase 12,782,896 5,945,981 NET ASSETS Beginning of period 46,125,144 40,179,163 --------------- ------------- End of period (including undistributed net investment income of $1,321,554 and $1,041,027, respectively) $ 58,908,040 $ 46,125,144 ============== ============== ------------------------------------------------------------------------------- See Notes to Financial Statements. 10 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein Utility Income Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 11 UTILITY 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, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $64,431. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 12 AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $73,466, 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: Purchases Sales ----------- ------------ Investment securities (excluding U.S. government securities) $24,286,589 $23,201,846 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 $45,473,188 =========== Gross unrealized appreciation $13,867,897 Gross unrealized depreciation (21,019) ------------ Net unrealized appreciation $13,846,878 =========== 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 UTILITY INCOME 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 565,570 318,483 $ 9,076,079 $ 4,272,481 Shares issued in reinvestment of dividends 64,195 90,572 962,290 1,261,672 Shares redeemed (644,878) (632,323) (10,263,375) (8,408,753) -------- -------- ----------- ---------- Net decrease (15,113) (223,268) $ (225,006) $ (2,874,600) ======== ======== =========== ========== CLASS B Shares sold 199,451 192,779 $ 3,123,163 $ 2,610,572 Shares issued in reinvestment of dividends 5,685 1,740 85,051 24,223 Shares redeemed (32,981) (9,754) (525,914) (136,392) -------- -------- ----------- ---------- Net increase 172,155 184,765 $ 2,682,300 $ 2,498,403 ======== ======== =========== ========== NOTE G: Risks Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ---------- ---------- Distributions paid from: Ordinary income $1,047,341 $1,285,895 ---------- ---------- Total taxable distributions 1,047,341 1,285,895 ---------- ---------- Total distributions paid $1,047,341 $1,285,895 ========== ========== 15 UTILITY INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 1,319,229 Accumulated capital and other losses (14,407,577)(a) Unrealized appreciation/(depreciation) 13,846,878(b) ------------- Total accumulated earnings/(deficit) $ 758,530 ============= (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $14,407,422, of which $13,962,543 expires in the year 2010 and $444,879 expires in the year 2011. During the current fiscal year, the Portfolio utilized capital loss carryforwards of $3,827,297. 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, 2004, the Portfolio deferred to January 1, 2005, post-October foreign currency losses of $155. (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 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 loss on investment and foreign currency transactions. The reclassification had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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. 16 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 17 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, 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $14.95 $12.86 $16.82 $22.65 $21.66 ----- ----- ------ ------ ----- Income From Investment Operations Net investment income (a) .43(b) .35 .36 .29 1.01(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.13 2.18 (4.06) (5.23) 1.36 ----- ----- ------ ------ ----- Net increase (decrease) in net asset value from operations 3.56 2.53 (3.70) (4.94) 2.37 ----- ----- ------ ------ ----- Less: Dividends and Distributions Dividends from net investment income (.34) (.44) (.26 ) (.76) (.36) Distributions from net realized gain on investment transactions -0- -0- -0- (.13) (1.02) ----- ----- ------ ------ ----- Total dividends and distributions (.34) (.44) (.26) (.89) (1.38) ----- ----- ------ ------ ----- Net asset value, end of period $18.17 $14.95 $12.86 $16.82 $22.65 ====== ====== ====== ====== ====== Total Return Total investment return based on net asset value (c) 24.33% 19.88 % (22.12)% (22.50)% 11.45% Ratios/Supplemental Data Net assets, end of period (000's omitted) $52,391 $43,323 $40,140 $62,684 $62,362 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.08% 1.48% 1.22 % 1.02% 1.00% Expenses, before waivers and reimbursements 1.21% 1.48% 1.22 % 1.02% 1.04% Net investment income 2.69%(b) 2.60% 2.60% 1.49% 4.63%(b) Portfolio turnover rate 48% 76% 90% 25% 18%
------------------------------------------------------------------------------- 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 ------------------------------------------- July 22, 2002(d) Year Ended December 31, to ------------------------ December 31, 2004 2003 2002 -------- -------- -------- Net asset value, beginning of period $14.92 $12.86 $11.40 -------- -------- -------- Income From Investment Operations Net investment income (a) .38(b) .28 .07 Net realized and unrealized gain on investment and foreign currency transactions 3.13 2.21 1.39 -------- -------- -------- Net increase in net asset value from operations 3.51 2.49 1.46 -------- -------- -------- Less: Dividends Dividends from net investment income (.33) (.43) -0- -------- -------- -------- Net asset value, end of period $18.10 $14.92 $12.86 ======== ======== ======== Total Return Total investment return based on net asset value (c) 24.01% 19.64% 12.81% Ratios/Supplemental Data Net assets, end of period (000's omitted) $6,517 $2,802 $39 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.30% 1.73% 1.45 %(e) Expenses, before waivers and reimbursements 1.43% 1.73% 1.45 %(e) Net investment income 2.41%(b) 2.07% 1.92%(e) Portfolio turnover rate 48% 76% 90%
------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (d) Commencement of distribution. (e) Annualized. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 of the AllianceBernstein Utility Income Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 TAX INFORMATION (unaudited) For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2004 qualifies for the corporate dividends received deduction. 20 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 21 UTILITY 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 22 UTILITY INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ______________________________________________________________________________ Officer Information (1) Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer, President Executive Vice President of Alliance Capital Manage- 10/2/57 ment Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000 . Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong, Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Paul C. Rissman, Vice President Executive Vice President of ACMC**, with which he 11/10/56 has been associated since prior to 2000. Annie Tsao,(1) Vice President Senior Vice President of ACMC**, with which she has 10/22/52 been associated since prior to 2000. Mark R. Manley, Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten, Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley, Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
------------------------------------------------------------------------------- (1) The day-to-day management of and investment decisions for the AllianceBerstein Utility Income Portfolio are made by Ms. Annie Tsao, Senior Vice President and Research Analyst, and Mr. Robert Ashton, Vice President and Research Analyst. * 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 VALUE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. VALUE PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ LETTER TO INVESTORS February 9, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Value Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2004. 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 research 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Russell 1000 Value Index, for the one-year period ended December 31, 2004 and since inception of the Portfolio's Class A shares on July 22, 2002. In 2004, the Portfolio outperformed the broad market, as represented by the Standard & Poor's (S&P) 500 Stock Index, but underperformed its benchmark. Positive sector selection in consumer growth, coupled with positive stock selection in the utilities and industrial resources sectors, were outweighed by slightly negative contributions from a few key sectors. Most of the differential in these relative returns is explained by the Portfolio's technology weighting, which is less than the sector's weight in the S&P 500 Stock Index, but larger than its weight in the Russell 1000 Value Index. Indeed, technology is one of the largest overweighted positions in the Portfolio today relative to its benchmark. The Portfolio's overweighted positions in the consumer cyclicals sector also hurt its relative returns, particularly the auto parts companies. The Portfolio's management team continues to expect its auto parts suppliers to benefit from continued growth in content per vehicle and market share gains outside of the U.S. We believe investors have become too pessimistic about the outlook for the auto market and the impact of higher raw material costs. MARKET REVIEW AND INVESTMENT STRATEGY Even after the gains in 2004, the U.S. equity market continues to appear reasonably priced. The valuation spread between the cheapest and most expensive stocks, however, remains compressed, reducing the value opportunity. In a relatively benign economic environment, with most companies delivering earnings close to expectations, free cash flow at record highs and balance sheets improving, there are none of the widespread anxieties that typically give rise to major valuation distortions. Even recent well-published crises, such as the Marsh & McLennan investigation and Merck's Vioxx problems, have not driven stocks for those companies or their industry peers to low enough valuations to compensate for ongoing uncertainty, in our analysis. The reduction of risk in the Portfolio is illustrated by the significant decline in tracking error versus the benchmark. As our investment process explicitly trades off risk and potential return, we have muted all of the Portfolio's sector and factor (i.e., size, momentum, growth, earnings yield) exposures in recent years. As such, we continue the two-pronged approach that has characterized our strategy for the last year: an emphasis on risk control and on using fundamental research to identify stock-specific opportunities. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Value Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 VALUE PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE THE UNMANAGED RUSSELL 1000 VALUE INDEX DOES NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT OF A MUTUAL FUND PORTFOLIO. The Index contains those securities in the Russell 1000 Index with a less-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. 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. A WORD ABOUT RISK Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ corrective strategies which would result in stock prices that rise as initially expected. Because the Portfolio can invest in foreign securities, it includes risks not associated with funds that invest primarily in U.S. issues, including magnified fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. To the extent that the Portfolio invests a substantial amount of its assets in a particular country, an investment in the Portfolio has the risk that market changes or other factors affecting that country may have a more significant effect on the Fund's net asset value. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 VALUE PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ RETURNS THE PORTFOLIO VS. ITS BENCHMARK -------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEARS INCE INCEPTION* ------------------------------------------------------------------------------- AllianceBernstein Value Portfolio Class A 12.77% 20.96% ------------------------------------------------------------------------------- Russell 1000 Value Index 16.49% 20.49% ------------------------------------------------------------------------------- * Inception Date: 7/22/02 for Class A shares. ALLIANCEBERNSTEIN VALUE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 7/22/02*-12/31/04 ALLIANCEBERNSTEIN VALUE PORTFOLIO CLASS A: $15,922 RUSSELL 1000 VALUE INDEX: $15,776 [THE FOLLOWING TABLE WAS DEPICTED BY 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 12/31/04 $ 15,922 $ 15,776 * Since inception of the Portfolio's Class A shares on 7/22/02. This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Value Portfolio Class A shares (from 7/22/02* to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 3 VALUE PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED VALUE PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,097.31 $4.06 0.77% Hypothetical (5% return before expenses) $1,000 $1,021.27 $3.91 0.77% CLASS B Actual $1,000 $1,096.16 $5.22 0.99% Hypothetical (5% return before expenses) $1,000 $1,020.16 $5.03 0.99%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 VALUE PORTFOLIO TEN LARGEST HOLDINGS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ General Electric Co. $ 7,920,500 5.2% ------------------------------------------------------------------------------- Exxon Mobil Corp. 7,325,054 4.8 ------------------------------------------------------------------------------- Citigroup, Inc. 6,330,851 4.2 ------------------------------------------------------------------------------- Bank of America Corp. 5,399,809 3.6 ------------------------------------------------------------------------------- Altria Group, Inc. 3,711,825 2.5 ------------------------------------------------------------------------------- ChevronTexaco Corp. 3,171,604 2.1 ------------------------------------------------------------------------------- Wachovia Corp. 2,795,690 1.8 ------------------------------------------------------------------------------- JPMorgan Chase & Co. 2,601,967 1.7 ------------------------------------------------------------------------------- Time Warner, Inc. 2,496,095 1.6 ------------------------------------------------------------------------------- Hewlett-Packard Co. 2,240,183 1.5 ------------ ---- ------------------------------------------------------------------------------- $ 43,993,578 29.0% ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION DECEMBER 31, 2004 _______________________________________________________________________________ PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Finance $ 50,443,338 33.2% ------------------------------------------------------------------------------- Energy 16,558,877 10.9 ------------------------------------------------------------------------------- Capital Equipment 16,165,684 10.7 ------------------------------------------------------------------------------- Consumer Staples 12,321,601 8.1 ------------------------------------------------------------------------------- Utilities 12,083,799 8.0 ------------------------------------------------------------------------------- Technology 10,720,628 7.1 ------------------------------------------------------------------------------- Consumer Cyclicals 10,365,301 6.8 ------------------------------------------------------------------------------- Consumer Growth 9,623,268 6.3 ------------------------------------------------------------------------------- Industrial Commodities 3,297,167 2.2 ------------------------------------------------------------------------------- Commodities 3,073,813 2.0 ------------------------------------------------------------------------------- Services 2,585,737 1.7 ------------------------------------------------------------------------------- Non-Finance 515,136 0.3 ------------ ----- ------------------------------------------------------------------------------- Total Investments* 147,754,349 97.3 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 4,044,370 2.7 ------------ ----- ------------------------------------------------------------------------------- Net Assets $151,798,719 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 5 VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- COMMON STOCKS-97.3% FINANCIAL-33.3% BANKS-5.9% Citigroup, Inc. 131,400 $ 6,330,851 JPMorgan Chase & Co. 66,700 2,601,967 ------------- 8,932,818 ------------- FINANCE - PERSONAL LOANS-0.3% Countrywide Credit Industries, Inc. 13,468 498,451 ------------- LIFE INSURANCE-2.9% Genworth Financial, Inc. 31,400 847,800 Jefferson-Pilot Corp. 8,400 436,464 Manulife Financial Corp. 22,757 1,051,373 MetLife, Inc. 24,800 1,004,648 Prudential Financial, Inc. 18,000 989,280 Torchmark Corp. 1,300 74,282 ------------- 4,403,847 ------------- MAJOR REGIONAL BANKS-12.2% Bank of America Corp. 114,914 5,399,809 BB&T Corp. 7,100 298,555 Comerica, Inc. 14,500 884,790 Huntington Bancshares, Inc. 32,200 797,916 KeyCorp. 27,950 947,505 Mellon Financial Corp. 31,300 973,743 National City Corp. 31,800 1,194,090 PNC Financial Services Group 14,700 844,368 SunTrust Banks, Inc. 17,600 1,300,288 U.S. Bancorp 59,700 1,869,804 Wachovia Corp. 53,150 2,795,690 Wells Fargo & Co. 19,000 1,180,850 ------------- 18,487,408 ------------- MULTI-LINE INSURANCE-1.2% American International Group, Inc. 8,500 558,195 The Hartford Financial Services Group, Inc. 18,500 1,282,235 ------------- 1,840,430 ------------- PROPERTY - CASUALTY INSURANCE-3.3% ACE Ltd. 9,900 423,225 Allstate Corp. 25,350 1,311,102 Chubb Corp. 12,500 961,250 PartnerRe Ltd. 4,300 266,342 The St. Paul Travelers Cos., Inc. 35,733 1,324,622 XL Capital Ltd. Cl.A 9,100 706,615 ------------- 4,993,156 ------------- SAVINGS AND LOANS-3.1% Astoria Financial Corp. 14,500 579,565 Fannie Mae 8,800 626,648 Freddie Mac 26,000 1,916,200 Washington Mutual, Inc. 36,000 1,522,080 ------------- 4,644,493 ------------- MISCELLANEOUS FINANCIAL-4.4% Lehman Brothers Holdings, Inc. 13,700 1,198,476 MBIA, Inc. 11,800 746,704 Merrill Lynch & Co., Inc. 21,100 1,261,147 MGIC Investment Corp. 11,900 820,029 Morgan Stanley 20,000 1,110,400 The Goldman Sachs Group, Inc. 14,475 1,505,979 ------------- 6,642,735 ------------- 50,443,338 ------------- ENERGY-10.9% GAS PIPELINES-0.1% El Paso Corp. 23,000 239,200 ------------- OILS - INTEGRATED DOMESTIC-3.4% Ashland, Inc. 11,300 659,694 ConocoPhillips 24,600 2,136,018 Marathon Oil Corp. 27,100 1,019,231 Occidental Petroleum Corp. 22,100 1,289,756 ------------- 5,104,699 ------------- OILS - INTEGRATED INTERNATIONAL-7.4% BP p.l.c. (ADR) 12,300 718,320 ChevronTexaco Corp. 60,400 3,171,604 Exxon Mobil Corp. 142,900 7,325,054 ------------- 11,214,978 ------------- 16,558,877 ------------- CAPITAL EQUIPMENT-10.6% AEROSPACE - DEFENSE-1.3% B.F. Goodrich Corp. 21,700 708,288 General Dynamics Corp. 4,200 439,320 The Boeing Co. 16,300 843,851 ------------- 1,991,459 ------------- AUTO TRUCKS - PARTS-0.6% Eaton Corp. 13,500 976,860 ------------- ELECTRICAL EQUIPMENT-6.8% Cooper Industries Ltd. Cl.A (Bermuda) 7,000 475,230 General Electric Co. 217,000 7,920,500 Honeywell International, Inc. 37,100 1,313,711 Hubbell, Inc. Cl.B 11,500 601,450 ------------- 10,310,891 ------------- 6 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- MISCELLANEOUS CAPITAL GOODS-1.9% Parker Hannifin Corp. 6,000 $ 454,440 SPX Corp. 13,400 536,804 Textron, Inc. 14,300 1,055,340 Tyco International Ltd. (Bermuda) 23,500 839,890 ------------- 2,886,474 ------------- 16,165,684 ------------- CONSUMER STAPLES-8.1% BEVERAGES - SOFT, LITE & HARD-0.6% Adolph Coors Co. 7,500 567,525 PepsiCo, Inc. 8,200 428,040 ------------- 995,565 ------------- FOOD-1.2% Del Monte Foods Co. (a) 33,400 368,068 Kraft Foods, Inc. 13,800 491,418 Sara Lee Corp. 40,600 980,084 ------------- 1,839,570 ------------- RESTAURANTS-1.3% Darden Restaurants, Inc. 9,700 269,078 McDonald's Corp. 51,800 1,660,708 ------------- 1,929,786 ------------- RETAIL STORES - FOOD-1.2% Albertson's, Inc. 10,200 243,576 Safeway, Inc. (a) 48,800 963,312 SUPERVALU, Inc. 500 17,260 The Kroger Co. (a) 34,100 598,114 ------------- 1,822,262 ------------- SOAPS-0.4% Unilever NV (ADR) 9,200 613,732 ------------- SUGAR REFINERS-0.3% Archer-Daniels-Midland Co. 19,805 441,850 ------------- TOBACCO-3.1% Altria Group, Inc. 60,750 3,711,825 UST, Inc. 20,100 967,011 ------------- 4,678,836 ------------- 12,321,601 ------------- UTILITIES-8.0% ELECTRIC COMPANIES-4.2% Alliant Energy Corp. 20,600 589,160 American Electric Power Co., Inc. 28,075 964,096 Constellation Energy Group, Inc. 14,500 633,795 Edison International 5,600 179,368 Entergy Corp. 12,300 831,357 Exelon Corp. 26,200 1,154,634 FirstEnergy Corp. 21,700 857,367 Sempra Energy 25,400 931,672 Xcel Energy, Inc. 9,700 176,540 ------------- 6,317,989 ------------- TELEPHONE-3.8% BellSouth Corp. 19,300 536,347 SBC Communications, Inc. 48,600 1,252,422 Sprint Corp. 80,000 1,988,000 Verizon Communications 49,100 1,989,041 ------------- 5,765,810 ------------- 12,083,799 ------------- TECHNOLOGY-7.1% COMMUNICATION - EQUIP. MFRS.-1.0% ADC Telecommunications, Inc. (a) 117,700 315,436 Nortel Networks Corp. (a) 126,500 441,485 Tellabs, Inc. (a) 80,100 688,059 ------------- 1,444,980 ------------- COMPUTERS-1.9% Hewlett-Packard Co. 106,828 2,240,183 International Business Machines Corp. 5,600 552,048 Quantum Corp. (a) 6,250 16,375 ------------- 2,808,606 ------------- COMPUTER/ INSTRUMENTATION-1.5% Celestica, Inc. (a) 40,700 574,277 Flextronics International Ltd. (Singapore) (a) 39,400 544,508 Sanmina-SCI Corp. (a) 51,200 433,664 Solectron Corp. (a) 126,310 673,232 ------------- 2,225,681 ------------- COMPUTER SERVICES/SOFTWARE-2.0% Electronic Data Systems Corp. 46,000 1,062,600 Microsoft Corp. 71,900 1,920,449 ------------- 2,983,049 ------------- SEMICONDUCTORS-0.3% Agere Systems, Inc. (a) 123,300 168,921 Vishay Intertechnology, Inc. (a) 30,550 458,861 ------------- 627,782 ------------- MISCELLANEOUS INDUSTRIAL TECHNOLOGY-0.4% Ingram Micro, Inc. Cl.A (a) 18,200 378,560 Tech Data Corp. (a) 5,550 251,970 ------------- 630,530 ------------- 10,720,628 ------------- 7 VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- CONSUMER CYCLICALS-6.8% AUTOS & AUTO PARTS-2.7% American Axle & Manufacturing Holdings, Inc. 10,500 $ 321,930 Autoliv, Inc. (Sweden) 15,700 758,310 BorgWarner, Inc. 10,800 585,036 Dana Corp. 25,900 448,847 General Motors Corp. 20,400 817,224 Lear Corp. 9,200 561,292 Magna International, Inc. Cl.A 8,200 676,910 ------------- 4,169,549 ------------- RETAILERS-2.5% Federated Department Stores, Inc. 16,500 953,535 Limited Brands 39,500 909,290 Nordstrom, Inc. 7,900 369,167 Office Depot, Inc. (a) 51,000 885,360 Target Corp. 14,100 732,213 ------------- 3,849,565 ------------- TEXTILES/SHOES - APPAREL MFG.-0.8% Jones Apparel Group, Inc. 20,600 753,342 V.F. Corp. 7,900 437,502 ------------- 1,190,844 ------------- TIRES & RUBBER GOODS-0.2% Cooper Tire & Rubber Co. 14,100 303,855 ------------- MISCELLANEOUS CONSUMER CYCLICALS-0.6% Newell Rubbermaid, Inc. 35,200 851,488 ------------- 10,365,301 ------------- CONSUMER GROWTH-6.3% ADVERTISING-0.5% The Interpublic Group of Cos., Inc. (a) 59,100 791,940 ------------- DRUGS-1.0% Bristol-Myers Squibb Co. 18,850 482,937 Merck & Co., Inc. 29,400 944,916 Pfizer, Inc. 4,900 131,761 ------------- 1,559,614 ------------- ENTERTAINMENT-1.8% Time Warner, Inc. (a) 128,400 2,496,095 Viacom, Inc. Cl.B 3,050 110,990 Walt Disney Co. 6,300 175,140 ------------- 2,782,225 ------------- HOSPITAL MANAGEMENT-0.4% HCA, Inc. 14,500 579,420 ------------- HOSPITAL SUPPLIES-0.7% Medco Health Solutions, Inc. 25,200 1,048,320 ------------- PHOTOGRAPHY-0.7% Eastman Kodak Co. 30,500 983,625 ------------- RADIO - TV BROADCASTING-1.2% Comcast Corp. Cl.A (a) 56,434 1,878,124 ------------- 9,623,268 ------------- INDUSTRIAL COMMODITIES-2.2% ALUMINUM-0.5% Alcoa, Inc. 24,400 766,648 ------------- FERTILIZERS-0.3% Monsanto Co. 7,900 438,845 ------------- PAPER-0.3% Smurfit-Stone Container Corp. (a) 27,600 515,568 ------------- STEEL-1.1% United States Steel Corp. 23,800 1,219,750 Worthington Industries, Inc. 18,200 356,356 ------------- 1,576,106 ------------- 3,297,167 ------------- COMMODITIES-2.0% CHEMICALS-0.9% E.I. du Pont de Nemours & Co. 6,100 299,205 Eastman Chemical Co. 15,400 889,042 The Dow Chemical Co. 4,000 198,040 ------------- 1,386,287 ------------- PAPER-1.1% Georgia-Pacific Group 24,950 935,126 Temple-Inland, Inc. 11,000 752,400 ------------- 1,687,526 ------------- 3,073,813 ------------- SERVICES-1.7% RAILROADS-1.7% Burlington Northern Santa Fe Corp. 19,900 941,469 CSX Corp. 16,600 665,328 Norfolk Southern Corp. 27,050 978,940 ------------- 2,585,737 ------------- NON-FINANCIAL-0.3% BUILDING MATERIALS - CEMENT-0.3% Martin Marietta Materials, Inc. 9,600 515,136 ------------- Total Common Stocks (cost $120,048,048) 147,754,349 ------------- 8 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-2.6% TIME DEPOSIT-2.6% The Bank of New York 1.50%, 1/03/05 (cost $3,935,000) $3,935 $ 3,935,000 ------------- TOTAL INVESTMENTS-99.9% (cost $123,983,048) 151,689,349 Other assets less liabilities-0.1% 109,370 ------------- NET ASSETS-100% $ 151,798,719 ============= (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 9 VALUE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $123,983,048) $ 151,689,349 Cash 869 Dividends and interest receivable 287,778 Receivable for capital stock sold 52,043 ------------- Total assets 152,030,039 ------------- LIABILITIES Payable for capital stock redeemed 77,123 Advisory fee payable 47,490 Distribution fee payable 31,603 Transfer agent fee payable 68 Accrued expenses 75,036 ------------- Total liabilities 231,320 ------------- NET ASSETS $ 151,798,719 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 12,103 Additional paid-in capital 119,569,978 Undistributed net investment income 1,881,639 Accumulated net realized gain on investment transactions 2,628,698 Net unrealized appreciation of investments 27,706,301 ------------- $ 151,798,719 ============= CLASS A SHARES Net assets $ 5,699.31 ============= Shares of capital stock outstanding 451.264 ============= Net asset value per share $ 12.63 ============= CLASS B SHARES Net assets $ 151,793,020 ============= Shares of capital stock outstanding 12,102,438 ============= Net asset value per share $ 12.54 ============= See Notes to Financial Statements. 10 VALUE PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $8,720) $ 3,139,532 Interest 32,675 ------------- Total investment income 3,172,207 ------------- EXPENSES Advisory fee 894,357 Distribution fee -- Class B 328,189 Custodian 124,609 Administrative 69,000 Audit 41,750 Printing 40,314 Legal 5,000 Directors' fees 1,000 Transfer agency 859 Miscellaneous 4,740 ------------- Total expenses 1,509,818 Less: expenses waived and reimbursed by the Adviser (see Note B) (241,333) ------------- Net expenses 1,268,485 ------------- Net investment income 1,903,722 ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 5,499,888 Net change in unrealized appreciation/depreciation of investments 9,888,130 ------------- Net gain on investment transactions 15,388,018 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 17,291,740 ============= See Notes to Financial Statements. 11 VALUE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 1,903,722 $ 1,132,568 Net realized gain (loss) on investment transactions 5,499,888 (1,657,272) Net change in unrealized appreciation/ depreciation of investments 9,888,130 24,092,056 ------------- ------------- Net increase in net assets from operations 17,291,740 23,567,352 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A -0- (2) Class B (1,139,078) (642,210) CAPITAL STOCK TRANSACTIONS Net increase 18,084,364 26,270,250 ------------- ------------- Total increase 34,237,026 49,195,390 NET ASSETS Beginning of period 117,561,693 68,366,303 ------------- ------------- End of period (including undistributed net investment income of $1,881,639 and $1,116,995, respectively) $ 151,798,719 $ 117,561,693 ============= ============= See Notes to Financial Statements. 12 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Value Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term growth of capital. The Portfolio commenced operations on May 1, 2001. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Class B shares bear a distribution expense and have voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 13 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2004 there were no such expenses waived by the Adviser. Effective January 1, 2004 through September 6, 2004, in connection with the Adviser's settlement with the New York Attorney General's Office ("NYAG") the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio 14 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $172,333. 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, 2004, the Adviser voluntarily waived such reimbursement in the amount of $69,000. Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $144,391, of which $92,625 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 54,092,451 $ 34,127,302 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 $ 123,987,307 ============= Gross unrealized appreciation $ 29,415,464 Gross unrealized depreciation (1,713,422) ------------- Net unrealized appreciation $ 27,702,042 ============= 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 VALUE 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. 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, 2004(a) 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 451 -0- $ 5,033 $ -0- Shares issued in reinvestment of dividends -0- -0-(b) -0- 2 Shares redeemed (21) -0-(b) (237) (2) ----------- ----------- ------------- ------------- Net increase 430 -0- $ 4,796 $ -0- =========== =========== ============= ============= (a) For the period May 10, 2004 through October 4, 2004, there were no Class A shares outstanding. (b) Share amount is less than one full share. 16 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS B Shares sold 3,265,962 4,251,131 $ 37,561,380 $ 40,598,585 Shares issued in reinvestment of dividends 101,244 65,001 1,139,078 642,210 Shares redeemed (1,800,817) (1,591,340) (20,620,890) (14,970,545) ----------- ----------- ------------- ------------- Net increase 1,566,389 2,724,792 $ 18,079,568 $ 26,270,250 =========== =========== ============= ============= NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Foreign Securities Risk-Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $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, 2004. NOTE H: DISTRIBUTIONS TOSHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ============= ============= Distributions paid from: Ordinary income $ 1,139,078 $ 642,212 ------------- ------------- Total distributions paid $ 1,139,078 $ 642,212 ============= ============= As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 2,161,911 Undistributed long-term capital gains 2,352,685(a) Unrealized appreciation/(depreciation) 27,702,042(b) ------------- Total accumulated earnings/(deficit) $ 32,216,638 ============= (a) During the current fiscal year, $2,866,923 of 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. For the current fiscal year, there were no permanent differences. 17 VALUE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE I: LEGAL PROCEEDINGS As has been previously reported, the staff of the U.S. Securities and Exchange Commission ("SEC") and the NYAG have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 18 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 19 VALUE PORTFOLIO FINANCIAL HIGHLIGHTS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD CLASS A ------------------------------------ JULY 22, YEAR ENDED DECEMBER 31, 2002(b) TO ------------------------ DECEMBER 31, 2004(a) 2003 2002 ----------- ----------- ----------- Net asset value, beginning of period $11.20 $8.76 $8.00 ------ ----- ----- INCOME FROM INVESTMENT OPERATIONS Net investment income (c)(d) .25 .16 .07 Net realized and unrealized gain on investment transactions 1.18 2.36 .69 ------ ----- ----- Net increase in net asset value from operations 1.43 2.52 .76 ------ ----- ----- LESS: DIVIDENDS Dividends from net investment Income -0- (.08) -0- ------ ----- ----- Net asset value, end of period $12.63 $11.20 $8.76 ====== ====== ===== TOTAL RETURN Total investment return based on net asset value (e) 12.77% 28.94% 9.50% RATIOS/SUPPLEMENTAL DATA Net assets, end of period $5,699 $239 $187 Ratio to average net assets of: Expenses, net of waivers and reimbursements .79%(f) .99% 1.20%(f) Expenses, before waivers and reimbursements .98%(f) 1.06% 2.28%(f) Net investment income (d) 2.02%(f) 1.51% 4.22%(f) Portfolio turnover rate 27% 27% 12% 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 -------------------------------------------------- MAY 1, YEAR ENDED DECEMBER 31, 2001(g) TO ------------------------------------- DECEMBER 31, 2004 2003 2002 2001 ----------- ----------- ----------- ----------- Net asset value, beginning of period $11.16 $8.75 $10.07 $10.00 ----- ---- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net investment income (c)(d) .17 .12 .12 .08 Net realized and unrealized gain (loss) on investment transactions 1.31 2.36 (1.42) (.01) ------ ---- ----- ----- Net increase (decrease) in net asset value from operations 1.48 2.48 (1.30) .07 ----- ---- ----- ----- LESS: DIVIDENDS Dividends from net investment income (.10) (.07) (.02) -0- ----- ---- ----- ----- Net asset value, end of period $12.54 $11.16 $8.75 $10.07 ===== ===== ===== ===== TOTAL RETURN Total investment return based on net asset value (e) 13.37% 28.46% (12.95)% .70% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $151,793 $117,561 $68,366 $27,286 Ratio to average net assets of: Expenses, net of waivers and reimbursements .97% 1.24% 1.21% 1.20%(f) Expenses, before waivers and reimbursements 1.15% 1.33% 1.43% 2.47%(f) Net investment income (d) 1.45% 1.29% 1.27% 1.29%(f) Portfolio turnover rate 27% 27% 12% 4%
(a) There were no Class A shares outstanding for the period May 11, 2004 through October 3, 2004. (b) Commencement of distribution. (c) Based on average shares outstanding. (d) Net of expenses waived or reimbursed by the Adviser. (e) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (f) Annualized. (g) Commencement of operations. 21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN VALUE PORTFOLIO: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Value Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 TAX INFORMATION (UNAUDITED) _______________________________________________________________________________ For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2004 qualifies for the corporate dividends received deduction. 22 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 23 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 24 VALUE PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
PRINCIPAL NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent 5/29/45 and Independent Compliance Officer--Mutual Funds of Compliance Officer ACMC,** with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which 4/28/45 he has been associated since prior to 2000. Marilyn G. Fedak(1) Vice President Executive Vice President of ACMC** since 1/3/47 October 2000. She is head of Sanford C. Bernstein &Co., Inc. ("Bernstein")**, Value Equities Business and Co-Chief Investment Officer of U.S. Value Equities. Prior thereto, she was Chief Investment Officer and Chairman of the U.S. Equity Investment Policy Group at Bernstein since prior to 2000. Ranji H. Nagaswami(1) Vice President Senior Vice President of ACMC** since 11/13/63 October 2000. She is also Vice Chairman of ABIRM** and Chief Investment Officer of AllianceBernstein Fund Investors since February 2004. Prior thereto, she was managing director and co-head of US Fixed Income at UBS Brinson since prior to 2000. Mark R. Manley Secretary Senior Vice President,Deputy General 10/23/62 Counsel and Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has 8/3/51 been associated since prior to 2000.
(1) Mses. Fisher, Fedak and Mr. 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, Bernstein 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. 25 ALLIANCEBERNSTEIN ------------------------------------------------------- VARIABLE PRODUCTS ----------------------------------------------------- SERIES FUND ----------------------------------------------------- ALLIANCEBERNSTEIN ----------------------------------------------------- GROWTH & INCOME PORTFOLIO ----------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2004 ================================================================================ The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. ================================================================================ Investment Products Offered ============================ o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed ============================ You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS January 24, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Russell 1000 Value Index, for the one-, five- and 10-year periods ended December 31, 2004. The Portfolio delivered healthy absolute gains in 2004. During the annual reporting period ended December 31, 2004, the Portfolio outpaced the broad market, as represented by the S&P 500 Stock Index, but lagged the Russell 1000 Value Index. The Portfolio's overweighted positions in media, property and casualty (P&C) insurance and health care were the primary detractors from relative returns in 2004. These groups, which were hit hard by intense negative publicity throughout the year, did not fare well. Not owning Merck & Co., Inc., the worst-performing drug stock in 2004, and owning several strong performing energy and managed-care stocks, contributed positively to the Portfolio's performance. More generally, the Portfolio's underperformance reflected the large-cap, high-quality bias of the Portfolio's holdings in a period when small-cap, and lower-quality stocks outperformed. Relative to the Russell 1000 Value Index, the Portfolio had a higher weighted-average market capitalization, greater earnings stability, and far less financial leverage than usual. MARKET REVIEW AND INVESTMENT STRATEGY Economically sensitive sectors such as technology and industrials led the resurgence of the late-year rally of the S&P 500 Stock Index. At this time, the sharp drop in energy prices from record highs calmed fears about the resilience of the U.S. economic and corporate-profit recovery. The Russell 1000 Value Index showed remarkable strength during the annual reporting period ended December 31, 2004. The Russell 1000 Value Index's unusually hefty premium relative to the broad market reflected its larger exposure to the outperforming energy, utilities and telecommunication-services sectors and smaller exposure to the underperforming technology and consumer-growth sectors. During the annual reporting period ended December 31, 2004 energy and interest rate sensitive stocks topped the charts. Except for health care, which was hobbled by the drug industry's woes, most other sectors posted gains. Despite its fourth-quarter rally, the technology sector was flat for the year, reflecting disappointment about the tepid upswing in information technology (IT) spending. Recent research indicated to the Portfolio's management team that interest-sensitive stocks had become expensive after strong appreciation, which is believed to make them more vulnerable to a fall in periods of Fed tightening. As a result, the team was net sellers of interest-sensitive stocks this year. In fact, the Portfolio currently has one of the largest underweighted positions in these groups versus the Russell 1000 Value Index. In a relatively benign economic environment, with most companies delivering earnings close to expectations, there was little of the widespread anxiety that would typically give rise to major valuation anomalies. Valuation differentials were not only unusually compressed between sectors but also compressed within industries; this made it harder to sort out potential winners from losers on the basis of traditional measures of value. Still, our in-depth fundamental research allowed the team to identify an array of stock-specific opportunities which caused the Portfolio's holdings to differ from its benchmark in meaningful ways. The most significant of these opportunities were the Portfolio's overweighted position in health care and underweighted position in interest-sensitive groups. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Growth & Income Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 GROWTH & INCOME PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund ================================================================================ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Russell 1000 Value Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The 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. A Word About Risk Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ corrective strategies which would result in stock prices that rise as initially expected. Because the Portfolio can invest in foreign securities, it includes risks not associated with funds that invest primarily in U.S. issues, including magnified fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to the political and economic uncertainties in foreign countries. Because the Portfolio will invest in foreign currency denominated securities, fluctuations may be magnified by changes in foreign exchange rates. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, it may at times use certain investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. -------------------------------------------------------------------------------- (Historical Performance continued on next page) 2 GROWTH & INCOME PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund ================================================================================ THE PORTFOLIO VS. ITS BENCHMARK Returns ------------------------------ PERIODS ENDED DECEMBER 31, 2004 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- AllianceBernstein Growth & Income Portfolio Class A 11.46% 5.64% 14.41% -------------------------------------------------------------------------------- Russell 1000 Value Index 16.49% 5.27% 13.83% ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94 - 12/31/04 AllianceBernstein Growth & Income Portfolio Class A: $38,440 Russell 1000 Value Index: $36,509 [TABLE BELOW REPRESENT MOUNTAIN CHART] AllianceBernstein Growth & Income Portfolio Class A Russell 1000 Value Index -------------------------------------------------------------------------------- 12/31/94 $10,000 $10,000 12/31/95 $13,576 $13,836 12/31/96 $16,846 $16,830 12/31/97 $21,698 $22,751 12/31/98 $26,231 $26,307 12/31/99 $29,213 $28,240 12/31/00 $33,271 $30,220 12/31/01 $33,391 $28,531 12/31/02 $26,028 $24,103 12/31/03 $34,487 $31,341 12/31/04 $38,440 $36,509 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Growth & Income Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. -------------------------------------------------------------------------------- See Historical Performance and Benchmark disclosures on previous page. 3 GROWTH & INCOME PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund ================================================================================ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized Growth & Income Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* ---------------------------- ---------------- ---------------- ---------------- ---------------- Class A Actual................................. $ 1,000 $ 1,080.30 $ 3.24 0.62% Hypothetical (5% return before expenses)......... $ 1,000 $ 1,022.02 $ 3.15 0.62% Class B Actual................................. $ 1,000 $ 1,079.11 $ 4.55 0.87% Hypothetical (5% return before expenses)......... $ 1,000 $ 1,020.75 $ 4.42 0.87%
-------------------------------------------------------------------------------- * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 GROWTH & INCOME PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ ================================================================================ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ================================================================================ Citigroup, Inc. $ 124,675,386 4.7% -------------------------------------------------------------------------------- Viacom, Inc. Cl.B 105,447,303 3.9 -------------------------------------------------------------------------------- General Electric Co. 102,809,550 3.8 -------------------------------------------------------------------------------- American International Group, Inc. 101,972,376 3.8 -------------------------------------------------------------------------------- Microsoft Corp. 100,234,617 3.8 -------------------------------------------------------------------------------- JP Morgan Chase & Co. 97,665,436 3.7 -------------------------------------------------------------------------------- Altria Group, Inc. 88,931,050 3.3 -------------------------------------------------------------------------------- WellPoint Health Networks, Inc. 84,778,000 3.2 -------------------------------------------------------------------------------- ConocoPhillips 79,258,424 3.0 -------------------------------------------------------------------------------- Union Pacific Corp. 78,346,250 2.9 -------------- ------ $ 964,118,392 36.1% SECTOR DIVERSIFICATION December 31, 2004 =============================================================================== ================================================================================ SECTOR U.S. $ VALUE PERCENT OF NET ASSETS ================================================================================ Finance $ 711,266,416 26.6% -------------------------------------------------------------------------------- Consumer Services 374,180,942 14.0 -------------------------------------------------------------------------------- Energy 283,831,503 10.6 -------------------------------------------------------------------------------- Healthcare 282,850,219 10.6 -------------------------------------------------------------------------------- Consumer Staples 228,457,964 8.5 -------------------------------------------------------------------------------- Capital Goods 188,687,998 7.1 -------------------------------------------------------------------------------- Technology 157,094,187 5.9 -------------------------------------------------------------------------------- Utilities 114,885,864 4.3 -------------------------------------------------------------------------------- Transportation 100,492,061 3.8 -------------------------------------------------------------------------------- Basic Industry 67,214,259 2.5 -------------------------------------------------------------------------------- Consumer Manufacturing 37,661,103 1.4 -------------------------------------------------------------------------------- Aerospace & defense 29,486,000 1.1 -------------------------------------------------------------------------------- Multi-Industry Companies 24,251,685 0.9 ------------ ------ Total Investments* 2,600,360,201 97.3 -------------------------------------------------------------------------------- Cash and receivables, net of liabilities 72,069,648 2.7 ------------ ------ Net Assets $ 2,672,429,849 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- * Excludes short-term investments. 5 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ==================================================================== COMMON STOCKS-97.3% FINANCE-26.6% BANKING - MONEY CENTER-4.6% JPMorgan Chase & Co. ................ 2,503,600 $ 97,665,436 Wachovia Corp. ...................... 475,000 24,985,000 ------------ 122,650,436 ------------ BANKING - REGIONAL-3.7% Bank of America Corp. ............... 1,638,900 77,011,911 North Fork Bancorporation, Inc. ............. 778,400 22,456,840 ------------ 99,468,751 ------------ BROKERAGE & MONEY MANAGEMENT-2.7% Merrill Lynch & Co., Inc. ........... 855,100 51,109,327 Morgan Stanley ...................... 355,300 19,726,256 ------------ 70,835,583 ------------ INSURANCE-9.0% ACE Ltd. (Cayman Islands)............ 1,502,200 64,219,050 AFLAC, Inc. ......................... 217,700 8,673,168 Allstate Corp. ...................... 381,400 19,726,008 American International Group, Inc. ...................... 1,552,800 101,972,376 Axis Capital Holdings Ltd. (Bermuda) ................... 925,700 25,327,152 MetLife, Inc. ....................... 488,900 19,805,339 ------------ 239,723,093 ------------ MORTGAGE BANKING-0.8% Fannie Mae .......................... 312,300 22,238,883 ------------ MISCELLANEOUS-5.8% Citigroup, Inc. ..................... 2,587,700 124,675,386 MBNA Corp. .......................... 1,123,600 31,674,284 ------------ 156,349,670 ------------ 711,266,416 ------------ CONSUMER SERVICES-14.0% BROADCASTING & CABLE-9.0% Clear Channel Communications, Inc. ................ 577,100 19,327,079 Comcast Corp. Cl. A(a) .............. 750,000 24,960,000 Comcast Corp. Special Cl. A(a) ................. 825,000 27,093,000 Time Warner, Inc.(a) ................ 2,150,200 41,799,888 Viacom, Inc. Cl. B .................. 2,897,700 105,447,303 Westwood One, Inc.(a) ............... 785,300 21,148,129 ------------ 239,775,399 ------------ ENTERTAINMENT & LEISURE-0.9% Harley-Davidson, Inc. ............... 325,000 19,743,750 Royal Caribbean Cruises Ltd. (Liberia) ...................... 104,500 5,688,980 ------------ 25,432,730 ------------ RESTAURANT & LODGING-0.5% Wendy's International, Inc. ......... 345,700 13,572,182 ------------ RETAIL - GENERAL MERCHANDISE-3.6% Bed Bath & Beyond, Inc.(a) ......... 232,400 9,256,492 Lowe's Cos., Inc. ................... 312,100 17,973,839 The Home Depot, Inc. ................ 1,595,000 68,170,300 ------------ 95,400,631 ------------ 374,180,942 ------------ ENERGY-10.6% DOMESTIC INTEGRATED-0.8% Occidental Petroleum Corp. .......... 350,000 20,426,000 ------------ DOMESTIC PRODUCERS-0.5% Noble Energy, Inc. .................. 225,000 13,873,500 ------------ INTERNATIONAL-2.5% BP p.l.c. (ADR) (United Kingdom) .................... 705,500 41,201,200 Exxon Mobil Corp. ................... 515,000 26,398,900 ------------ 67,600,100 ------------ OIL SERVICE-3.8% Baker Hughes, Inc. .................. 532,500 22,721,775 EnCana Corp. (Canada) ............... 400,300 22,841,118 FMC Technologies, Inc.(a) ........... 300,700 9,682,540 Nabors Industries Ltd. (Bermuda)(a) ..................... 430,900 22,100,861 Schlumberger Ltd. ................... 378,300 25,327,185 ------------ 102,673,479 ------------ MISCELLANEOUS-3.0% ConocoPhillips ...................... 912,800 79,258,424 ------------ 283,831,503 ------------ HEALTHCARE-10.6% BIOTECHNOLOGY-0.4% Applera Corp. - Applied Biosystems Group ................. 575,000 12,023,250 ------------ DRUGS-2.1% Forest Laboratories, Inc.(a) ........ 340,100 15,256,886 Pfizer, Inc. ........................ 809,200 21,759,388 Wyeth ............................... 456,100 19,425,299 ------------ 56,441,573 ------------ 6 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ==================================================================== MEDICAL PRODUCTS-3.0% Beckman Coulter, Inc. ............... 109,600 $ 7,342,104 Boston Scientific Corp.(a). ......... 2,016,900 71,700,795 ------------ 79,042,899 ------------ MEDICAL SERVICES-5.1% Caremark Rx, Inc.(a) ................ 479,900 18,922,457 Health Management Associates, Inc. Cl. A ........... 472,100 10,726,112 UnitedHealth Group, Inc. ............ 237,600 20,915,928 WellPoint Health Networks, Inc.(a) ................... 737,200 84,778,000 ------------ 135,342,497 ------------ 282,850,219 ------------ CONSUMER STAPLES-8.5% COSMETICS-1.8% Avon Products, Inc. ................. 1,274,300 49,315,410 ------------ FOOD-0.4% Dean Foods Co. ...................... 307,600 10,135,420 ------------ HOUSEHOLD PRODUCTS-1.5% The Procter & Gamble Co. ............ 725,000 39,933,000 ------------ TOBACCO-4.1% Altria Group, Inc. .................. 1,455,500 88,931,050 Loews Corp. - Carolina Group ............................ 750,000 21,712,500 110,643,550 ------------ MISCELLANEOUS-0.7% Fortune Brands, Inc. ................ 238,800 18,430,584 ------------ 228,457,964 ------------ CAPITAL GOODS-7.1% ELECTRICAL EQUIPMENT-1.2% Emerson Electric Co. ................ 165,050 11,570,005 Johnson Controls, Inc. .............. 340,200 21,582,288 ------------ 33,152,293 ------------ MACHINERY-1.1% Deere & Co. ......................... 64,600 4,806,240 Ingersoll-Rand Co. Cl. A (Bermuda) .................. 289,800 23,270,940 ------------ 28,077,180 ------------ MISCELLANEOUS-4.8% General Electric Co. ................ 2,816,700 102,809,550 United Technologies Corp. ........... 238,500 24,648,975 ------------ 127,458,525 ------------ 188,687,998 ------------ TECHNOLOGY-5.9% COMMUNICATION EQUIPMENT-0.2% Corning, Inc.(a) .................... 558,300 6,571,191 ------------ COMPUTER HARDWARE/ STORAGE-0.8% Hewlett-Packard Co. ................. 960,700 20,145,879 ------------ COMPUTER SERVICES-1.1% Fiserv, Inc.(a) ..................... 750,000 30,142,500 ------------ SOFTWARE-3.8% Microsoft Corp. ..................... 3,752,700 100,234,617 ------------ 157,094,187 ------------ UTILITIES-4.3% ELECTRIC & GAS UTILITY-2.9% Dominion Resources, Inc. ............ 75,000 5,080,500 Entergy Corp. ....................... 325,000 21,966,750 Exelon Corp. ........................ 521,900 23,000,133 PPL Corp. ........................... 400,000 21,312,000 Sempra Energy ....................... 182,200 6,683,096 ------------ 78,042,479 ------------ TELEPHONE UTILITY-1.4% BellSouth Corp. ..................... 533,800 14,834,302 Verizon Communications, Inc. ............................. 543,300 22,009,083 ------------ 36,843,385 ------------ 114,885,864 ------------ TRANSPORTATION-3.8% RAILROAD-3.8% Burlington Northern Santa Fe Corp. ................... 468,100 22,145,811 Union Pacific Corp. ................. 1,165,000 78,346,250 ------------ 100,492,061 ------------ BASIC INDUSTRY-2.5% CHEMICALS-1.8% Air Products and Chemicals, Inc. ..................... 400,000 23,188,000 E. I. du Pont de Nemours & Co. ............................. 503,500 24,696,675 ------------ 47,884,675 ------------ MINING & METALS-0.7% Alcoa, Inc. ......................... 615,200 19,329,584 ------------ 67,214,259 ------------ CONSUMER MANUFACTURING-1.4% BUILDING & RELATED-1.4% American Standard Cos., Inc.(a) .................... 543,900 22,473,948 D.R. Horton, Inc. ................... 246,500 9,936,415 Pulte Homes, Inc. ................... 82,300 5,250,740 ------------ 37,661,103 ------------ 7 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ==================================================================== AEROSPACE & DEFENSE-1.1% AEROSPACE-1.1% General Dynamics Corp. .............. 100,000 $ 10,460,000 Northrop Grumman Corp. .............. 350,000 19,026,000 -------------- 29,486,000 -------------- MULTI-INDUSTRY COMPANIES-0.9% 3M Co. .............................. 295,500 24,251,685 -------------- Total Common Stocks (cost $2,144,434,465) ............ 2,600,360,201 -------------- Principal Amount Company (000) U.S. $ Value ==================================================================== SHORT-TERM INVESTMENT-3.0% TIME DEPOSIT-3.0% The Bank of New York 1.50%, 1/03/05 (cost $79,930,000) ............... $79,930 $ 79,930,000 -------------- TOTAL INVESTMENTS-100.3% (cost $2,224,364,465) ............ 2,680,290,201 Other assets less liabilities-(0.3%) ............... (7,860,352) -------------- NET ASSETS-100% ..................... $2,672,429,849 -------------- -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 8 GROWTH & INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
ASSETS Investments in securities, at value (cost $2,224,364,465)................... $2,680,290,201 Cash........................................................................ 281 Dividends and interest receivable........................................... 3,854,947 Receivable for investment securities sold................................... 2,007,276 Receivable for capital stock sold........................................... 1,111,613 -------------- Total assets................................................................ 2,687,264,318 -------------- LIABILITIES Payable for investment securities purchased................................. 9,100,641 Payable for capital stock redeemed.......................................... 3,713,557 Advisory fee payable........................................................ 1,211,367 Distribution fee payable.................................................... 439,013 Administrative fee payable.................................................. 17,500 Transfer agent fee payable.................................................. 60 Accrued expenses............................................................ 352,331 -------------- Total liabilities .......................................................... 14,834,469 -------------- NET ASSETS..................................................................... $2,672,429,849 ============== COMPOSITION OF NET ASSETS Capital stock, at par....................................................... $ 111,715 Additional paid-in capital.................................................. 2,347,242,637 Undistributed net investment income......................................... 35,347,674 Accumulated net realized loss on investment transactions.................... (166,197,913) Net unrealized appreciation of investments.................................. 455,925,736 -------------- $2,672,429,849 ============== Class A Shares Net assets.................................................................. $ 627,688,984 ============== Shares of capital stock outstanding......................................... 26,061,948 ============== Net asset value per share................................................... $ 24.08 ============== Class B Shares Net assets.................................................................. $2,044,740,865 ============== Shares of capital stock outstanding......................................... 85,653,206 ============== Net asset value per share................................................... $ 23.87 ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 9 GROWTH & INCOME PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Dividends (net of foreign taxes withheld of $73,846)..................................... $ 54,205,730 Interest................................................................................. 644,633 -------------- Total investment income.................................................................. 54,850,363 -------------- EXPENSES Advisory fee............................................................................. 14,705,220 Distribution fee--Class B................................................................ 4,603,123 Printing................................................................................. 702,090 Custodian................................................................................ 284,492 Administrative........................................................................... 69,000 Audit.................................................................................... 41,050 Legal.................................................................................... 38,631 Directors' fees.......................................................................... 1,000 Transfer agency.......................................................................... 859 Miscellaneous............................................................................ 98,871 -------------- Total expenses........................................................................... 20,544,336 Less: expenses waived and reimbursed by the Adviser (see Note B)......................... (1,231,926) -------------- Net expenses............................................................................. 19,312,410 -------------- Net investment income.................................................................... 35,537,953 -------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions............................................. 105,022,737 Net change in unrealized appreciation/depreciation of investments........................ 128,326,583 -------------- Net gain on investment transactions...................................................... 233,349,320 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS.................................................. $ 268,887,273 ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 10 GROWTH & INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2004 2003 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 35,537,953 $ 19,192,015 Net realized gain on investment transactions......................... 105,022,737 27,303,599 Net change in unrealized appreciation/depreciation of investments.... 128,326,583 468,948,547 -------------- -------------- Net increase in net assets from operations........................... 268,887,273 515,444,161 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (5,566,213) (5,298,556) Class B............................................................ (13,683,981) (10,692,656) CAPITAL STOCK TRANSACTIONS Net increase......................................................... 147,448,288 251,538,159 -------------- -------------- Total increase....................................................... 397,085,367 750,991,108 NET ASSETS Beginning of period.................................................. 2,275,344,482 1,524,353,374 -------------- -------------- End of period (including undistributed net investment income of $35,347,674 and $19,059,915, respectively)......................... $2,672,429,849 $2,275,344,482 ============== ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 11 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein Growth & Income Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the 12 AllianceBernstein Variable Products Series Fund ================================================================================ interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. Dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .625% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. 13 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $1,231,926. 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 $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $3,213,606, of which $318,467 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $1,353,142,996 $1,183,150,434 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........................................................................................ $2,231,305,991 ============== Gross unrealized appreciation............................................................... $ 470,354,415 Gross unrealized depreciation............................................................... (21,370,205) -------------- Net unrealized appreciation................................................................. $ 448,984,210 ==============
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 14 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 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 15 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, 2004 2003 2004 2003 -------------- -------------- ------------ ------------ Class A Shares sold....................... 3,532,531 4,525,746 $ 78,969,217 $ 85,909,173 Shares issued in reinvestment of dividends................... 251,523 271,026 5,566,213 5,298,557 Shares redeemed................... (5,415,639) (4,570,168) (120,998,817) (83,057,077) -------------- -------------- -------------- -------------- Net increase (decrease)........... (1,631,585) 226,604 $ (36,463,387) $ 8,150,653 ============== ============== ============== ============== Class B Shares sold....................... 17,417,975 23,010,963 $ 384,138,537 $ 432,799,344 Shares issued in reinvestment of dividends................... 623,132 550,600 13,683,981 10,692,656 Shares redeemed................... (9,695,569) (11,015,402) (213,910,843) (200,104,494) -------------- -------------- -------------- -------------- Net increase...................... 8,345,538 12,546,161 $ 183,911,675 $ 243,387,506 ============== ============== ============== ==============
NOTE G: Risks Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ---------------- ---------------- Distributions paid from: Ordinary income................... $ 19,250,194 $ 15,991,212 Total taxable distributions.......... 19,250,194 15,991,212 --------------- --------------- Total distributions paid............. $ 19,250,194 $ 15,991,212 =============== =============== 16 AllianceBernstein Variable Products Series Fund ================================================================================ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income........................... $ 35,347,674 Accumulated capital and other losses.................... (159,256,387)(a) Unrealized appreciation/(depreciation).................. 448,984,210(b) --------------- Total accumulated earnings/(deficit).................... $ 325,075,497 =============== (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $159,256,387 of which $136,280,263 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. During the current fiscal year the Portfolio utilized capital loss carryforwards of $92,862,698. (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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affil- 17 GROWTH & INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ iated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 18 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, ------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period .......... $21.80 $16.62 $22.16 $23.15 $21.79 ------ ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment income (a)...................... .36(b) .23 .22 .21 .22 Net realized and unrealized gain (loss) on investment and foreign currency transactions................................ 2.12 5.15 (5.01) (.05) 2.75 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations............................. 2.48 5.38 (4.79) .16 2.97 ------ ------ ------ ------ ------ Less: Dividends and Distributions --------------------------------- Dividends from net investment income........... (.20) (.20) (.12) (.14) (.14) Distributions from net realized gain on investment transactions..................... -0- -0- (.63) (1.01) (1.47) ------ ------ ------ ------ ------ Total dividends and distributions.............. (.20) (.20) (.75) (1.15) (1.61) ------ ------ ------ ------ ------ Net asset value, end of period $24.08 $21.80 $16.62 $22.16 $23.15 ====== ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (c) 11.46% 32.50% (22.05)% .36% 13.89% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted)...... $627,689 $603,673 $456,402 $673,722 $596,547 Ratio to average net assets of: Expenses, net of waivers and reimbursements........................... .60% .66% .68% .67% .69% Expenses, before waivers and reimbursements........................... .65% .66% .68% .67% .69% Net investment income....................... 1.62%(b) 1.25% 1.15% .95% 1.01% Portfolio turnover rate ....................... 50% 57% 69% 80% 74%
-------------------------------------------------------------------------------- See footnote summary on page 20. 19 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 ============================================================= Year Ended December 31, ------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $21.62 $16.49 $22.03 $23.06 $21.76 ------ ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment income (a)...................... .31(b) .18 .17 .16 .18 Net realized and unrealized gain (loss) on investment and foreign currency transactions................................ 2.10 5.11 (4.98) (.05) 2.73 ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations............................. 2.41 5.29 (4.81) .11 2.91 ------ ------ ------ ------ ------ Less: Dividends and Distributions --------------------------------- Dividends from net investment income........... (.16) (.16) (.10) (.13) (.14) Distributions from net realized gain on investment transactions..................... -0- -0- (.63) (1.01) (1.47) ------ ------ ------ ------ ------ Total dividends and distributions ............. (.16) (.16) (.73) (1.14) (1.61) ------ ------ ------ ------ ------ Net asset value, end of period................. $23.87 $21.62 $16.49 $22.03 $23.06 ====== ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (c)............................ 11.22% 32.18% (22.26)% .15% 13.59% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted)............................ $2,044,741 $1,671,671 $1,067,952 $889,394 $151,739 Ratio to average net assets of: Expenses, net of waivers and reimbursements.......................... .85% .91% .93% .92% .95% Expenses, before waivers and reimbursements.......................... .90% .91% .93% .92% .95% Net investment income...................... 1.39%(b) .99% .91% .75% .85% Portfolio turnover rate....................... 50% 57% 69% 80% 74%
-------------------------------------------------------------------------------- (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. 20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein Growth & Income Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Growth & Income Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 21 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 22 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
-------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 23 GROWTH & INCOME PORTFOLIO AllianceBernstein Variable Products Series Fund Officer Information(1) Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Frank Caruso Vice President Senior Vice President of ACMC**, with which 10/28/56 he has been associated since prior to 2000. Paul C. Rissman Vice President Executive Vice President of ACMC**, with which he 11/10/56 has been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and Chief 10/23/62 Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
-------------------------------------------------------------------------------- (1) The day-to-day management of and investment decisions for the AllianceBernstein Growth and Income Portfolio and AllianceBernstein Total Return Portfolio are made by the Adviser's Relative Value Team, which is responsible for management for all of the Adviser's Relative Value accounts. * 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 (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN GROWTH PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. INVESTMENT PRODUCTS OFFERED --------------------------- o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Growth Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmarks, the Russell 3000 Index and the S&P 500 Stock Index, for the one-, five- and 10-year periods ended December 31, 2004. During the annual period ended December 31, 2004, the Portfolio outperformed both the Russell 3000 Index and the S&P 500 Stock Index. Specific stocks within the Portfolio's Technology holdings provided particularly strong performance, led by semiconductor, communication equipment and security software companies. A number of health care and financial services holdings also performed well. This strength was partially offset by an underweighted position in energy. MARKET REVIEW AND INVESTMENT STRATEGY Equity markets were volatile during the annual reporting period ended December 31, 2004 amid a generally positive fundamental environment for economic expansion and corporate profits. Businesses across many sectors exhibited impressive growth, with revenues, earnings and cash-flow growth for a number of leading companies exceeding initial expectations. Investor sentiment nonetheless vacillated with marked short-term rotation in the relative performance of industry sectors and individual securities that was often unrelated to fundamentals. The annual period began with investor sentiment focused upon the robust pace of economic recovery and an earnings rebound across a range of economically sensitive sectors. While corporate profitability remained generally strong and exceeded expectations, sentiment changed during the spring as investors focused on the end of the stimulative monetary environment that had prevailed over the prior two years. In late May, concerns shifted from monetary policy to the implications of escalating energy prices, ongoing geopolitical tensions, heightened terrorist anxieties and the acrimonious U.S. presidential campaign. Expectations for economic growth deteriorated, prompting the most significant correction in the equity markets since the cyclical recovery began in early 2003. Health care, technology and financial service equities all exhibited weakness, despite generally robust business fundamentals. In response, exposure to several holdings that had disproportionately corrected were selectively added to the Portfolio. The annual period ended with a rebound in investment sentiment, reflecting resolution of the election uncertainties, retreating energy prices, improving measures of consumer and business confidence and continuing favorable earnings prospects for many companies. Equity markets experienced a severe compression in relative price/earnings multiples over the past four years--one largely indiscriminate of the success of individual companies that has, in many instances, remained consistently impressive throughout. Many leading companies were priced at historically modest relative valuations, despite their superior competitive attributes and growth prospects. Management sought to maintain a balanced exposure to both economically-sensitive sectors such as technology, consumer, and financial services, and more defensive, consistent, growth sectors, such as health care. Across each of these, focus has been on successful, well-managed companies with sustainable competitive advantages and superior prospective growth. Reflecting this, the average revenue per share of the Portfolio's holdings grew 21% compounded annually over the past five years, compared with 11% for the Russell 3000 Growth Index. Similarly, average earnings per share grew at 30% compounded over the same five years, compared with 13% for the Russell 3000 Growth Index. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Growth Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 GROWTH PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE 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. A WORD ABOUT RISK The Portfolio can invest in foreign securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, market or economic developments. In addition, fluctuations in the value of investments in foreign currency denominated securities may be magnified by changes in foreign exchange rates. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, it may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 GROWTH PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ THE PORTFOLIO VS. ITS BENCHMARKS RETURNS PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------------- AllianceBernstein Growth Portfolio Class A 14.73% -6.79% 10.65% Russell 3000 Index 11.95% -1.16% 12.01% S&P 500 Stock Index 10.87% -2.30% 12.07% ALLIANCEBERNSTEIN GROWTH PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 S&P 500 STOCK INDEX: $31,245 RUSSELL 3000 INDEX: $31,089 ALLIANCEBERNSTEIN GROWTH PORTFOLIO CLASS A: $27,511 AllianceBernstein Growth Russell S&P 500 Portfolio Class A 3000 Index Stock Index ------------------------------------------------------------------------------- 12/31/94 10,000 10,000 10,000 12/31/95 13,523 13,680 13,753 12/31/96 17,376 16,665 16,909 12/31/97 22,592 21,961 22,549 12/31/98 29,080 27,263 28,997 12/31/99 39,104 32,960 35,096 12/31/00 32,257 30,502 31,902 12/31/01 24,686 27,006 28,112 12/31/02 17,754 21,189 21,902 12/31/03 23,979 27,770 28,181 12/31/04 27,511 31,089 31,245 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Growth Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmarks. The chart assumes the reinvestment of dividends and capital gains. SEE HISTORICAL PERFORMANCE AND BENCHMARK DISCLOSURES ON PREVIOUS PAGE. 3 FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. BEGINNING ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE GROWTH PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 PERIOD* RATIO* ------------------------------------------------------------------------------- CLASS A ACTUAL $ 1,000 $ 1,049.30 $ 4.58 0.89% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.66 $ 5.87 0.89% CLASS B Actual $ 1,000 $ 1,048.20 $ 5.87 1.14% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.41 $ 5.79 1.14% * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 GROWTH PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ------------------------------------------------------------------------------- eBay, Inc. $ 14,000,112 4.8% Legg Mason, Inc. 13,824,162 4.8 WellPoint Health Networks, Inc. 11,994,500 4.1 Marvell Technology Group Ltd. (Bermuda) 10,229,547 3.5 American International Group, Inc. 10,139,448 3.5 Juniper Networks, Inc. 9,600,789 3.3 Zimmer Holdings, Inc. 9,157,716 3.2 Dell, Inc. 8,663,984 3.0 Citigroup, Inc. 8,484,498 2.9 Forest Laboratories, Inc. 8,433,680 2.9 ------------ ---- $ 104,528,436 36.0% SECTOR DIVERSIFICATION December 31, 2004 SECTOR U.S. $ VALUE PERCENT OF NET ASSETS ------------------------------------------------------------------------------- Technology $ 78,336,189 27.0% Healthcare 67,656,580 23.3 Finance 59,013,663 20.3 Consumer Services 47,587,982 16.4 Consumer Manufacturing 21,412,659 7.4 Oil & Gas Field Services 4,411,927 1.5 Multi-Industry Companies 3,490,528 1.2 Aerospace & Defense 3,098,052 1.1 Capital Goods 610,155 0.2 Transportation 581,128 0.2 ------------ ------ Total Investments* 286,198,863 98.6 ------------ ------ Net Assets $ 290,244,209 100.0% * Excludes short-term investments. 5 GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- COMMON STOCKS-98.6% TECHNOLOGY-27.0% COMMUNICATION EQUIPMENT-6.7% Corning, Inc. (a) 368,400 $ 4,336,068 Juniper Networks, Inc. (a) 353,100 9,600,789 QUALCOMM, Inc. 131,100 5,558,640 ------------ 19,495,497 ------------ COMPUTER HARDWARE / STORAGE-3.5% Dell, Inc. (a) 205,600 8,663,984 EMC Corp. (a) 103,000 1,531,610 ------------ 10,195,594 ------------ COMPUTER PERIPHERALS-1.5% Network Appliance, Inc. (a) 129,800 4,311,956 ------------ COMPUTER SERVICES-1.1% Alliance Data Systems Corp. (a) 65,200 3,095,696 ------------ INTERNET MEDIA-2.9% Yahoo!, Inc. (a) 221,400 8,342,352 ------------ SEMI-CONDUCTOR COMPONENTS-4.7% Broadcom Corp. Cl.A (a) 89,000 2,872,920 Marvell Technology Group Ltd. (Bermuda) (a) 288,400 10,229,547 Silicon Laboratories, Inc. (a) 18,500 653,235 ------------ 13,755,702 ------------ SOFTWARE-4.3% Comverse Technology, Inc. (a) 87,800 2,146,710 SAP AG (ADR) (Germany) 108,200 4,783,522 Symantec Corp. (a) 212,100 5,463,696 ------------ 12,393,928 ------------ MISCELLANEOUS-2.3% Amphenol Corp. Cl.A (a) 183,600 6,745,464 ------------ 78,336,189 ------------ HEALTHCARE-23.3% BIOTECHNOLOGY-2.6% Amgen, Inc. (a) 68,200 4,375,030 Genentech, Inc. (a) 33,900 1,845,516 GILEAD SCIENCES, INC. (A) 39,700 1,389,103 ------------ 7,609,649 ------------ DRUGS-5.1% Forest Laboratories, Inc. (a) 188,000 8,433,680 Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 211,300 6,309,418 ------------ 14,743,098 ------------ MEDICAL PRODUCTS-10.3% Alcon, Inc. (Switzerland) 68,700 5,537,220 Patterson Cos., Inc. 58,800 2,551,332 St. Jude Medical, Inc. (a) 157,800 6,616,554 Stryker Corp. 128,200 6,185,650 Zimmer Holdings, Inc. (a) 114,300 9,157,716 ------------ 30,048,472 ------------ MEDICAL SERVICES-5.3% Caremark Rx, Inc. (a) 82,700 3,260,861 WellPoint Health Networks, Inc. (a) 104,300 11,994,500 ------------ 15,255,361 ------------ 67,656,580 ------------ FINANCE-20.3% BANKING - MONEY CENTER-0.9% JPMorgan Chase & Co. 69,168 2,698,244 ------------ BROKERAGE & MONEY MANAGEMENT-8.1% Legg Mason, Inc. 188,700 13,824,162 Merrill Lynch & Co., Inc. 46,800 2,797,236 Morgan Stanley 27,100 1,504,592 The Charles Schwab Corp. 131,200 1,569,152 The Goldman Sachs Group, Inc. 38,000 3,953,520 ------------ 23,648,662 ------------ INSURANCE-4.9% American International Group, Inc. 154,400 10,139,448 Everest Re Group Ltd. (Bermuda) 44,100 3,949,596 ------------ 14,089,044 ------------ MISCELLANEOUS-6.4% Ambac Financial Group, Inc. 51,500 4,229,695 Citigroup, Inc. 176,100 8,484,498 MBNA Corp. 208,000 5,863,520 ------------ 18,577,713 ------------ 59,013,663 ------------ CONSUMER SERVICES-16.4% APPAREL-0.5% Coach, Inc. (a) 27,900 1,573,560 ------------ BROADCASTING & CABLE-0.5% XM Satellite Radio Holdings, Inc. Cl.A (a) 37,500 1,410,750 ------------ 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- ENTERTAINMENT & LEISURE-2.8% DreamWorks Animation SKG, Inc. Cl. A (a) 4,800 $ 180,048 Harley-Davidson, Inc. 129,500 7,867,125 ------------ 8,047,173 ------------ RETAIL - GENERAL MERCHANDISE-8.0% Best Buy Co., Inc. 14,700 873,474 eBay, Inc. (a) 120,400 14,000,112 Lowe's Cos., Inc. 76,900 4,428,671 Williams-Sonoma, Inc. (a) 108,900 3,815,856 ------------ 23,118,113 ------------ MISCELLANEOUS-4.6% CDW Corp. 63,600 4,219,860 Education Management Corp. (a) 55,600 1,835,356 Electronic Arts, Inc. (a) 27,450 1,693,116 Iron Mountain, Inc. (a) 143,050 4,361,595 Strayer Education, Inc. 12,100 1,328,459 ------------ 13,438,386 ------------ 47,587,982 ------------ CONSUMER MANUFACTURING-7.4% BUILDING & RELATED-7.4% Centex Corp. 84,600 5,040,468 D.R. Horton, Inc. 125,900 5,075,029 Lennar Corp. Cl.A 100,900 5,719,012 NVR, Inc. (a) 7,250 5,578,150 ------------ 21,412,659 ------------ OIL & GAS FIELD SERVICES-1.5% ENERGY EQUIPMENT & SERVICES-1.5% Baker Hughes, Inc. 54,600 2,329,782 Schlumberger Ltd. 31,100 2,082,145 ------------ 4,411,927 ------------ MULTI-INDUSTRY COMPANIES-1.2% Danaher Corp. 60,800 3,490,528 ------------ AEROSPACE & DEFENSE-1.1% DEFENSE ELECTRONICS-1.1% L-3 Communications Holdings, Inc. 42,300 3,098,052 ------------ CAPITAL GOODS-0.2% MACHINERY-0.2% Actuant Corp. Cl. A 11,700 610,155 ------------ TRANSPORTATION-0.2% AIR FREIGHT-0.2% United Parcel Service, Inc. 6,800 581,128 ------------ Total Common Stocks (cost $198,826,233) 286,198,863 ------------ SHORT-TERM INVESTMENT-1.9% U.S. GOVERNMENT SPONSORED AGENCY OBLIGATION-1.9% Federal Home Loan Bank 1.50%, 1/03/05 (cost $5,399,625) $ 5,400 5,400,000 ------------ TOTAL INVESTMENTS-100.5% (cost $204,225,858) 291,598,863 Other assets less liabilities-(0.5%) (1,354,654) ------------- NET ASSETS-100% $290,244,209 ============= (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 7 GROWTH PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $204,225,858) $ 291,598,863 Dividends receivable 81,549 Receivable for capital stock sold 9,339 ------------- Total assets 291,689,751 ------------- LIABILITIES Due to custodian 271,214 Payable for capital stock redeemed 794,708 Advisory fee payable 183,054 Distribution fee payable 34,011 Administrative fee payable 17,500 Transfer agent fee payable 60 Accrued expenses 144,995 ------------- Total liabilities 1,445,542 ------------- NET ASSETS $ 290,244,209 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 15,974 Additional paid-in capital 345,028,739 Undistributed net investment income 7,546 Accumulated net realized loss on investment transactions (142,181,055) Net unrealized appreciation of investments 87,373,005 ------------- $ 290,244,209 ============= CLASS A SHARES Net assets $ 137,345,105 ============= Shares of capital stock outstanding 7,503,328 ============= Net asset value per share $ 18.30 ============= CLASS B SHARES Net assets $ 152,899,104 ============= Shares of capital stock outstanding 8,470,485 ============= Net asset value per share $ 18.05 ============= See Notes to Financial Statements. 8 GROWTH PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $11,909) $ 1,220,046 Interest 40,994 ------------- Total investment income 1,261,040 ------------- EXPENSES Advisory fee 2,073,373 Distribution fee--Class B 348,513 Custodian 134,492 Printing 86,338 Administrative 69,000 Audit 41,750 Legal 7,597 Directors' fees 1,000 Transfer agency 859 Miscellaneous 28,704 ------------- Total expenses 2,791,626 ------------- Net investment loss (1,530,586) ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 19,525,775 Net change in unrealized appreciation/depreciation of investments 18,576,850 ------------- Net gain on investment transactions 38,102,625 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 36,572,039 ============= See Notes to Financial Statements. 9 GROWTH PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (1,530,586) $ (1,170,753) Net realized gain (loss) on investment transactions 19,525,775 (10,808,268) Net change in unrealized appreciation/ depreciation of investments 18,576,850 77,063,597 ------------- ------------- Net increase in net assets from operations 36,572,039 65,084,576 CAPITAL STOCK TRANSACTIONS Net increase (decrease) (8,596,957) 4,021,668 ------------- ------------- Total increase 27,975,082 69,106,244 NET ASSETS Beginning of period 262,269,127 193,162,883 ------------- ------------- End of period (including undistributed net investment income of $7,546 and $0, respectively) $ 290,244,209 $ 262,269,127 ============= ============= See Notes to Financial Statements. 10 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Growth Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 11 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended, in connection with the final agreement with the office of New York Attorney General ("NYAG") so that the advisory fee is calculated at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $406,802 of which $5,956 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES --------------- -------------- Investment securities (excluding U.S. government securities) $151,897,603 $158,282,927 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 $204,431,673 ============ Gross unrealized appreciation $87,882,988 Gross unrealized depreciation (715,798) ------------ Net unrealized appreciation $87,167,190 ============ 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 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having a value at least equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, reflects the total exposure the Portfolio has in that particular currency contract. 2. OPTION TRANSACTIONS For hedging and investment purposes, the Portfolio may purchase and write (sell) 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 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, 2004 2003 2004 2003 ------------- ------------ -------------- -------------- CLASS A Shares sold 401,183 503,509 $6,730,222 $6,916,297 Shares redeemed (1,790,906) (1,895,109) (29,838,731) (25,118,830) ---------- ---------- ------------ ------------- Net decrease (1,389,723) (1,391,600) $(23,108,509) $(18,202,533) ========== ========== ============ ============= 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SHARES AMOUNT --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2004 2003 2004 2003 ------------- ------------ -------------- -------------- CLASS B Shares sold 3,293,538 4,048,545 $55,088,374 $56,912,203 Shares redeemed (2,464,295) (2,536,343) (40,576,822) (34,688,002) ---------- ---------- ------------ ------------ Net increase 829,243 1,512,202 $14,511,552 $22,224,201 ========== ========== ============ ============ NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT) As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $(141,967,694)(a) Unrealized appreciation/(depreciation) 87,167,190(b) -------------- Total accumulated earnings/(deficit) $(54,800,504) ============== (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $141,967,694 of which $42,732,873 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. During the current fiscal year, the Portfolio utilized capital loss carryforward of $19,458,382. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the tax treatment of dividends received. During the current fiscal year, permanent differences, primarily due to net operating losses, resulted in a net increase in undistributed net investment income 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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. 15 GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its 16 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 17 GROWTH PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A ---------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $15.95 $11.81 $16.42 $25.10 $33.59 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (.07) (.06) (.06) (.06) .08 Net realized and unrealized gain (loss) on investment transactions 2.42 4.20 (4.55) (5.47) (5.36) ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 2.35 4.14 (4.61) (5.53) (5.28) ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -0- -0- -0- (.06) (.02) Distributions from net realized gain on investment transactions -0- -0- -0- (1.85) (3.19) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (1.23) -0- Return of capital -0- -0- -0- (.01) -0- ------ ------ ------ ------ ------ Total dividends and distributions -0- -0- -0- (3.15) (3.21) ------ ------ ------ ------ ------ Net asset value, end of period $18.30 $15.95 $11.81 $16.42 $25.10 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (b) 14.73% 35.06% (28.08)% (23.47)% (17.51)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000'S omitted) $137,345 $141,809 $121,439 $226,237 $357,664 Ratio to average net assets of: Expenses . .88% .89% .88% .85% .81% Net investment income (loss) (.43)% (.43)% (.44)% (.31)% .26% Portfolio turnover rate 56% 49% 38% 104% 58%
See footnote summary on page 19. 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B ---------------------------------------------------------------- Year Ended December 31, ---------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $15.76 $11.70 $16.31 $24.99 $33.54 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) (.11) (.09) (.09) (.11) .04 Net realized and unrealized gain (loss) on investment transactions 2.40 4.15 (4.52) (5.44) (5.39) ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations 2.29 4.06 (4.61) (5.55) (5.35) ------ ------ ------ ------ ------ LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -0- -0- -0- (.04) (.01) Distributions from net realized gain on investment transactions -0- -0- -0- (1.85) (3.19) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (1.23) -0- Return of capital -0- -0- -0- (.01) -0- ------ ------ ------ ------ ------ Total dividends and distributions -0- -0- -0- (3.13) (3.20) ------ ------ ------ ------ ------ Net asset value, end of period $18.05 $15.76 $11.70 $16.31 $24.99 ====== ====== ====== ====== ====== TOTAL RETURN Total investment return based on net asset value (b) 14.53% 34.70% (28.26)% (23.65)% (17.75)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000'S omitted) $152,899 $120,460 $71,724 $94,215 $54,127 Ratio to average net assets of: Expenses 1.13% 1.14% 1.13% 1.11% 1.08% Net investment income (loss) (.68)% (.68)% (.69)% (.59)% .13% Portfolio turnover rate 56% 49% 38% 104% 58%
-------------------------------------------------------------------------- (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. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN GROWTH PORTFOLIO We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Growth Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 20 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 21 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#,** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
-------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 22 GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Alan Levi(1) Vice President Senior Vice President of ACMC**, with which he has 9/27/49 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
----------------------------------------------------------------------------- (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. 23 ALLIANCEBERNSTEIN ------------------------------------------------ VARIABLE PRODUCTS ------------------------------------------------ SERIES FUND ------------------------------------------------ ALLIANCEBERNSTEIN ------------------------------------------------ INTERNATIONAL PORTFOLIO ------------------------------------------------ ANNUAL REPORT DECEMBER 31, 2004 ================================================================================ The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. ================================================================================ Investment Products Offered ============================ o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed ============================ You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. INTERNATIONAL PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 11, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein International Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Morgan Stanley Captial International (MSCI) Europe, Australasia and Far East (EAFE) Index, for the one-, five- and 10-year periods ended December 31, 2004. During the annual period ended December 31, 2004, the Portfolio produced strong returns, but it underperformed its benchmark, the MSCI EAFE Index. The Portfolio was negatively affected by underperformance from the health care sector where the Portfolio's stocks were hurt by disappointing clinical data, delays in drug development, expected FDA drug approval that did not materialize and the adverse impact from safety concerns. Weakness in semiconductor components and telecom hardware also detracted from the Portfolio's performance. The industrial sector also detracted from performance where electrical equipment was weak. The Portfolio's positive performance was characterized by a strong contribution from the energy sector, which was the greatest positive driver of overall performance. Within the energy sector, the Portfolio benefited from strong stock selection in oil services, mining and emerging market companies. The Portfolio also benefited from an overweighted position in the telecom sector. Strong emerging market performance benefited the consumer stock holdings, although this was partially offset by weak performance in cosmetic stocks. MARKET REVIEW AND INVESTMENT STRATEGY The annual reporting period ended December 31, 2004 was characterized by a recovery in global GDP, although economic growth was curtailed in the second half of the year by strong oil prices, rising interest rates and concerns over the potential slowdown in China. During the first nine months of the year, the markets were also concerned by the backdrop of an uncertain geopolitical environment where there was renewed terrorist activity in Spain and Iraq and the uncertain outcome of the U.S. election. The Portfolio had an overweighted position in the energy sector during the annual period given the view that oil prices were likely to remain high during the year and oil services were beneficiaries of increased demand for capital expenditure in the industry. Given the inflection point in interest rates, the Portfolio had an underweighted position in financial stocks. The Portfolio had an overweighted position in technology due to the view that increasing economic activity would generate demand for renewed capital expenditure from companies. However, confidence at the corporate level did not translate into the expected level of reinvestment demand. The Portfolio was cautious on consumer stocks due to the backdrop of increasing interest rates globally and the impact of rising oil prices. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund International Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 INTERNATIONAL PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund ================================================================================ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure 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 any specific investment, including AllianceBernstein International Portfolio. A Word About Risk Substantially all of the Portfolio's assets will be invested in foreign securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments. In addition, because the Portfolio will invest in foreign currency denominated securities, fluctuations in the value of the Portfolio's investments may be magnified by changes in foreign exchange rates. The Portfolio may at times buy and sell foreign currencies or enter into forward foreign currency exchange contracts and can invest up to 50% of its assets in such financial instruments. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. Also, at the discretion of the Investment Manager, the Portfolio can invest up to 10% of its total assets in illiquid securities or make loans of portfolio securities of up to 30% of its total assets. In addition, the Portfolio may also enter into repurchase agreements of up to seven days' duration for up to 10% of the Portfolio's total assets. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. -------------------------------------------------------------------------------- (Historical Performance continued on next page) 2 INTERNATIONAL PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund ================================================================================
Returns --------------------------------------------------------------------------------------------------------- THE PORTFOLIO VS. ITS BENCHMARK PERIODS ENDED DECEMBER 31, 2004 1 Year 5 Years 10 Years --------------------------------------------------------------------------------------------------------- AllianceBernstein International Portfolio Class A 17.62% -3.98% 4.64% --------------------------------------------------------------------------------------------------------- MSCI EAFE Index 20.70% -0.80% 5.94% ---------------------------------------------------------------------------------------------------------
ALLIANCEBERNSTEIN INTERNATIONAL PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 MSCI EAFE Index: $17,814 AllianceBernstein International Portfolio Class A: $15,745 [TABLE BELOW REPRESENT MOUNTAIN CHART IN PRINTED MATERIAL.] AllianceBernstein International Portfolio Class A MSCI EAFE Index ---------------------------------------------------------------------------- 12/31/94 $10,000 $10,000 12/31/95 $10,986 $11,155 12/31/96 $11,782 $11,864 12/31/97 $12,175 $12,109 12/31/98 $13,760 $14,571 12/31/99 $19,296 $18,548 12/31/00 $15,464 $15,959 12/31/01 $12,007 $12,574 12/31/02 $10,173 $10,605 12/31/03 $13,386 $14,759 12/31/04 $15,745 $17,814 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein International Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. -------------------------------------------------------------------------------- See Historical Performance and Benchmark disclosures on previous page. 3 INTERNATIONAL PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund ================================================================================ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized International Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* ----------------------- -------------- ----------------- -------------- -------------- Class A Actual............................... $1,000 $1,155.18 $6.88 1.27% Hypothetical (5% return before expenses)....... $1,000 $1,018.75 $6.44 1.27% Class B Actual............................... $1,000 $1,154.73 $8.23 1.52% Hypothetical (5% return before expenses)....... $1,000 $1,017.50 $7.71 1.52%
-------------------------------------------------------------------------------- * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 INTERNATIONAL PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
----------------------------------------------------------------------------------------------------------- COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ----------------------------------------------------------------------------------------------------------- UBS AG $ 1,941,842 3.0% ----------------------------------------------------------------------------------------------------------- Vodafone Group Plc 1,933,633 3.0 ----------------------------------------------------------------------------------------------------------- HSBC Holdings Plc 1,675,105 2.5 ----------------------------------------------------------------------------------------------------------- SAP AG 1,613,091 2.5 ----------------------------------------------------------------------------------------------------------- Schlumberger Ltd. 1,593,410 2.4 ----------------------------------------------------------------------------------------------------------- Total, SA 1,556,961 2.4 ----------------------------------------------------------------------------------------------------------- Credit Suisse Group 1,509,206 2.3 ----------------------------------------------------------------------------------------------------------- BHP Billiton Plc 1,373,825 2.1 ----------------------------------------------------------------------------------------------------------- Novartis AG 1,285,411 2.0 ----------------------------------------------------------------------------------------------------------- Mitsubishi Tokyo Financial Group, Inc. 1,208,532 1.8 ------------ ------ $ 15,691,016 24.0% -----------------------------------------------------------------------------------------------------------
SECTOR DIVERSIFICATION December 31, 2004
----------------------------------------------------------------------------------------------------------- SECTOR U.S. $ VALUE PERCENT OF NET ASSETS ----------------------------------------------------------------------------------------------------------- Aerospace & Defense $ 905,465 1.4% ----------------------------------------------------------------------------------------------------------- Basic Industries 2,471,608 3.8 ----------------------------------------------------------------------------------------------------------- Capital Goods 2,155,253 3.3 ----------------------------------------------------------------------------------------------------------- Consumer Manufacturing 4,494,270 6.9 ----------------------------------------------------------------------------------------------------------- Consumer Services 9,702,877 14.8 ----------------------------------------------------------------------------------------------------------- Consumer Staples 3,891,031 5.9 ----------------------------------------------------------------------------------------------------------- Energy 8,834,631 13.5 ----------------------------------------------------------------------------------------------------------- Finance 13,483,105 20.6 ----------------------------------------------------------------------------------------------------------- Healthcare 6,839,995 10.5 ----------------------------------------------------------------------------------------------------------- Multi Industry Companies 1,143,280 1.8 ----------------------------------------------------------------------------------------------------------- Technology 5,915,351 9.0 ----------------------------------------------------------------------------------------------------------- Utilities 4,519,324 6.9 ----------------------------------------------------------------------------------------------------------- Total Investments 64,356,190 98.4 ----------------------------------------------------------------------------------------------------------- Cash and receivables, net of liabilities 1,050,017 1.6 ------------ ------ ----------------------------------------------------------------------------------------------------------- Net Assets $ 65,406,207 100.0%
5 INTERNATIONAL PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ COUNTRY DIVERSIFICATION December 31, 2004
----------------------------------------------------------------------------------------------------------- COUNTRY U.S. $ VALUE PERCENT OF NET ASSETS ----------------------------------------------------------------------------------------------------------- United Kingdom $ 15,562,075 23.8% ----------------------------------------------------------------------------------------------------------- Japan 11,507,905 17.6 ----------------------------------------------------------------------------------------------------------- Switzerland 6,938,336 10.6 ----------------------------------------------------------------------------------------------------------- France 5,969,263 9.1 ----------------------------------------------------------------------------------------------------------- Spain 3,140,614 4.8 ----------------------------------------------------------------------------------------------------------- Germany 2,601,451 4.0 ----------------------------------------------------------------------------------------------------------- Italy 1,970,789 3.0 ----------------------------------------------------------------------------------------------------------- Hong Kong 1,698,278 2.6 ----------------------------------------------------------------------------------------------------------- Norway 1,685,836 2.6 ----------------------------------------------------------------------------------------------------------- South Korea 1,610,072 2.5 ----------------------------------------------------------------------------------------------------------- United States 1,593,410 2.4 ----------------------------------------------------------------------------------------------------------- Bermuda 1,159,154 1.8 ----------------------------------------------------------------------------------------------------------- South Africa 1,121,933 1.7 ----------------------------------------------------------------------------------------------------------- Taiwan 1,106,821 1.7 ----------------------------------------------------------------------------------------------------------- Netherlands 1,049,684 1.6 ----------------------------------------------------------------------------------------------------------- Brazil 922,236 1.4 ----------------------------------------------------------------------------------------------------------- Australia 918,105 1.4 ----------------------------------------------------------------------------------------------------------- Ireland 777,195 1.2 ----------------------------------------------------------------------------------------------------------- Finland 751,676 1.1 ----------------------------------------------------------------------------------------------------------- Other* 2,271,357 3.5 ------------ ------ ----------------------------------------------------------------------------------------------------------- Total Investments 64,356,190 98.4 ----------------------------------------------------------------------------------------------------------- Cash and receivables, net of liabilities 1,050,017 1.6 ------------ ------ ----------------------------------------------------------------------------------------------------------- Net Assets $ 65,406,207 100.0%
-------------------------------------------------------------------------------- * The Portfolio's country breakdown is expressed as a percentage of net assets and may vary over time. "Other" represents less than 1% weightings in the following countries: Hong Kong, India, Israel, Russia and Thailand. 6 INTERNATIONAL PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- COMMON STOCKS & OTHER INVESTMENTS-98.4% AUSTRALIA-1.4% Rinker Group Ltd. .......................... 80,419 $ 671,945 Telstra Corp., Ltd. ........................ 63,955 246,160 ----------- 918,105 ----------- BERMUDA-1.8% Nabors Industries Ltd. (a) ................ 22,600 1,159,154 ----------- BRAZIL-1.4% Aracruz Celulose, SA (ADR) ................ 11,400 429,780 Petroleo Brasileiro, SA (ADR) .............. 13,600 492,456 ----------- 922,236 ----------- HONG KONG-2.6% China Resources Power Holdings Co., Ltd. (a) ................... 570,000 309,222 CNOOC Ltd. (ADR) ........................... 14,600 791,174 Datang International Power Generation Co., Ltd. .................... 794,800 597,882 ----------- 1,698,278 ----------- FINLAND-1.1% Nokia Corp. ................................ 48,000 751,676 ----------- FRANCE-9.1% Accor, SA .................................. 11,295 494,560 France Telecom, SA ......................... 17,492 577,929 Groupe Danone .............................. 8,013 740,640 L'Air Liquide, SA .......................... 1,400 258,866 Renault, SA ................................ 8,924 747,442 Sanofi-Aventis, SA (a) ..................... 8,300 663,597 Schneider Electric, SA ..................... 13,358 929,268 Total, SA .................................. 7,109 1,556,961 ----------- 5,969,263 ----------- GERMANY-4.0% Altana AG .................................. 4,133 260,347 Deutsche Telekom AG (a) .................... 32,215 728,013 SAP AG ..................................... 9,110 1,613,091 ----------- 2,601,451 ----------- HONG KONG-0.8% Esprit Holdings Ltd. ....................... 83,000 501,654 ----------- INDIA-0.8% Infosys Technologies Ltd. (ADR) ................................... 4,000 277,240 Ranbaxy Laboratories Ltd. (GDR) ................................... 7,445 214,324 491,564 ----------- IRELAND-1.2% Allied Irish Banks Plc ..................... 26,106 540,686 Eircom Group Plc (a) ....................... 100,000 236,509 ----------- 777,195 ----------- ISRAEL-0.4% Teva Pharmaceutical Industries Ltd. (ADR) ................... 9,800 292,628 ----------- ITALY-3.0% Alleanza Assicurazioni ..................... 60,388 $ 842,897 Fastweb (a) ................................ 2,066 118,844 Telecom Italia Mobile SpA .................. 52,564 391,929 Telecom Italia SpA ......................... 151,166 617,119 ----------- 1,970,789 ----------- JAPAN-17.6% Aisin Seiki Co., Ltd. ...................... 12,000 304,756 Canon, Inc. ................................ 8,200 445,289 Daikin Industries Ltd. ..................... 27,900 808,688 Denso Corp. ................................ 30,700 825,961 Eisai Co., Ltd. ............................ 13,200 435,349 Hitachi Chemical Co., Ltd. ................. 22,800 409,137 Honda Motor Co., Ltd. ...................... 13,400 700,576 HOYA Corp. ................................. 8,800 994,286 INPEX Corp. (a) ............................ 113 570,128 Ito-Yokado Co., Ltd. ....................... 8,200 344,651 KDDI Corp. ................................. 36 194,166 Kirin Brewery Co., Ltd. .................... 31,000 306,028 Kissei Pharmaceutical Co., Ltd. .................................... 9,000 189,141 Mitsubishi Corp. ........................... 49,400 638,952 Mitsubishi Tokyo Financial Group, Inc. ............................. 118 1,208,532 Mitsui & Co., Ltd. ......................... 56,000 504,329 Nishimatsuya Chain Co., Ltd. ............... 6,800 257,480 Nitto Denko Corp. .......................... 7,600 417,297 Sony Corp. ................................. 9,000 351,405 Suzuki Motor Corp. ......................... 24,400 446,292 Takeda Pharmaceutical Co., Ltd. .................................... 7,700 388,784 The Bank of Fukuoka Ltd. ................... 116,000 766,678 ----------- 11,507,905 ----------- NETHERLANDS-1.6% ASML Holdings NV (a) ....................... 25,000 399,595 Royal Numico NV (a) ........................ 18,060 650,089 ----------- 1,049,684 ----------- NORWAY-2.6% Norsk Hydro ASA ............................ 11,803 928,194 Smedvig ASA ................................ 45,000 757,642 ----------- 1,685,836 ----------- RUSSIA-0.8% LUKOIL (ADR) ............................... 4,400 534,160 ----------- SOUTH AFRICA-1.7% Edgars Consolidated Stores Ltd. .................................... 6,620 355,162 JD Group Ltd. .............................. 42,525 511,772 Massmart Holdings Ltd. ..................... 31,720 254,999 ----------- 1,121,933 ----------- SOUTH KOREA-2.5% Kookmin Bank (a) ........................... 14,070 550,526 LG Electronics, Inc. ....................... 7,210 445,892 LG.Philips LCD Co., Ltd. (a) ............... 8,100 305,158 Samsung Electronics Co., Ltd. .............. 710 308,496 ----------- 1,610,072 ----------- 7 INTERNATIONAL PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- SPAIN-4.8% Banco Bilbao Vizcaya Argentaria, SA .......................... 48,065 $ 852,468 Gestevision Telecinco, SA (a) .............. 35,132 724,893 Industria de Diseno Textil, SA (Inditex) ............................... 18,697 550,928 Telefonica, SA ............................. 53,829 1,012,325 ----------- 3,140,614 ----------- SWITZERLAND-10.6% Compagnie Financiere Richemont AG (a) ........................ 19,518 649,752 Credit Suisse Group ........................ 35,901 1,509,206 Nobel Biocare Holding AG ................... 2,393 432,413 Novartis AG ................................ 25,542 1,285,411 Roche Holding AG-Genusshein ........................... 9,755 1,119,712 UBS AG ..................................... 23,165 1,941,842 ----------- 6,938,336 ----------- TAIWAN-1.7% Chinatrust Financial Holding Co., Ltd. ............................... 339,072 405,145 Hon Hai Precision Industry Co., Ltd. ............................... 88,549 411,276 Taiwan Semiconductor Manufacturing Co., Ltd. Merrill Lynch International & Co. warrants, expiring 11/21/05 (a) ............................ 150,000 290,400 ----------- 1,106,821 ----------- THAILAND-0.7% Thai Oil Public Co., Ltd. (a) .............. 350,700 451,351 ----------- UNITED KINGDOM-23.8% AstraZeneca Group Plc ...................... 21,948 $ 795,439 BAE Systems Plc ............................ 204,963 905,465 BHP Billiton Plc ........................... 117,562 1,373,825 Carnival Plc ............................... 11,950 729,082 Diageo Plc ................................. 38,224 545,953 GlaxoSmithKline Plc ........................ 18,929 444,424 HSBC Holdings Plc .......................... 99,425 1,675,105 InterContinental Hotels Group Plc ............................... 29,694 369,137 ITV Plc .................................... 230,899 465,650 Legal & General Group Plc .................. 358,067 754,453 Man Group Plc .............................. 27,445 774,495 MmO2 Plc (a) ............................... 52,338 123,242 Reckitt Benckiser Plc ...................... 26,333 794,213 Royal Bank of Scotland Group Plc ............................... 35,452 1,190,648 SABMiller Plc .............................. 20,668 342,337 Smith & Nephew Plc ......................... 31,120 318,426 Standard Chartered Plc ..................... 25,342 470,423 Tesco Plc .................................. 140,202 865,065 Vodafone Group Plc ......................... 710,697 1,933,633 WPP Group Plc .............................. 63,021 691,060 ----------- 15,562,075 ----------- UNITED STATES-2.4% Schlumberger Ltd. .......................... 23,800 1,593,410 ----------- TOTAL INVESTMENTS-98.4% (cost $50,985,543) ...................... 64,356,190 Other assets less liabilities-1.6% .......................... 1,050,017 ----------- NET ASSETS-100% ............................ $65,406,207 =========== -------------------------------------------------------------------------------- (a) Non-income producing security. Glossary of Terms: ADR - American Depositary Receipt GDR - Global Depositary Receipt See Notes to Financial Statements. 8 INTERNATIONAL PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
ASSETS Investments in securities, at value (cost $50,985,543)................................... $ 64,356,190 Cash..................................................................................... 283,931 Foreign cash, at value (cost $996,663)................................................... 998,434 Receivable for investment securities sold and foreign currency contracts................. 1,225,893 Dividends and interest receivable........................................................ 126,945 -------------- Total assets............................................................................. 66,991,393 -------------- LIABILITIES Payable for investment securities purchased and foreign currency contracts............... 1,165,171 Payable for capital stock redeemed....................................................... 212,860 Advisory fee payable..................................................................... 77,258 Administrative fee payable............................................................... 17,500 Foreign capital gain tax payable......................................................... 13,961 Distribution fee payable................................................................. 2,895 Transfer agent fee payable............................................................... 60 Accrued expenses......................................................................... 95,481 -------------- Total liabilities........................................................................ 1,585,186 -------------- NET ASSETS.................................................................................. $ 65,406,207 ============== COMPOSITION OF NET ASSETS Capital stock, at par.................................................................... $ 4,289 Additional paid-in capital............................................................... 66,372,463 Undistributed net investment income...................................................... 318,344 Accumulated net realized loss on investment and foreign currency transactions............ (14,658,530) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities........................................................................ 13,369,641 -------------- $ 65,406,207 ============== Class A Shares Net assets............................................................................... $ 58,341,291 ============== Shares of capital stock outstanding...................................................... 3,822,056 ============== Net asset value per share................................................................ $ 15.26 ============== Class B Shares Net assets............................................................................... $ 7,064,916 ============== Shares of capital stock outstanding...................................................... 466,473 ============== Net asset value per share................................................................ $ 15.15 ==============
------------------------------------------------------------------------------- See Notes to Financial Statements. 9 INTERNATIONAL PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Dividends (net of foreign taxes withheld of $117,983)........................ $ 1,146,037 Interest..................................................................... 1,859 -------------- Total investment income...................................................... 1,147,896 -------------- EXPENSES Advisory fee................................................................. 538,697 Distribution fee--Class B.................................................... 12,389 Custodian.................................................................... 199,475 Administrative............................................................... 69,000 Audit........................................................................ 41,750 Printing..................................................................... 16,611 Legal........................................................................ 6,014 Directors' fees.............................................................. 1,000 Transfer agency.............................................................. 859 Miscellaneous................................................................ 4,350 -------------- Total expenses............................................................... 890,145 Less: expenses waived and reimbursed by the Adviser (see Note B)............. (98,040) -------------- Net expenses................................................................. 792,105 -------------- Net investment income........................................................ 355,791 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions.................................................... 7,574,165 Foreign currency transactions.............................................. (28,370) Net change in unrealized appreciation/depreciation of: Investments................................................................ 1,988,836 Foreign currency denominated assets and liabilities........................ (2,213) -------------- Net gain on investment and foreign currency transactions..................... 9,532,418 -------------- Contribution from Adviser (see Note B)....................................... 32,057 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS...................................... $ 9,920,266 ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 10 INTERNATIONAL PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2004 2003 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income................................................ $ 355,791 $ 97,971 Net realized gain on investment and foreign currency transactions.... 7,545,795 1,875,251 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities............ 1,986,623 11,999,606 Contribution from Adviser............................................ 32,057 -0- -------------- -------------- Net increase in net assets from operations........................... 9,920,266 13,972,828 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A............................................................ (146,839) (65,147) Class B............................................................ (9,710) (1,610) CAPITAL STOCK TRANSACTIONS Net decrease......................................................... (548,275) (4,660,978) -------------- -------------- Total increase....................................................... 9,215,442 9,245,093 NET ASSETS Beginning of period.................................................. 56,190,765 46,945,672 -------------- -------------- End of period (including undistributed net investment income of $318,344 and $147,472, respectively)............................... $ 65,406,207 $ 56,190,765 ============== ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 11 INTERNATIONAL PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein International Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). 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 two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the 12 AllianceBernstein Variable Products Series Fund ================================================================================ interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. 13 INTERNATIONAL PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $98,040. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. During the year ended December 31, 2004, the Adviser reimbursed the Portfolio $32,057 for trading losses incurred due to a trading entry error. Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $300,831, 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows:
Purchases Sales ---------------- ---------------- Investment securities (excluding U.S. government securities)............ $ 73,706,927 $ 73,420,369 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........................................................................................ $ 51,106,027 ============== Gross unrealized appreciation............................................................... $ 13,479,809 Gross unrealized depreciation............................................................... (229,646) -------------- Net unrealized appreciation................................................................. $ 13,250,163 ==============
14 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 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, 2004, the Portfolio had no securities on loan. For the year ended December 31, 2004, the Portfolio earned fee income of $537 which is included in interest income in the accompanying statement of operations. 15 INTERNATIONAL 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. 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, 2004 2003 2004 2003 ---------------- ---------------- ---------------- ---------------- Class A Shares sold....................... 591,525 1,549,813 $ 7,887,871 $ 16,548,722 Shares issued in reinvestment of dividends................... 11,243 5,933 146,839 65,146 Shares redeemed................... (887,738) (2,144,595) (11,894,787) (22,845,563) -------------- -------------- -------------- -------------- Net decrease...................... (284,970) (588,849) $ (3,860,077) $ (6,231,695) ============== ============== ============== ============== Class B Shares sold....................... 329,435 2,579,858 $ 4,365,653 $ 25,688,833 Shares issued in reinvestment of dividends................... 749 147 9,711 1,610 Shares redeemed................... (77,673) (2,413,375) (1,063,562) (24,119,726) -------------- -------------- -------------- -------------- Net increase...................... 252,511 166,630 $ 3,311,802 $ 1,570,717 ============== ============== ============== ==============
NOTE G: Risks Involved in Investing in the Portfolio Concentration of Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ---------------- ---------------- Distributions paid from: Ordinary income................... $ 156,549 $ 66,757 -------------- -------------- Total taxable distributions.......... 156,549 66,757 -------------- -------------- Total distributions paid............. $ 156,549 $ 66,757 ============== ============== 16 AllianceBernstein Variable Products Series Fund ================================================================================ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income.......................... $ 314,151 Accumulated capital and other losses................... (14,538,046)(a) Unrealized appreciation/(depreciation)................. 13,253,350(b) --------------- Total accumulated earnings/(deficit)................... $ (970,545) =============== (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $14,538,046 of which $555,431 will expire in the year 2008, $1,494,192 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. During the fiscal year, the Portfolio utilized capital loss carryforwards of $7,306,005. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the recognition for tax purposes of gains/losses on certain derivative instruments. During the current fiscal year, permanent differences, primarily due to foreign currency transactions, resulted in a net decrease in undistributed net investment income and a corresponding decrease 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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement , please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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. 17 INTERNATIONAL 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 18 INTERNATIONAL 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, ------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $13.01 $ 9.90 $11.69 $16.01 $21.78 ------ ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment income (a)...................... .08(b) .02 -0-(b) .03(b) .01(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions................................ 2.20 3.11 (1.78) (3.55) (4.01) Contribution from Adviser...................... .01 -0- -0- -0- -0- ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations............................. 2.29 3.13 (1.78) (3.52) (4.00) ------ ------ ------ ------ ------ Less: Dividends and Distributions --------------------------------- Dividends from net investment income........... (.04) (.02) (.01) -0- (.03) Distributions from net realized gain on investment transactions..................... -0- -0- -0- (.78) (1.74) Distributions in excess of net realized gain on investment transactions.................. -0- -0- -0- (.02) -0- ------ ------ ------ ------ ------ Total dividends and distributions.............. (.04) (.02) (.01) (.80) (1.77) ------ ------ ------ ------ ------ Net asset value, end of period................. $15.26 $13.01 $ 9.90 $11.69 $16.01 ====== ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (c) 17.62% 31.59% (15.28)% (22.35)% (19.86) Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted)...... $58,341 $53,425 $46,478 $64,036 $78,990 Ratio to average net assets of: Expenses, net of waivers and reimbursements........................... 1.33% 1.80% 1.36% .95% .95% Expenses, before waivers and reimbursements........................... 1.50% 1.80% 1.66% 1.44% 1.34% Net investment income....................... .63%(b) .22% .04%(b) .23%(b) .07%(b) Portfolio turnover rate........................ 128% 96% 70% 56% 57%
-------------------------------------------------------------------------------- See footnote summary on page 20. 19 INTERNATIONAL PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
------------------------------------------------- Class B ------------------------------------------------- October 26, Year Ended December 31, 2001(d) to ------------------------------------ December 31, 2004 2003 2002 2001 ----------- ----------- ----------- ----------- Net asset value, beginning of period....................... $12.93 $ 9.87 $11.68 $11.31 ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment income (loss) (a)........................... .05(b) (.02) (.03)(b) (.02)(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions....................... 2.20 3.09 (1.78) .39 Contribution from Adviser.................................. -0- -0- -0- -0- ------ ------ ------ ------ Net increase (decrease) in net asset value from operations......................................... 2.25 3.07 (1.81) .37 ------ ------ ------ ------ Less: Dividends --------------- Dividends from net investment income....................... (.03) (.01) -0- -0- ------ ------ ------ ------ Net asset value, end of period............................. $15.15 $12.93 $9.87 $11.68 ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (c)....... 17.41% 31.11% (15.50)% 3.27% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted).................. $7,065 $2,766 $467 $413 Ratio to average net assets of: Expenses, net of waivers and reimbursements....................................... 1.56% 2.05% 1.63% 1.20%(e) Expenses, before waivers and reimbursements....................................... 1.73% 2.05% 1.92% 2.26%(e) Net investment income (loss)............................ .35%(b) (.17)% (.25)%(b) (.88)%(b)(e) Portfolio turnover rate.................................... 128% 96% 70% 56%
-------------------------------------------------------------------------------- (a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser. (c) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (d) Commencement of distribution. (e) Annualized. 20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein International Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein International Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 21 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 22 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of the Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
-------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 23 INTERNATIONAL PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATEOFBIRTH HELD WITH FUND DURING PAST 5 YEARS --------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 1999. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer--Mutual Funds of ACMC,** with which Compliance Officer he has been associated since October 2004.Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Russell Brody Vice President Vice President of ACMC**, with which he has been 11/14/66 associated since prior to 2000. William Johnston(1) Vice President Vice President of ACMC**, with which he has been 2/24/61 associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
-------------------------------------------------------------------------------- (1) Mr. Johnston 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 (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 9, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Russell 1000 Growth Index, in addition to the broad market as measured by the Standard & Poor's (S&P) 500 Stock Index, for the one-, five- and 10-year periods ended December 31, 2004. The Portfolio outperformed its benchmark, the Russell 1000 Growth Index, for the annual reporting period ended December 31, 2004. The primary driver of outperformance was the Portfolio's overweighted position in the consumer discretionary sector, in addition to strong stock selection in that sector. The Portfolio gained substantial ground relative to the benchmark in the technology sector, as the benefit from good stock selection in that sector exceeded the loss from the Portfolio's overweighted position in the worst-performing sector in the benchmark during the annual reporting period. Strong stock selection in the health care sector also contributed to the Portfolio's outperformance during the annual period, while negative stock selection in the financial services sector detracted from the Portfolio's performance during the same time frame. MARKET REVIEW AND INVESTMENT STRATEGY The U.S. equity markets reacted positively to the November 2004 election results and falling oil prices, and posted strong returns in the fourth quarter of 2004. For the annual reporting period, the market continued its value bias with the Russell 1000 Value Index posting a 16.49% return while the Russell 1000 Growth Index returned 6.30%. During the five-year period ended December 31, 2004, the Russell 1000 Value Index posted a cumulative return of 29.29% while the Russell 1000 Growth Index lost 38.60% during the same period. This is the largest and longest sustained style bias in the 25-year history of the Russell Indices. As a result, the premium for growth stocks relative to the broad market is as low as it has been in the past 25 years, and within growth, the fastest growing companies are selling at valuations not very different from their less promising counterparts. Over the past few months, the Portfolio's management team has been taking advantage of this anomalous situation to trade up to faster growing companies at little valuation premium. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Premier Growth Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 PREMIER GROWTH PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE 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 indices, and their results are not indicative of the performance for any specific investment, including AllianceBernstein Premier Growth Portfolio. A WORD ABOUT RISK The Portfolio concentrates its investments in a limited number of issues and an investment in the Portfolio is therefore subject to greater risk and volatility than investments in a more diversified portfolio. Growth investing does not guarantee a profit or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with more modest growth expectations. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, it may at times use certain investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 PREMIER GROWTH PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________
RETURNS THE PORTFOLIO VS. ITS BENCHMARK ------------------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------------------------------- AllianceBernstein Premier Growth Portfolio Class A 8.62% -8.44% 11.60% ------------------------------------------------------------------------------------------------- Russell 1000 Growth Index 6.30% -9.29% 9.59% ------------------------------------------------------------------------------------------------- S&P 500 Stock Index 10.87% -2.30% 12.07% -------------------------------------------------------------------------------------------------
ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO CLASS A: $29,974 RUSSELL 1000 GROWTH INDEX: $24,999 S&P 500 STOCK INDEX: $31,245 [THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.] AllianceBernstein Premier Growth Russell 1000 S&P 500 Portfolio Class A Growth Index Stock Index ------------------------------------------------------------------------------- 12/31/94 $ 10,000 $ 10,000 $ 10,000 12/31/95 $ 14,485 $ 13,718 $ 13,753 12/31/96 $ 17,773 $ 16,890 $ 16,909 12/31/97 $ 23,791 $ 22,039 $ 22,549 12/31/98 $ 35,204 $ 30,571 $ 28,997 12/31/99 $ 46,581 $ 40,708 $ 35,096 12/31/00 $ 38,858 $ 31,581 $ 31,902 12/31/01 $ 32,171 $ 25,132 $ 28,112 12/31/02 $ 22,314 $ 18,125 $ 21,902 12/31/03 $ 27,595 $ 23,518 $ 28,181 12/31/04 $ 29,974 $ 24,999 $ 31,245 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Premier Growth Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark, the Russell 1000 Growth Index, and the broad market as represented by the S&P 500 Stock Index. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 3 PREMIER GROWTH PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED PREMIER GROWTH PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,049.71 $4.17 0.81% Hypothetical (5% return before expenses) $1,000 $1,021.06 $4.12 0.81% CLASS B Actual $1,000 $1,048.55 $5.46 1.06% Hypothetical (5% return before expenses) $1,000 $1,019.81 $5.38 1.06%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 PREMIER GROWTH PORTFOLIO TEN LARGEST HOLDINGS DECEMBER 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Yahoo!, Inc. $ 63,860,064 5.1% ------------------------------------------------------------------------------- eBay, Inc. 61,930,728 4.9 ------------------------------------------------------------------------------- Dell, Inc. 54,048,763 4.3 ------------------------------------------------------------------------------- Lowe's Cos., Inc. 47,788,182 3.8 ------------------------------------------------------------------------------- Electronic Arts, Inc. 47,240,712 3.8 ------------------------------------------------------------------------------- QUALCOMM, Inc. 44,464,880 3.5 ------------------------------------------------------------------------------- American International Group, Inc. 43,177,500 3.4 ------------------------------------------------------------------------------- UnitedHealth Group, Inc. 39,182,153 3.1 ------------------------------------------------------------------------------- MBNA Corp. 38,276,382 3.1 ------------------------------------------------------------------------------- Amgen, Inc. 36,988,890 2.9 ------------------------------------------------------------------------------- $476,958,254 37.9% ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION DECEMBER 31, 2004 _______________________________________________________________________________ PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Technology $ 391,313,656 31.1% ------------------------------------------------------------------------------- Consumer Services 296,749,844 23.5 ------------------------------------------------------------------------------- Healthcare 243,922,570 19.4 ------------------------------------------------------------------------------- Finance 174,460,309 13.8 ------------------------------------------------------------------------------- Consumer Staples 41,252,760 3.3 ------------------------------------------------------------------------------- Energy 38,065,012 3.0 ------------------------------------------------------------------------------- Capital Goods 33,791,700 2.7 ------------------------------------------------------------------------------- Consumer Manufacturing 27,931,640 2.2 ------------------------------------------------------------------------------- Total Investments* 1,247,487,491 99.0 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 12,106,392 1.0 ------------------------------------------------------------------------------- Net Assets $1,259,593,883 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 5 PREMIER GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- COMMON STOCKS-99.0% TECHNOLOGY-31.1% COMMUNICATION EQUIPMENT-9.6% Corning, Inc. (a) 2,470,800 $ 29,081,316 Juniper Networks, Inc. (a) 1,352,900 36,785,351 QUALCOMM, Inc. 1,048,700 44,464,880 Research In Motion Ltd. (a) 137,400 11,324,508 -------------- 121,656,055 -------------- COMPUTER HARDWARE/STORAGE-7.0% Apple Computer, Inc. (a) 311,400 20,054,160 Dell, Inc. (a) 1,282,600 54,048,763 EMC Corp. (a) 949,000 14,111,630 -------------- 88,214,553 -------------- COMPUTER PERIPHERALS-1.1% Network Appliance, Inc. (a) 408,700 13,577,014 -------------- INTERNET MEDIA-5.1% Yahoo!, Inc. (a) 1,694,800 63,860,064 -------------- SEMI-CONDUCTOR COMPONENTS-5.6% Advanced Micro Devices, Inc. (a) 671,200 14,779,824 Altera Corp. (a) 581,400 12,034,980 Broadcom Corp. Cl. A (a) 716,600 23,131,848 Marvell Technology Group Ltd. (Bermuda) (a) 576,200 20,437,814 -------------- 70,384,466 -------------- SOFTWARE-2.7% Microsoft Corp. 414,400 11,068,624 Symantec Corp. (a) 875,500 22,552,880 -------------- 33,621,504 -------------- 391,313,656 -------------- CONSUMER SERVICES-23.5% BROADCASTING & CABLE-2.3% The E.W. Scripps Co. Cl. A 506,200 24,439,336 Univision Communications, Inc. Cl. A (a) 154,610 4,525,435 -------------- 28,964,771 -------------- ENTERTAINMENT & LEISURE-1.4% Carnival Corp. (Panama) 299,800 17,277,474 -------------- RESTAURANT & LODGING-1.1% Starbucks Corp. (a) 234,500 14,623,420 -------------- RETAIL-GENERAL MERCHANDISE-13.3% Amazon.com, Inc. (a) 116,200 5,146,498 Bed Bath & Beyond, Inc. (a) 471,600 18,783,828 eBay, Inc. (a) 532,600 61,930,728 Lowe's Cos., Inc. 829,800 47,788,182 Target Corp. 643,600 33,422,148 -------------- 167,071,384 -------------- MISCELLANEOUS-5.4% Apollo Group, Inc. Cl. A (a) 94,300 7,610,953 Electronic Arts, Inc. (a) 765,900 47,240,712 Google, Inc. Cl. A (a) 72,300 13,961,130 -------------- 68,812,795 -------------- 296,749,844 -------------- HEALTHCARE-19.4% BIOTECHNOLOGY-3.6% Amgen, Inc. (a) 576,600 36,988,890 Biogen Idec, Inc. (a) 123,800 8,246,318 -------------- 45,235,208 -------------- DRUGS-2.9% Pfizer, Inc. 314,600 8,459,594 Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 935,000 27,919,100 -------------- 36,378,694 -------------- MEDICAL PRODUCTS-8.0% Alcon, Inc. (Switzerland) 288,100 23,220,860 Boston Scientific Corp. (a) 551,500 19,605,825 St. Jude Medical, Inc. (a) 795,000 33,334,350 Zimmer Holdings, Inc. (a) 304,000 24,356,480 -------------- 100,517,515 -------------- MEDICAL SERVICES-4.9% UnitedHealth Group, Inc. 445,100 39,182,153 WellPoint Health Networks, Inc. (a) 196,600 22,609,000 -------------- 61,791,153 -------------- 243,922,570 -------------- FINANCE-13.8% BANKING-MONEY CENTER-1.3% JPMorgan Chase & Co. 409,300 15,966,793 -------------- BROKERAGE & MONEY MANAGEMENT-2.1% Franklin Resources, Inc. 111,200 7,745,080 Merrill Lynch & Co., Inc. 314,600 18,803,642 -------------- 26,548,722 -------------- INSURANCE-5.4% AFLAC, Inc. 173,500 6,912,240 American International Group, Inc. 657,492 43,177,500 The Progressive Corp. 215,400 18,274,536 -------------- 68,364,276 -------------- 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- MISCELLANEOUS-5.0% Citigroup, Inc. 525,200 $ 25,304,136 MBNA Corp. 1,357,800 38,276,382 -------------- 63,580,518 -------------- 174,460,309 -------------- CONSUMER STAPLES-3.3% COSMETICS-2.1% Avon Products, Inc. 688,800 26,656,560 -------------- HOUSEHOLD PRODUCTS-1.2% The Procter & Gamble Co. 265,000 14,596,200 -------------- 41,252,760 -------------- ENERGY-3.0% OIL SERVICE-3.0% Halliburton Co. 247,500 9,711,900 Nabors Industries Ltd. (Bermuda) (a) 552,800 28,353,112 -------------- 38,065,012 -------------- CAPITAL GOODS-2.7% MISCELLANEOUS-2.7% General Electric Co. 925,800 33,791,700 -------------- SHARES OR PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- CONSUMER MANUFACTURING-2.2% BUILDING & RELATED-2.2% Pulte Homes, Inc. 437,800 $ 27,931,640 -------------- Total Common Stocks (cost $975,608,588) 1,247,487,491 -------------- SHORT-TERM INVESTMENT-0.9% TIME DEPOSIT-0.9% The Bank of New York 1.50%, 1/03/05 (cost $10,997,000) $ 10,997 10,997,000 -------------- TOTAL INVESTMENTS-99.9% (cost $986,605,588) 1,258,484,491 Other assets less liabilities-0.1% 1,109,392 -------------- NET ASSETS-100% $1,259,593,883 ============== (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 7 PREMIER GROWTH PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $986,605,588) $1,258,484,491 Cash 22 Receivable for investment securities sold 3,497,628 Dividends and interest receivable 467,420 Receivable for capital stock sold 208,261 -------------- Total assets 1,262,657,822 -------------- LIABILITIES Payable for capital stock redeemed 1,422,294 Advisory fee payable 800,037 Payable for investment securities purchased 456,642 Distribution fee payable 127,217 Administrative fee payable 17,500 Transfer agent fee payable 60 Accrued expenses 240,189 -------------- Total liabilities 3,063,939 -------------- NET ASSETS $1,259,593,883 ============== COMPOSITION OF NET ASSETS Capital stock, at par $ 54,109 Additional paid-in capital 1,803,819,166 Undistributed net investment income 44,513 Accumulated net realized loss on investment transactions (816,202,808) Net unrealized appreciation of investments 271,878,903 -------------- $1,259,593,883 ============== CLASS A SHARES Net assets $ 656,543,932 ============== Shares of capital stock outstanding 28,011,580 ============== Net asset value per share $ 23.44 ============== CLASS B SHARES Net assets $ 603,049,951 ============== Shares of capital stock outstanding 26,097,742 ============== Net asset value per share $ 23.11 ============== See Notes to Financial Statements. 8 PREMIER GROWTH PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $184,401) $ 9,120,102 Interest 48,936 ------------ Total investment income 9,169,038 ------------ EXPENSES Advisory fee 12,506,756 Distribution fee -- Class B 1,554,412 Printing 375,563 Custodian 254,714 Administrative 69,000 Audit 41,750 Legal 5,000 Directors' fees 1,000 Transfer agency 859 Miscellaneous 26,925 ------------ Total expenses 14,835,979 Less: expenses waived and reimbursed by the Adviser (see Note B) (2,393,982) ------------ Net expenses 12,441,997 ------------ Net investment loss (3,272,959) ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 112,065,843(a) Net change in unrealized appreciation/depreciation of Investments (11,444,905) ------------ Net gain on investment transactions 100,620,938 ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 97,347,979 ============ (a) On April 30, 2004, the Portfolio had a redemption-in-kind with total proceeds in the amount of $130,541,513. The net realized gain of the transactions of $15,783,738 will not be realized for tax purposes. See Notes to Financial Statements. 9 PREMIER GROWTH PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============== ============== INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (3,272,959) $ (5,000,925) Net realized gain (loss) on investment transactions 112,065,843 (79,811,980) Net change in unrealized appreciation/ depreciation of investments (11,444,905) 393,353,656 -------------- -------------- Net increase in net assets from operations 97,347,979 308,540,751 CAPITAL STOCK TRANSACTIONS Net decrease (449,453,220) (59,908,719) -------------- -------------- Total increase (decrease) (352,105,241) 248,632,032 NET ASSETS Beginning of period 1,611,699,124 1,363,067,092 -------------- -------------- End of period (including undistributed net investment income of $44,513 and $0, respectively) $1,259,593,883 $1,611,699,124 ============== ============== See Notes to Financial Statements. 10 PREMIER GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Premier Growth Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 11 PREMIER GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Porfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $2,393,982. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $2,982,600, of which $216,322 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ============== ============== Investment securities (excluding U.S. government securities) $ 977,540,373 $1,420,937,901 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 $ 995,198,229 ============== Gross unrealized appreciation $ 271,095,290 Gross unrealized depreciation (7,809,028) -------------- Net unrealized appreciation $ 263,286,262 ============== 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. 13 PREMIER GROWTH 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. 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 541,796 1,261,503 $ 11,866,276 $ 24,349,408 Shares redeemed (15,060,638) (8,537,343) (326,511,199) (160,817,203) ----------- ----------- ------------- ------------- Net decrease (14,518,842) (7,275,840) $(314,644,923) $(136,467,795) =========== =========== ============= ============= CLASS B Shares sold 3,994,801 8,653,586 $ 86,087,736 $ 164,814,247 Shares redeemed (10,419,161) (4,698,475) (220,896,033) (88,255,171) ----------- ----------- ------------- ------------- Net increase (decrease) (6,424,360) 3,955,111 $(134,808,297) $ 76,559,076 =========== =========== ============= ============= NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT) As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $(807,565,654)(a) Unrealized appreciation/(depreciation) 263,286,262(b) ------------- Total accumulated earnings/(deficit) $(544,279,392) ============= (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $807,565,654 of which $162,234,067 will expire in the year 2009, $478,225,244 will expire in the year 2010 and $167,106,343 will expire in the year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the current fiscal year, the Portfolio utilized capital loss carryforwards of $75,488,264. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the tax treatment of dividends received. During the current fiscal year, permanent differences, primarily due to net operating losses, the tax treatment of the dividends received, and the tax treatment of the redemption in kind resulted in a net increase in undistributed net investment income, 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 PREMIER GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE J: LEGAL PROCEEDINGS As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 16 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 17 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, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $21.58 $17.45 $25.16 $32.05 $40.45 INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.03)(b) (.05)(b) (.08) (.06) (.11) Net realized and unrealized gain (loss) on investment transactions 1.89 4.18 (7.63) (5.31) (6.18) Net increase (decrease) in net asset value from operations 1.86 4.13 (7.71) (5.37) (6.29) LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- -0- (1.38) (2.11) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (.14) -0- Total distributions -0- -0- -0- (1.52) (2.11) Net asset value, end of period $23.44 $21.58 $17.45 $25.16 $32.05 TOTAL RETURN Total investment return based on net asset value (c) 8.62% 23.67% (30.64)% (17.21)% (16.58)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $656,544 $917,935 $869,130 $1,586,575 $2,148,332 Ratio to average net assets of: Expenses, net of waivers and reimbursements .81% 1.04% 1.05% 1.04% 1.04% Expenses, before waivers and reimbursements .98% 1.05% 1.05% 1.04% 1.04% Net investment loss (.13)%(b) (.24)%(b) (.41)% (.21)% (.29)% Portfolio turnover rate 73% 79% 109% 49% 41%
See footnote summary on page 19. 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $21.33 $17.29 $25.00 $31.93 $40.40 INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.08)(b) (.09)(b) (.13) (.12) (.18) Net realized and unrealized gain (loss) on investment transactions 1.86 4.13 (7.58) (5.29) (6.18) Net increase (decrease) in net asset value from operations 1.78 4.04 (7.71) (5.41) (6.36) LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- -0- (1.38) (2.11) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (.14) -0- Total distributions -0- -0- -0- (1.52) (2.11) Net asset value, end of period $23.11 $21.33 $17.29 $25.00 $31.93 TOTAL RETURN Total investment return based on net asset value (c) 8.34% 23.37% (30.84)% (17.40)% (16.78)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $603,050 $693,764 $493,937 $572,266 $336,104 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.06% 1.29% 1.31% 1.29% 1.30% Expenses, before waivers and reimbursements 1.24% 1.30% 1.31% 1.29% 1.30% Net investment loss (.38)%(b) (.49)%(b) (.64)% (.47)% (.51)% Portfolio turnover rate 73% 79% 109% 49% 41%
(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. 19 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN PREMIER GROWTH PORTFOLIO We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Premier Growth Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 20 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 21 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH, OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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- Chairman of the Board ated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block,#,** Formerly Executive Vice President and 94 None 500 SE Mizner Blvd. Chief Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; Chair- 11/7/30 man and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 95 None P.O. Box 167 1994, he was Senior Vice President of Alliance Spring Lake, NJ 07762 Capital Management Corporation ("ACMC") 10/23/29 responsible for mutual fund administration. (1990) 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,# Consultant. Formerly President of Save 98 None P.O. Box 12 Venice, Inc. (preservation organization) Annandale, NY 12504 from 2001-2002, Senior Advisor from 2/19/42 June 1999-June 2000 and President (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 22 PREMIER GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
PRINCIPAL NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital Management 10/2/57 Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Thomas Kamp(1) Vice President Senior Vice President of ACMC**, with which he has 8/11/61 been associated since prior to 2000. Daniel Nordby Vice President Senior Vice President of ACMC**, with which he has 4/27/44 been associated since 2000. Michael J. Reilly Vice President Senior Vice President of ACMC** with which he has 6/3/64 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. 23 ALLIANCEBERNSTEIN -------------------------------------------------- VARIABLE PRODUCTS -------------------------------------------------- SERIES FUND -------------------------------------------------- ALLIANCEBERNSTEIN -------------------------------------------------- SMALL CAP GROWTH -------------------------------------------------- PORTFOLIO -------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2004 The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. Investment Products Offered ============================ o Are Not FDIC Insured o May Lose Value o Are Not Bank Guaranteed ============================ You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. SMALL CAP GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ LETTER TO INVESTORS February 9, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Small Cap Growth Portfolio (the "Portfolio"), formerly named AllianceBernstein Quasar Portfolio, for the annual reporting period ended December 31, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Russell 2000 Growth Index, for the one- and five-year periods ended December 31, 2004 and since the Portfolio's Class A shares inception on August 5, 1996. Driven by a robust market for small-cap growth stocks, the Portfolio posted strong absolute gains during 2004, exceeding the broader market, as measured by the Standard & Poor's (S&P) 500 Stock Index, and marginally outperforming its benchmark. All sectors of the Portfolio, with the exception of the health care sector, generated solidly positive returns. Non-traditional growth sectors within the Portfolio, including the industrials, energy and financials sectors, had the strongest gains, each returning in excess of 30% during the annual period under review. Sector allocations drove the Portfolio's outperformance versus its benchmark, as the Portfolio benefited from an overweighted position in the very strong performing energy sector. Stock selection was roughly neutral to relative returns as strong performance in the technology sector was offset by disappointing stock selection within the health care sector. MARKET REVIEW AND INVESTMENT STRATEGY Driven by a strong fourth quarter rally, small-cap growth stocks, as represented by the Russell 2000 Growth Index, gained 14.31% in 2004. This return reflects significant outperformance versus the broader market, as measured by the S&P 500 Stock Index, which gained 10.87% over the same period. In a reversal of trends experienced in 2003, slower-growing, more value-oriented shares were the strongest performers during 2004. All sectors, with the exception of the technology sector, turned in solid double-digit returns. The energy sector was the standout performer with a gain of more than 50% for the year. Despite rising almost 20% in the fourth quarter, technology shares finished the year down roughly 2.5%. During the annual reporting period, the Portfolio's management team increased the Portfolio's holdings in commercial services and software/IT services stocks in anticipation of improving corporate spending trends. The team also increased its energy exposure based on the belief that higher longer-term commodity price trends will drive strong profit growth for oil service and exploration & production (E&P) companies. Funding these increases were reductions in the Portfolio's exposure to semiconductors, media and industrials. As of December 31, 2004, the Portfolio held overweighted positions in the consumer/commercial services and energy sectors, and notably underweighted positions in the health care, financials and industrials sectors. Cash was managed to only minimal levels throughout the reporting period. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Small Cap Growth Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 SMALL CAP GROWTH PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund ================================================================================ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Russell 2000 Growth Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Index contains those securities in the Russell 2000 Index with a greater-than-average growth orientation. The unmanaged Russell 2000 Index is a capitalization-weighted index that includes 2,000 of the smallest stocks representing approximately 10% of the U.S. 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 Small Cap Growth Portfolio. A Word About Risk The Portfolio concentrates its investments in the stocks of small-capitalization companies, which tend to be more volatile than large-cap companies. Small-cap stocks may have additional risks because these companies tend to have limited product lines, markets or financial resources. The Portfolio invests in foreign securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments. In addition, because the Portfolio will invest in foreign currency denominated securities, fluctuations in the value of the Portfolio's investments may be magnified by changes in foreign exchange rates. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. ------------------------------------------------------------------------------- (Historical Performance continued on next page) 2 SMALL CAP GROWTH PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund
Returns -------------------------------------------- THE PORTFOLIO VS. ITS BENCHMARK PERIODS ENDED DECEMBER 31, 2004 1 Year 5 Years Since Inception* ------------------------------------------------------------------------------------------------------------- AllianceBernstein Small Cap Growth Portfolio Class A 14.55% -0.95% 3.59% ------------------------------------------------------------------------------------------------------------- Russell 2000 Growth Index 14.31% -3.57% 4.85% -------------------------------------------------------------------------------------------------------------
* Inception Date: 8/5/96 for Class A shares. ALLIANCEBERNSTEIN SMALL CAP GROWTH PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 8/5/96* - 12/31/04 Russell 2000 Growth Index: $14,897 AllianceBernstein Small Cap Growth Portfolio Class A: $13,456 [TABLE BELOW REPRESENT MOUNTAIN CHART] AllianceBernstein Small Cap Growth Portfolio Class A Russell 2000 Growth Index -------------------------------------------------------------------------------- 8/5/96* $10,000 $10,000 12/31/96 $10,640 $10,921 12/31/97 $12,619 $12,335 12/31/98 $12,052 $12,487 12/31/99 $14,111 $17,867 12/31/00 $13,252 $13,860 12/31/01 $11,562 $12,581 12/31/02 $ 7,889 $ 8,774 12/31/03 $11,746 $13,032 12/31/04 $13,456 $14,897 * Since inception of the Portfolio's Class A shares on 8/5/96. This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Small Cap Growth Portfolio Class A shares (from 8/5/96* to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. -------------------------------------------------------------------------------- See Historical Performance and Benchmark disclosures on previous page. 3 FUND EXPENSES AllianceBernstein Variable Products Series Fund ================================================================================ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized SmallCap Growth Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* ------------------------- ---------------- ---------------- ---------------- ---------------- Class A Actual................................. $ 1,000 $ 1,101.13 $ 5.92 1.12% Hypothetical (5% return before expenses)......... $ 1,000 $ 1,019.51 $ 5.69 1.12% Class B Actual................................. $ 1,000 $ 1,100.19 $ 7.39 1.40% Hypothetical (5% return before expenses)......... $ 1,000 $ 1,018.10 $ 7.10 1.40%
-------------------------------------------------------------------------------- * Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 SMALL CAP GROWTH PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
=========================================================================================================== COMPANY U.S. $ VALUE PERCENT OF NET ASSETS =========================================================================================================== Insight Enterprises, Inc. $ 1,432,296 1.7% ----------------------------------------------------------------------------------------------------------- TTM Technologies, Inc. 1,315,700 1.5 ----------------------------------------------------------------------------------------------------------- Dycom Industries, Inc. 1,312,360 1.5 ----------------------------------------------------------------------------------------------------------- Resources Connection, Inc. 1,298,009 1.5 ----------------------------------------------------------------------------------------------------------- Scansource, Inc. 1,295,414 1.5 ----------------------------------------------------------------------------------------------------------- Actuant Corp. Cl.A 1,293,320 1.5 ----------------------------------------------------------------------------------------------------------- Quest Software, Inc. 1,269,620 1.5 ----------------------------------------------------------------------------------------------------------- Avocent Corp. 1,268,276 1.5 ----------------------------------------------------------------------------------------------------------- Laureate Education, Inc. 1,222,175 1.4 ----------------------------------------------------------------------------------------------------------- MGI Pharma, Inc. 1,151,211 1.3 ----------- ----- $ 12,858,381 14.9%
SECTOR DIVERSIFICATION December 31, 2004
=========================================================================================================== SECTOR U.S. $ VALUE PERCENT OF NET ASSETS =========================================================================================================== Consumer Services $ 22,577,662 26.2% ----------------------------------------------------------------------------------------------------------- Technology 21,827,959 25.4 ----------------------------------------------------------------------------------------------------------- Healthcare 13,167,991 15.3 ----------------------------------------------------------------------------------------------------------- Capital Goods 7,478,017 8.7 ----------------------------------------------------------------------------------------------------------- Energy 7,168,488 8.3 ----------------------------------------------------------------------------------------------------------- Finance 6,980,673 8.1 ----------------------------------------------------------------------------------------------------------- Transportation 2,816,078 3.3 ----------------------------------------------------------------------------------------------------------- Basic Industry 2,263,163 2.6 ----------------------------------------------------------------------------------------------------------- Consumer Staples 788,640 0.9 ----------- ------ ----------------------------------------------------------------------------------------------------------- Total Investments* 85,068,671 98.8 ----------------------------------------------------------------------------------------------------------- Cash and receivables, net of liabilities 1,040,454 1.2 ----------- ------ ----------------------------------------------------------------------------------------------------------- Net Assets $ 86,109,125 100.0%
-------------------------------------------------------------------------------- * Excludes short-term investments. 5 SMALL CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ------------------------------------------------------------ COMMON STOCKS-98.8% CONSUMER SERVICES-26.2% ADVERTISING-2.1% Digitas, Inc. (a) ............. 109,700 $ 1,047,635 Startek, Inc. ................. 26,600 756,770 ----------- 1,804,405 ----------- APPAREL-1.1% Carter's, Inc. (a) ............ 27,200 924,528 ----------- BROADCASTING & CABLE-2.0% Cumulus Media, Inc. Cl.A (a) .. 58,082 875,877 Entravision Communications Corp. Cl.A (a) ............. 101,100 844,185 ----------- 1,720,062 ----------- ENTERTAINMENT/ LEISURE-1.0% Activision, Inc. (a) .......... 45,550 919,199 ----------- GAMING-1.0% Station Casinos, Inc. ......... 16,100 880,348 ----------- RETAIL-GENERAL MERCHANDISE-3.2% Dick's Sporting Goods, Inc. (a) ................... 30,810 1,082,972 Too, Inc. (a) ................. 36,200 885,452 Tuesday Morning Corp. (a) ..... 25,500 781,065 ----------- 2,749,489 ----------- MISCELLANEOUS-15.8% Bright Horizons Family Solutions, Inc. (a) ........... 15,200 984,352 Charles River Associates, Inc. (a) ................... 16,100 752,997 Dycom Industries, Inc. (a) ... 43,000 1,312,360 Hughes Supply, Inc. ........... 31,600 1,022,260 Huron Consulting Group, Inc. (a) ................... 31,800 705,960 Insight Enterprises, Inc. (a) . 69,800 1,432,296 Laureate Education, Inc. (a) .. 27,720 1,222,175 Life Time Fitness, Inc. (a) ... 35,400 916,152 MSC Industrial Direct Co., Inc. Cl.A ...................... 25,600 921,088 Niku Corp.(a) ................. 23,800 479,808 Resources Connection, Inc. (a) ................... 23,900 1,298,009 Scansource, Inc. (a) .......... 20,840 1,295,414 Strayer Education, Inc. ....... 9,100 999,089 ZipRealty, Inc. (a) ........... 13,300 237,671 ----------- 13,579,631 ----------- 22,577,662 ----------- TECHNOLOGY-25.4% COMMUNICATION SERVICES-0.7% InPhonic, Inc. (a) ............ 20,800 571,584 ----------- COMPUTER HARDWARE / STORAGE-1.5% Avocent Corp. (a) ............. 31,300 1,268,276 ----------- COMPUTER SERVICES-6.4% Alliance Data Systems Corp. (a) .................. 23,800 1,130,024 Cogent, Inc. (a) .............. 9,500 313,500 Euronet Worldwide, Inc. (a) ... 42,700 1,111,054 Kanbay International, Inc. (a) 27,700 867,010 Ness Technologies, Inc. (a) ... 69,400 1,034,060 Sapient Corp. (a) ............. 129,500 1,024,345 ----------- 5,479,993 ----------- CONTRACT MANUFACTURING-0.8% Semtech Corp. (a) ............. 29,600 647,352 ----------- INTERNET INFRASTRUCTURE -1.8% RightNow Technologies, Inc. (a) ................... 31,400 507,110 SupportSoft, Inc. (a) ......... 155,800 1,037,628 ----------- 1,544,738 ----------- SEMI-CONDUCTOR CAPITAL EQUIPMENT-1.2% FormFactor, Inc. (a) .......... 38,100 1,034,034 ----------- SEMI-CONDUCTOR COMPONENTS-1.3% Microsemi Corp. (a) ........... 36,200 628,432 Silicon Image, Inc. (a) ....... 30,900 508,614 ----------- 1,137,046 ----------- SOFTWARE-3.7% Audible, Inc. ................. 31,800 828,390 Macromedia, Inc. (a) .......... 36,400 1,132,768 Quest Software, Inc. (a) ...... 79,600 1,269,620 ----------- 3,230,778 ----------- MISCELLANEOUS-8.0% Amphenol Corp. Cl.A (a) ....... 24,450 898,293 Exar Corp. (a) ................ 39,200 556,248 Kronos, Inc. (a) .............. 16,900 864,097 Micros Sytems, Inc. (a) ....... 12,200 952,332 O2MICRO International, Ltd. (a) ................... 39,100 447,304 Power-One, Inc. (a) ........... 74,400 663,648 Tektronix, Inc. ............... 17,197 519,521 TNS, Inc. (a) ................. 31,900 697,015 TTM Technologies, Inc. (a) ... 111,500 1,315,700 ----------- 6,914,158 ----------- 21,827,959 ----------- HEALTHCARE-15.3% BIOTECHNOLOGY-7.7% Indevus Pharmaceuticals, Inc. (a) ................... 98,700 588,252 Martek Biosciences Corp. (a) .. 20,500 1,049,600 MGI Pharma, Inc. (a) .......... 41,100 1,151,211 6 AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value ------------------------------------------------------------ Neopharm, Inc. (a) ........... 53,900 $ 674,289 Protein Design Labs, Inc. (a) 36,000 743,760 Seattle Genetics, Inc. (a) .. 61,400 400,942 Serologicals Corp. (a) ....... 34,400 760,928 Techne Corp. (a) ............. 20,200 785,780 Telik, Inc. (a) .............. 24,100 461,274 ----------- 6,616,036 ----------- DRUGS-0.7% Connetics Corp. (a) .......... 26,700 648,543 ----------- MEDICAL PRODUCTS-4.2% Abaxis, Inc. (a) ............. 35,900 520,191 Adeza Biomedical Corp. (a) .. 1,300 22,815 Angiotech Pharmaceuticals, Inc. (a) .................. 45,900 846,855 Animas Corp. (a) ............. 34,200 534,546 Inamed Corp. (a) ............. 13,648 863,236 OraSure Technologies, Inc. (a) .................. 60,500 406,560 Vnus Medical Technologies (a) 28,500 385,320 ----------- 3,579,523 ----------- MEDICAL SERVICES-2.7% Labone, Inc. (a) ............. 29,600 948,384 SFBC International, Inc. (a) . 14,000 553,000 Stericycle, Inc. (a) ......... 17,900 822,505 ----------- 2,323,889 ----------- 13,167,991 ----------- CAPITAL GOODS-8.7% ELECTRICAL EQUIPMENT-2.4% Engineered Support Systems, Inc. ...................... 11,625 688,433 Essex Corp. (a) .............. 31,700 641,925 United Defense Industries, Inc. (a) .................. 15,000 708,750 ----------- 2,039,108 ----------- MACHINERY-3.3% Actuant Corp. Cl.A (a) ....... 24,800 1,293,320 Commercial Vehicle Group, Inc. (a) .................. 41,500 905,945 OshKosh Truck Corp. .......... 9,900 676,962 ----------- 2,876,227 ----------- MISCELLANEOUS-3.0% Graftech International Ltd. (a) .................. 96,700 914,782 IDEX Corp. ................... 21,300 862,650 Simpson Manufacturing Co., Inc. ...................... 22,500 785,250 2,562,682 ----------- 7,478,017 ----------- ENERGY-8.3% OIL SERVICE-7.4% Bill Barrett Corp. (a) ....... 12,800 $ 409,472 Cimarex Energy Co. (a) ....... 15,000 568,500 Core Laboratories NV (a) ..... 29,500 688,825 FMC Technologies, Inc. (a) .. 31,600 1,017,520 Helmerich & Payne, Inc. ...... 26,800 912,272 Range Resources Corp. ........ 48,400 990,264 Spinnaker Exploration Co. (a) 17,300 606,711 W-H Energy Services, Inc. (a) 31,200 697,632 Whiting Petroleum Corp. (a) .. 17,100 517,275 ----------- 6,408,471 ----------- PIPELINES-0.9% Hydril Co. (a) ............... 16,700 760,017 ----------- 7,168,488 ----------- FINANCE-8.1% BANKING-MONEY CENTER-1.1% Community Bancorp (a) ........ 11,500 351,900 UCBH Holdings, Inc. .......... 6,900 316,158 Wintrust Financial Corp. ..... 5,700 324,672 ----------- 992,730 ----------- BANKING-REGIONAL-1.4% Oriental Financial Group ..... 20,240 572,994 R&G Financial Corp. Cl.B ..... 16,200 629,856 ----------- 1,202,850 ----------- BROKERAGE & MONEY MANAGEMENT-2.2% Affiliated Managers Group, Inc. (a) .................. 9,000 609,660 Greenhill & Co., Inc. ........ 13,700 393,190 Southwest Bancorporation of Texas, Inc. .................. 37,300 868,717 ----------- 1,871,567 ----------- INSURANCE-1.6% Primus Guaranty Ltd. (Bermuda) (a) ............. 47,600 780,164 Triad Guaranty, Inc. (a) ..... 10,100 610,848 ----------- 1,391,012 ----------- MISCELLANEOUS-1.8% Advance America Cash Advance Centers, Inc. (a).. 9,340 213,886 Archipelago Holdings, Inc. (a) 21,400 448,972 Investors Financial Services Corp. ..................... 17,200 859,656 1,522,514 ----------- 6,980,673 ----------- 7 SMALL CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Company Shares U.S. $ Value -------------------------------------------------------------------------------- TRANSPORTATION-3.3% AIR FREIGHT-1.3% UTI Worldwide, Inc. (U.S. Virgin Islands) ....................... 16,600 $ 1,129,132 ------------ SHIPPING-1.0% Kirby Corp. (a) ................................ 19,200 852,096 ------------ TRUCKING-1.0% Werner Enterprises, Inc. ....................... 36,875 834,850 ------------ 2,816,078 ------------ BASIC INDUSTRY-2.6% CHEMICALS-1.6% Georgia Gulf Corp. ............................. 11,200 557,760 Hexcel Corp. (a) ............................... 56,400 817,800 ------------ 1,375,560 ------------ MINING & METALS-1.0% Allegheny Technologies, Inc. ................... 40,960 887,603 ------------ 2,263,163 ------------ CONSUMER STAPLES-0.9% HOUSEHOLD PRODUCTS-0.9% Tempur-Pedic International, Inc. (a) .................................... 37,200 788,640 Total Common Stocks (cost $65,391,798) .......................... 85,068,671 ------------ SHORT-TERM INVESTMENT-1.7% TIME DEPOSIT-1.7% The Bank of New York 1.50%, 1/03/05 (cost $1,434,000) ........................... 1,434 1,434,000 ------------ TOTAL INVESTMENTS-100.5% (cost $66,825,798) .......................... 86,502,671 Other assets less liabilities-(0.5%) .......................... (393,546) ------------ NET ASSETS-100% ................................ $ 86,109,125 ============ -------------------------------------------------------------------------------- (a) Non-income producing security. See Notes to Financial Statements. 8 SMALL CAP GROWTH PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
ASSETS Investments in securities, at value (cost $66,825,798)....................... $ 86,502,671 Cash......................................................................... 919 Receivable for investment securities sold.................................... 314,417 Receivable for capital stock sold............................................ 11,200 Dividends and interest receivable............................................ 4,321 -------------- Total assets................................................................. 86,833,528 -------------- LIABILITIES Payable for capital stock redeemed........................................... 330,326 Payable for investment securities purchased.................................. 198,796 Advisory fee payable......................................................... 35,597 Administrative fee payable................................................... 17,500 Distribution fee payable..................................................... 6,074 Transfer agent fee payable................................................... 60 Accrued expenses............................................................. 136,050 -------------- Total liabilities............................................................ 724,403 -------------- NET ASSETS...................................................................... $ 86,109,125 ============== COMPOSITION OF NET ASSETS Capital stock, at par........................................................ $ 7,412 Additional paid-in capital................................................... 136,482,611 Accumulated net realized loss on investment transactions..................... (70,057,771) Net unrealized appreciation of investments................................... 19,676,873 -------------- $ 86,109,125 ============== Class A Shares Net assets................................................................... $ 61,661,355 ============== Shares of capital stock outstanding.......................................... 5,290,677 ============== Net asset value per share.................................................... $ 11.65 ============== Class B Shares Net assets................................................................... $ 24,447,770 ============== Shares of capital stock outstanding.......................................... 2,120,897 ============== Net asset value per share.................................................... $ 11.53 ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 9 SMALL CAP GROWTH PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================
INVESTMENT INCOME Dividends (net of foreign taxes withheld of $959)............................ $ 145,913 Interest..................................................................... 13,309 -------------- Total investment income...................................................... 159,222 -------------- EXPENSES Advisory fee................................................................. 721,220 Distribution fee--Class B.................................................... 46,884 Custodian.................................................................... 145,227 Administrative............................................................... 69,000 Audit........................................................................ 41,750 Printing..................................................................... 21,769 Legal........................................................................ 14,464 Directors' fees.............................................................. 1,000 Transfer agency.............................................................. 859 Miscellaneous................................................................ 10,671 -------------- Total expenses............................................................... 1,072,844 Less: expenses waived and reimbursed by the Adviser (see Note B)............. (132,548) -------------- Net expenses................................................................. 940,296 Net investment loss.......................................................... (781,074) REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions................................. 10,953,121 Net change in unrealized appreciation/depreciation of investments............ 550,533 -------------- Net gain on investment transactions.......................................... 11,503,654 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS...................................... $ 10,722,580 ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 10 SMALL CAP GROWTH PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund ================================================================================
Year Ended Year Ended December 31, December 31, 2004 2003 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss.................................................. $ (781,074) $ (981,904) Net realized gain on investment transactions......................... 10,953,121 17,151,773 Net change in unrealized appreciation/depreciation of investments.... 550,533 17,476,095 -------------- -------------- Net increase in net assets from operations........................... 10,722,580 33,645,964 CAPITAL STOCK TRANSACTIONS Net decrease......................................................... (1,538,906) (47,914,869) -------------- -------------- Total increase (decrease)............................................ 9,183,674 (14,268,905) NET ASSETS Beginning of period.................................................. 76,925,451 91,194,356 -------------- -------------- End of period (including accumulated net investment loss of $0 and $0, respectively)........................................... $ 86,109,125 $ 76,925,451 ============== ==============
-------------------------------------------------------------------------------- See Notes to Financial Statements. 11 SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE A: Significant Accounting Policies The AllianceBernstein Small Cap Growth Portfolio (the "Portfolio"), formerly Alliance Quasar Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 12 AllianceBernstein Variable Products Series Fund ================================================================================ 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain and loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's avarage daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at 13 SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $132,548. 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 $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $261,803, of which $2,007 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows:
Purchases Sales -------------- -------------- Investment securities (excluding U.S. government securities)............ $ 71,440,684 $ 72,885,530 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 ...................................................................................... $ 68,076,672 ============== Gross unrealized appreciation.............................................................. $ 20,124,624 Gross unrealized depreciation.............................................................. (1,698,625) -------------- Net unrealized appreciation................................................................ $ 18,425,999 ==============
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. 14 AllianceBernstein Variable Products Series Fund ================================================================================ Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as unrealized appreciation and depreciation by the Portfolio. The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having a value at least equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, reflects the total exposure the Portfolio has in that particular currency contract. 2. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Portfolio. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. For the year ended December 31, 2004, the Portfolio earned fee income of $558 which is included in the interest income in the accompanying statement of operations. 15 SMALL CAP GROWTH 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, 2004 2003 2004 2003 ------------- ------------ ------------ ------------ Class A Shares sold....................... 802,498 1,879,099 $ 8,496,602 $ 16,198,723 Shares redeemed................... (1,518,067) (8,487,293) (15,698,678) (71,082,082) -------------- -------------- -------------- -------------- Net decrease...................... (715,569) (6,608,194) $ (7,202,076) $ (54,883,359) ============== ============== ============== ============== Class B Shares sold....................... 975,376 1,989,555 $ 10,075,709 $ 16,775,516 Shares redeemed................... (426,003) (1,170,025) (4,412,539) (9,807,026) -------------- -------------- -------------- -------------- Net increase...................... 549,373 819,530 $ 5,663,170 $ 6,968,490 ============== ============== ============== ==============
NOTE G: Risks Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: Components of Accumulated Earnings (Deficit) As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $(68,806,897)(a) Unrealized appreciation/(depreciation)................... 18,425,999(b) ------------ Total accumulated earnings/(deficit)..................... $(50,380,898) ============ (a) On December 31, 2004, the Portfolio had a net capital loss carrryforward of $68,806,897 of which $213,259 expires in the year 2008, $23,270,400 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 $9,699,895. (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 decrease in accumulated net investment losses, and a decrease in additional paid in capital. The reclassification had no effect on net assets. 16 AllianceBernstein Variable Products Series Fund ================================================================================ NOTE J:Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 17 SMALL CAP GROWTH PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 18 SMALL CAP GROWTH PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================= Class A ============================================================= Year Ended December 31, ------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $10.17 $ 6.83 $10.01 $11.84 $13.00 ------ ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment loss (a)........................ (.10)(b) (.09) (.07)(b) (.07)(b) (.06)(b) Net realized and unrealized gain (loss) on investment transactions.................. 1.58 3.43 (3.11) (1.41) (.71) ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations............................. 1.48 3.34 (3.18) (1.48) (.77) ------ ------ ------ ------ ------ Less: Dividends and Distributions --------------------------------- Dividends from net investment income........... -0- -0- -0- -0- (.05) Distributions from net realized gain on investment transactions.................. -0- -0- -0- (.26) (.34) Distributions in excess of net realized gain on investment transactions.................. -0- -0- -0- (.09) -0- ------ ------ ------ ------ ------ Total dividends and distributions.............. -0- -0- -0- (.35) (.39) ------ ------ ------ ------ ------ Net asset value, end of period................. $11.65 $10.17 $ 6.83 $10.01 $11.84 ====== ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (c)......................... 14.55% 48.90% (31.77)% (12.75)% (6.09)% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted)...... $61,661 $61,079 $86,093 $184,223 $232,239 Ratio to average net assets of: Expenses, net of waivers and reimbursements........................... 1.14% 1.36% 1.11% .95% .95% Expenses, before waivers and reimbursements........................... 1.30% 1.36% 1.25% 1.16% 1.14% Net investment loss......................... (.93)%(b) (1.10)% (.86)%(b) (.70)%(b) (.46)%(b) Portfolio turnover rate........................ 92% 129% 111% 113% 178%
-------------------------------------------------------------------------------- See footnote summary on page 20. 19 SMALL CAP GROWTH PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund ================================================================================ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
============================================================= Class B ============================================================= Year Ended December 31, ------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period........... $10.08 $ 6.78 $ 9.98 $11.82 $13.00 ------ ------ ------ ------ ------ Income From Investment Operations --------------------------------- Net investment loss (a)........................ (.12)(b) (.11) (.09)(b) (.09)(b) (.03)(b) Net realized and unrealized gain (loss) on investment transactions.................. 1.57 3.41 (3.11) (1.40) (1.15) ------ ------ ------ ------ ------ Net increase (decrease) in net asset value from operations............................. 1.45 3.30 (3.20) (1.49) (1.18) ------ ------ ------ ------ ------ Less: Distributions ------------------- Distributions from net realized gain on investment transactions.................. -0- -0- -0- (.26) -0- Distributions in excess of net realized gain on investment transactions.................. -0- -0- -0- (.09) -0- ------ ------ ------ ------ ------ Total distributions............................ -0- -0- -0- (.35) -0- ------ ------ ------ ------ ------ Net asset value, end of period................. $11.53 $10.08 $ 6.78 $9.98 $11.82 ====== ====== ====== ====== ====== Total Return ------------ Total investment return based on net asset value (c)......................... 14.39% 48.67% (32.06)% (12.86)% (8.16)% Ratios/Supplemental Data ------------------------ Net assets, end of period (000's omitted)...... $24,448 $15,846 $5,101 $6,835 $435 Ratio to average net assets of: Expenses, net of waivers and reimbursements........................... 1.40% 1.61% 1.37% 1.20% 1.20%(e) Expenses, before waivers and reimbursements........................... 1.56% 1.61% 1.51% 1.43% 1.41%(e) Net investment loss......................... (1.19)%(b) (1.37)% (1.10)%(b) (.98)%(b) (.69)%(b)(e) Portfolio turnover rate........................ 92% 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 annualized. (d) Commencement of distribution. (e) Annualized. 20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund ================================================================================ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Small Cap Growth Portfolio We have audited the accompanying statement of assets and liabilities of the AllianceBernstein SmallCap Growth Portfolio, formerly Alliance Quasar Portfolio, of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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 SmallCap Growth Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 21 SMALL CAP 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 22 SMALL CAP 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR --------------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
-------------------------------------------------------------------------------- * There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 23 SMALL CAP GROWTH PORTFOLIO AllianceBernstein Variable Products Series Fund ================================================================================ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital Manage- 10/2/57 ment Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Bruce K. Aronow Vice President Senior Vice President of ACMC**, with which he has 7/2/66 been associated since 2000. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
------------------------------------------------------------------------------- (1) The day-to-day management of and investment decisions for the investment portfolio are made by the Small Cap Growth Investment Team comprised of Senior Small Cap Growth Team members. * 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. 24 (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. INVESTMENT PRODUCTS OFFERED > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 10, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Technology Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmarks, the NASDAQ Composite Index and the Standard & Poor's (S&P) 500 Stock Index, for the one- and five-year periods ended December 31, 2004, and since inception of the Portfolio's Class A shares on January 11, 1996. During the annual reporting period ended December 31, 2004, the Portfolio posted solid absolute performance, outperforming its peer group of technology managers (as reflected by the Lipper Science & Technology Index) but underperforming the S&P 500 and NASDAQ Composite Indices. The Portfolio's relative underperformance compared to the indices came primarily from the Portfolio's focus on technology stocks, which underperformed the broader markets for the year. From an industry perspective, strong stock selection in communication equipment, cellular communications and semiconductors, contributed positively, as did Internet-related holdings. Negative relative contributors included computer hardware, software and contract manufacturing. MARKET REVIEW AND INVESTMENT STRATEGY During the annual period ended December 31, 2004, technology stocks traded higher but continued to display significant volatility. After a January rally, technology stocks traded broadly lower for much of the year, with essentially all of the sector performance coming in the fourth calendar quarter. Meanwhile, the broader markets outperformed with particular strength in energy, financials, consumer segments and utilities. Within the technology sector, semiconductors, and software and computer services lagged, while Internet and hardware stocks led performance. During the annual period, the Portfolio's holdings in the computer services and Internet segments were increased, while contract manufacturing, semiconductor components and semiconductor capital equipment positions were reduced. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Technology Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 TECHNOLOGY PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure 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. A Word About Risk The Portfolio concentrates its investments in technology-related stocks and may therefore be subject to greater risks and volatility than a fund with a more diversified portfolio. Technology stocks, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall stock market. The Portfolio can invest in foreign securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments. In addition, because the Portfolio will invest in foreign currency denominated securities, fluctuations in the value of the Fund's investments may be magnified by changes in foreign exchange rates. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. (HISTORICAL PERFORMANCE CONTINUED ON NEXT PAGE) 2 TECHNOLOGY PORTFOLIO HISTORICAL PERFORMANCE (CONTINUED FROM PREVIOUS PAGE) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Returns ------------------------------------ THE PORTFOLIO VS. ITS BENCHMARKS Since PERIODS ENDED DECEMBER 31, 2004 1 Year 5 Years Inception* ------------------------------------------------------------------------------- AllianceBernstein Technology Portfolio Class A 5.38% -12.27% 6.49% NASDAQ Composite Index 8.59% -11.77% 8.91% S&P 500 Stock Index 10.87% -2.30% 9.83% Lipper Science & Technology Index 4.11% -15.92% 5.96%** * The Portfolio's Class A Share inception date is 1/11/96. ** Lipper Science & Technology Index performance is shown for the period 1/31/96-12/31/04. ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 1/11/96* - 12/31/04 ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO CLASS A: $17,580 NASDAQ COMPOSITE INDEX: $21,517 S&P 500 STOCK INDEX: $23,204 [THE FOLLOWING DATA WAS REPRESENTED BY A CHART IN THE PRINTED MATERIAL] AllianceBernstein NASDAQ S&P 500 Technolgy Portfolio Composite Stock Class A Index Index ------------------------------------------------------------------------------- 1/11/96* 10000 10000 10000 12/31/96 11040 12769 12558 12/31/97 11754 15532 16746 12/31/98 19252 21688 21535 12/31/99 33828 40250 26064 12/31/00 26548 24436 23693 12/31/01 19850 19292 20878 12/31/02 11571 13209 16266 12/31/03 16683 19815 20929 12/31/04 17580 21517 23204 *Since Inception of the Portfolio's Class A shares on 1/11/96. THIS CHART ILLUSTRATES THE TOTAL VALUE OF AN ASSUMED $10,000 INVESTMENT IN ALLIANCEBERNSTEIN TECHNOLOGY PORTFOLIO CLASS A SHARES (FROM 1/11/96* TO 12/31/04) AS COMPARED TO THE PERFORMANCE OF THE PORTFOLIO'S BENCHMARKS. THE CHART ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. See Historical Performance and Benchmark disclosures on previous page. 3 TECHNOLOGY PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized Technology Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* ------------------------------------------------------------------------------------------------------- Class A Actual $ 1,000 $ 1,043.75 $ 4.67 0.91% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.56 $ 4.62 0.91% Class B Actual $ 1,000 $ 1,042.16 $ 5.95 1.16% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.30 $ 5.89 1.16%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 TECHNOLOGY PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- QUALCOMM, Inc. $ 15,446,319 5.5% Dell, Inc. 15,134,580 5.4 Yahoo!, Inc. 13,176,696 4.7 SAP AG (ADR) 11,961,015 4.2 Intel Corp. 11,734,763 4.2 Juniper Networks, Inc. 11,271,615 4.0 Microsoft Corp. 11,081,979 3.9 eBay, Inc. 10,500,084 3.7 Marvell Technology Group Ltd. 10,488,479 3.7 Oracle Corp. 9,559,410 3.4 $120,354,940 42.7% SECTOR DIVERSIFICATION December 31, 2004 ------------------------------------------------------------------------------- PERCENT OF SECTOR U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- Technology $256,891,217 91.1% Consumer Services 16,237,425 5.8 Capital Goods 1,570,353 0.6 Total Investments* 274,698,995 97.5 Cash and receivables, net of liabilities 7,167,612 2.5 Net Assets $281,866,607 100.0% * Excludes short-term investments. 5 TECHNOLOGY PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value ------------------------------------------------------------------------------- COMMON STOCKS & OTHER INVESTMENTS-97.5% TECHNOLOGY-91.1% COMMUNICATION EQUIPMENT-16.6% Alcatel, SA (a) 101,900 $ 1,587,757 Cisco Systems, Inc. (a) 426,100 8,223,730 Corning, Inc. (a) 571,300 6,724,201 Juniper Networks, Inc. (a) 414,550 11,271,615 Motorola, Inc. 202,900 3,489,880 QUALCOMM, Inc. 364,300 15,446,319 ------------ 46,743,502 COMPUTER HARDWARE/STORAGE/PERIPHERALS-10.5% Apple Computer, Inc. (a) 25,100 1,616,440 Dell, Inc. (a) 359,150 15,134,580 EMC Corp. (a) 529,263 7,870,141 Network Appliance, Inc. (a) 147,700 4,906,594 ------------ 29,527,755 COMPUTER SERVICES-9.2% Accenture Ltd. Cl.A (Bermuda) (a) 55,100 1,487,700 Alliance Data Systems Corp. 33,800 1,604,824 Cogent, Inc. (a) 32,500 1,072,500 Computer Sciences Corp. (a) 65,350 3,683,780 First Data Corp. (a) 147,600 6,278,904 Fiserv, Inc. (a) 77,625 3,119,749 Infosys Technologies Ltd. (ADR) (India) 105,200 7,291,412 Inphonic, Inc. 56,600 1,555,368 ------------ 26,094,237 CONTRACT MANUFACTURING-2.8% Flextronics International Ltd. (Singapore) (a) 197,500 2,729,450 Hon Hai (Salomon Smith Barney) warrants expiring 1/17/07 (a) 1,121,288 5,201,655 ------------ 7,931,105 ELECTRONIC COMPONENTS-1.0% LG. Philips LCD Co., Ltd. (ADR) (South Korea) 164,800 2,964,752 INTERNET-11.0% eBay, Inc. (a) 90,300 10,500,084 Fastweb (a) 49,500 2,847,414 Google, Inc. Cl.A (a) 15,800 3,050,980 SINA Corp. (Cayman Islands) (a) 41,400 1,327,284 Yahoo!, Inc. (a) 349,700 13,176,696 ------------ 30,902,458 SEMICONDUCTOR CAPITAL EQUIPMENT-2.4% ASML Holding NV (a) 98,300 1,571,209 KLA-Tencor Corp. (a) 49,700 2,315,026 Lam Research Corp. (a) 99,200 2,867,872 ------------ 6,754,107 SEMICONDUCTOR COMPONENTS-15.5% Altera Corp. (a) 167,280 3,462,696 Intel Corp. 501,700 11,734,763 Linear Technology Corp. 106,100 4,112,436 Marvell Technology Group Ltd. (Bermuda) (a) 295,700 10,488,479 Maxim Integrated Products, Inc. 48,250 2,045,318 Samsung Electronics Co., Ltd. (GDR) (South Korea) (b) 29,290 6,414,510 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (Taiwan) 653,027 5,544,199 ------------ 43,802,401 SOFTWARE-20.0% Electronic Arts, Inc. (a) 54,000 3,330,720 McAfee, Inc. (a) 113,600 3,286,448 Mercury Interactive Corp. (a) 63,200 2,878,760 Microsoft Corp. 414,900 11,081,979 NAVTEQ Corp. 68,900 3,194,204 Oracle Corp. (a) 696,750 9,559,410 SAP AG (ADR) (Germany) 270,550 11,961,015 Symantec Corp. (a) 311,700 8,029,392 TIBCO Software, Inc. (a) 226,300 3,018,842 ------------ 56,340,770 MISCELLANEOUS-2.1% HOYA Corp. (Japan) 51,600 5,830,130 ------------ 256,891,217 CONSUMER SERVICES-5.8% BROADCASTING & CABLE-3.2% News Corp. Cl.A (a) 155,700 2,905,362 Time Warner, Inc. (a) 309,600 6,018,624 ------------ 8,923,986 CELLULAR COMMUNICATIONS-2.6% Nextel Communications, Inc. Cl.A (a) 151,800 4,554,000 Vodafone Group Plc (ADR) (United Kingdom) 100,783 2,759,439 ------------ 7,313,439 ------------ 16,237,425 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value ------------------------------------------------------------------------------- CAPITAL GOODS-0.6% MISCELLANEOUS-0.6% NITTO DENKO Corp. (Japan) 28,600 $ 1,570,353 Total Common Stocks & Other Investments (cost $205,762,212) 274,698,995 Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-2.7% TIME DEPOSIT-2.7% The Bank of New York 1.50%, 1/03/05 (cost $7,574,000) $ 7,574 $ 7,574,000 TOTAL INVESTMENTS-100.2% (cost $213,336,212) 282,272,995 Other assets less liabilities-(0.2%) (406,388) NET ASSETS-100% $281,866,607 (a) Non-income producing security. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2004, the aggregate market value of this security amounted to $6,414,510 or 2.3% of net assets. Glossary of Terms: ADR-American Depositary Receipt GDR-Global Depositary Receipt See Notes to Financial Statements. 7 TECHNOLOGY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $213,336,212) $282,272,995 Cash 218 Receivable for capital stock sold 394,491 Dividends and interest receivable 107,162 Total assets 282,774,866 LIABILITIES Payable for capital stock redeemed 589,212 Advisory fee payable 160,738 Distribution fee payable 35,106 Administrative fee payable 17,500 Transfer agent fee payable 56 Accrued expenses 105,647 Total liabilities 908,259 NET ASSETS $281,866,607 COMPOSITION OF NET ASSETS Capital stock, at par $ 18,597 Additional paid-in capital 525,525,563 Undistributed net investment income 49,783 Accumulated net realized loss on investment and foreign currency transactions (312,664,119) Net unrealized appreciation of investments 68,936,783 $281,866,607 CLASS A SHARES Net assets $117,145,299 Shares of capital stock outstanding 7,673,913 Net asset value per share $ 15.27 CLASS B SHARES Net assets $164,721,308 Shares of capital stock outstanding 10,923,061 Net asset value per share $ 15.08 See Notes to Financial Statements. 8 TECHNOLOGY PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $66,425) $ 1,864,427 Interest 65,902 Total investment income 1,930,329 EXPENSES Advisory fee 2,679,362 Distribution fee--Class B 427,447 Custodian 156,081 Printing 80,733 Administrative 69,000 Audit 41,750 Legal 6,352 Directors' fees 1,000 Transfer agency 859 Miscellaneous 27,350 Total expenses 3,489,934 Less: expenses waived and reimbursed by the Adviser (see Note B) (507,681) Net expenses 2,982,253 Net investment loss (1,051,924) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions 23,500,977 Foreign currency transactions (117,574) Net change in unrealized appreciation/depreciation of investments (11,132,030) Net gain on investment and foreign currency transactions 12,251,373 NET INCREASE IN NET ASSETS FROM OPERATIONS $ 11,199,449 See Notes to Financial Statements. 9 TECHNOLOGY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Year Ended Year Ended December 31, December 31, 2004 2003 -------------- -------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss $ (1,051,924) $ (2,464,249) Net realized gain (loss) on investment and foreign currency transactions 23,383,403 (8,583,216) Net change in unrealized appreciation/depreciation of investments (11,132,030) 97,858,822 Net increase in net assets from operations 11,199,449 86,811,357 CAPITAL STOCK TRANSACTIONS Net increase (decrease) (46,778,798) 37,738,092 Total increase (decrease) (35,579,349) 124,549,449 NET ASSETS Beginning of period 317,445,956 192,896,507 End of period (including undistributed net investment income and accumulated net investment loss of $49,783 and ($2,121), respectively) $281,866,607 $317,445,956 See Notes to Financial Statements. 10 TECHNOLOGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein Technology Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 11 TECHNOLOGY 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 Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Porfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $507,681. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $1,210,680, of which $59,578 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: Purchases Sales -------------- -------------- Investment securities (excluding U.S. government securities) $241,737,252 $291,407,496 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 $219,679,076 Gross unrealized appreciation $ 63,056,403 Gross unrealized depreciation (462,484) Net unrealized appreciation $ 62,593,919 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. 13 TECHNOLOGY 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. 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 1,182,455 1,984,424 $ 17,321,633 $ 24,443,993 Shares redeemed (2,487,001) (2,293,157) (35,151,097) (27,150,563) Net decrease (1,304,546) (308,733) $(17,829,464) $ (2,706,570) CLASS B Shares sold 3,127,554 6,947,943 $ 45,109,667 $ 86,020,360 Shares redeemed (5,255,261) (3,870,229) (74,059,001) (45,575,698) Net increase (decrease) (2,127,707) 3,077,714 $(28,949,334) $ 40,444,662 NOTE G: Risks Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: Components of Accumulated Earnings (Deficit) As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $ (306,271,472)(a) Unrealized appreciation/(depreciation) 62,593,919(b) Total accumulated earnings/(deficit) $ (243,677,553) (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $306,255,792 of which $112,714,185 expires in the year 2009, $172,308,210 expires in the year 2010, and $21,233,397 expires in the year 2011. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the current fiscal year, the Portfolio utilized capital loss carryforward of $12,126,307. 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, 2004, the Portfolio deferred to January 1, 2005, post October foreign currency losses of $15,680. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, and the tax character of dividends received. During the current fiscal year, permanent differences, primarily due to tax treatment of foreign currency gains and losses, net operating losses, and the tax treatment of the dividends received resulted in an increase in undistributed net investment income, a decrease in accumulated net realized loss on investment and foreign currency transactions, and a decrease in additional paid-in capital. The reclassification had no effect on net assets. 15 TECHNOLOGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE J: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 16 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V. ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 17 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, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $14.49 $10.05 $17.24 $24.95 $33.61 INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.03)(b) (.11) (.13) (.12) (.14)(b) Net realized and unrealized gain (loss) on investment transactions .81 4.55 (7.06) (5.92) (6.40) Net increase (decrease) in net asset value from operations .78 4.44 (7.19) (6.04) (6.54) LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- -0- (.11) (2.12) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (1.56) -0- Total distributions -0- -0- -0- (1.67) (2.12) Net asset value, end of period $15.27 $14.49 $10.05 $17.24 $24.95 TOTAL RETURN Total investment return based on net asset value (c) 5.38% 44.18% (41.71)% (25.23)% (21.52)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $117,145 $130,127 $93,369 $235,252 $343,601 Ratio to average net assets of: Expenses, net of waivers and reimbursements .88% 1.11% 1.20% 1.08% 1.02% Expenses, before waivers and reimbursements 1.06% 1.11% 1.20% 1.08% 1.06% Net investment loss (.22)%(b) (.86)% (1.01)% (.64)% (.38)%(b) Portfolio turnover rate 86% 90% 68% 40% 61%
See footnote summary on page 19. 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B --------------------------------------------------------------- Year Ended December 31, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $14.35 $ 9.98 $17.15 $24.90 $33.61 INCOME FROM INVESTMENT OPERATIONS Net investment loss (a) (.07)(b) (.14) (.16) (.17) (.21)(b) Net realized and unrealized gain (loss) on investment transactions .80 4.51 (7.01) (5.91) (6.38) Net increase (decrease) in net asset value from operations .73 4.37 (7.17) (6.08) (6.59) LESS: DISTRIBUTIONS Distributions from net realized gain on investment transactions -0- -0- -0- (.11) (2.12) Distributions in excess of net realized gain on investment transactions -0- -0- -0- (1.56) -0- Total distributions -0- -0- -0- (1.67) (2.12) Net asset value, end of period $15.08 $14.35 $ 9.98 $17.15 $24.90 TOTAL RETURN Total investment return based on net asset value (c) 5.09% 43.79% (41.81)% (25.45)% (21.68)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $164,721 $187,319 $99,528 $179,076 $178,768 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.13% 1.37% 1.46% 1.33% 1.31% Expenses, before waivers and reimbursements 1.31% 1.37% 1.46% 1.33% 1.33% Net investment loss (.47)%(b) (1.11)% (1.27)% (.92)% (.66)%(b) Portfolio turnover rate 86% 90% 68% 40% 61%
(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. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein Technology Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Technology Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 20 TECHNOLOGY 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 21 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 CHAIRMAN OF THE BOARD associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 22 TECHNOLOGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Janet A. Walsh(1) Vice President Senior Vice President of ACMC**, with which she has 2/2/62 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. 23 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. WORLDWIDE PRIVATIZATION PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Morgan Stanley Capital International (MSCI) World (minus the U.S.) Index, for the one-, five- and 10-year periods ended December 31, 2004. During the annual reporting period ended December 31, 2004, the Portfolio outperformed its benchmark, the MSCI World (minus the U.S.) Index. The Portfolio's outperformance was due to a combination of positive returns from stock selection and the Portfolio's relative overweighted positions within Latin American and EMEA (East Europe, Middle East and Africa) emerging market equities. Developed market stock selection, while mixed, was broadly positive; European positions performed well but Japanese positions, in particular telecommunication names, generated somewhat weak relative returns. The Portfolio's relative overweighted exposure to emerging Asian equities proved to be a minor drag on performance, although stock selection within this exposure was positive. MARKET REVIEW AND INVESTMENT STRATEGY During the annual reporting period ended December 31, 2004, both developed and emerging market equities posted strong positive returns. In U.S. dollar ("USD") terms, the Far East (minus Japan) and European regions posted the strongest performance within the developed market group and Japanese returns, while positive, lagged the rest of the group. Within the Emerging markets, the EMEA regions witnessed very strong performance, while emerging Asia lagged its peers. Overall, international local currency market returns, when translated into USD terms, were boosted by the weakness of the USD currency unit. At the sector level, the sectors that performed relatively well included telecommunications, energy and materials, while sectors that lagged included technology and health care. International equity markets performed well on the back of a recovery in global economic growth, combined with improved corporate profitability, balance sheet strength and robust cash flows. Although global interest rates did start to rise, interest rates generally remained below their long-term average, which supported equity markets. Some investor concerns did surface during the annual period, but they proved to be insufficient to derail investor enthusiasm for equities. Inflationary pressure, exacerbated by a sustained high oil price and upward commodity price pressure, started to build. The fall in the value of the USD currency put some pressure on export-orientated companies, particularly in Europe and Japan. The sustainability of Chinese economic growth and political interference in corporate Russia were also cause for much debate during the annual period. 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 remained at encouraging levels and a number of large privatization deals were successfully completed. The privatization deal flow provided the Portfolio with a range of new investment opportunities. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Worldwide Privatization Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 WORLDWIDE PRIVATIZATION PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE THE UNMANAGED MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD (MINUS THE U.S.) INDEX DOES NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT OF A MUTUAL FUND PORTFOLIO. The MSCI World (minus the U.S.) Index is a market capitalization-weighted index that measures the performance of stock markets in 22 countries outside the United States. Investors cannot invest directly in indices, and their results are not indicative of the performance for any specific investment, including AllianceBernstein Worldwide Privatization Portfolio. A WORD ABOUT RISK Substantially all of the Portfolio's assets will be invested in foreign securities which may magnify fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. While the Portfolio invests principally in common stocks and other equity securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 WORLDWIDE PRIVATIZATION PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________
RETURNS THE PORTFOLIO VS. ITS BENCHMARK ------------------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------------------------------- AllianceBernstein Worldwide Privatization Portfolio Class A 24.27% 1.70% 10.79% ------------------------------------------------------------------------------------------------- MSCI World (minus the U.S.) Index 20.84% -0.43% 6.27% -------------------------------------------------------------------------------------------------
ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 ALLIANCEBERNSTEIN WORLDWIDE PRIVATIZATION PORTFOLIO CLASS A: $27,869 MSCI WORLD INDEX (MINUS THE U.S.): $18,373 [THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.] AllianceBernstein Worldwide Privatization MSCI World Index Portfolio Class A (minus the U.S.) ------------------------------------------------------------------------------- 12/31/94 $ 10,000 $ 10,000 12/31/95 $ 11,087 $ 11,176 12/31/96 $ 13,139 $ 11,981 12/31/97 $ 14,552 $ 12,287 12/31/98 $ 16,128 $ 14,635 12/31/99 $ 25,615 $ 18,773 12/31/00 $ 19,726 $ 16,302 12/31/01 $ 16,316 $ 12,853 12/31/02 $ 15,632 $ 10,859 12/31/03 $ 22,426 $ 15,204 12/31/04 $ 27,869 $ 18,373 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Worldwide Privatization Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical performance and Benchmark disclosures on previous page. 3 WORLDWIDE PRIVATIZATION PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED WORLDWIDE PRIVATIZATION PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,208.38 $ 9.10 1.64% Hypothetical (5% return before expenses) $1,000 $1,016.89 $ 8.31 1.64% CLASS B Actual $1,000 $1,207.08 $10.49 1.89% Hypothetical (5% return before expenses) $1,000 $1,015.63 $ 9.58 1.89%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 WORLDWIDE PRIVATIZATION PORTFOLIO TEN LARGEST HOLDINGS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Mitsubishi Tokyo Financial Group, Inc. $ 1,403,126 2.5% ------------------------------------------------------------------------------- Kookmin Bank (Common & ADR) 1,226,075 2.2 ------------------------------------------------------------------------------- ING Groep NV 1,211,421 2.2 ------------------------------------------------------------------------------- Banco Bibao Vizcaya Argentaria, SA 1,154,260 2.1 ------------------------------------------------------------------------------- France Telecom, SA 1,139,042 2.0 ------------------------------------------------------------------------------- Veolia Environnement 1,131,493 2.0 ------------------------------------------------------------------------------- National Grid Transco Plc 1,106,510 2.0 ------------------------------------------------------------------------------- East Japan Railway Co. 1,102,957 2.0 ------------------------------------------------------------------------------- BAE Systems Plc 1,049,544 1.9 ------------------------------------------------------------------------------- TotalFina Elf SA 1,026,731 1.8 ------------------------------------------------------------------------------- $ 11,551,159 20.7% ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION DECEMBER 31, 2004 _______________________________________________________________________________ PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Finance $ 12,829,840 23.0% ------------------------------------------------------------------------------- Utilities 11,386,741 20.4 ------------------------------------------------------------------------------- Consumer Services 8,838,029 15.9 ------------------------------------------------------------------------------- Energy 5,616,570 10.1 ------------------------------------------------------------------------------- Technology 2,999,975 5.4 ------------------------------------------------------------------------------- Basic Industry 2,735,493 4.9 ------------------------------------------------------------------------------- Transportation 2,252,119 4.0 ------------------------------------------------------------------------------- Healthcare 1,862,955 3.3 ------------------------------------------------------------------------------- Consumer Staples 1,534,212 2.8 ------------------------------------------------------------------------------- Aerospace & Defense 1,049,544 1.9 ------------------------------------------------------------------------------- Consumer Manufacturing 971,993 1.7 ------------------------------------------------------------------------------- Multi Industry Companies 422,507 0.8 ------------------------------------------------------------------------------- Capital Goods 159,463 0.3 ------------------------------------------------------------------------------- Total Investments* 52,659,441 94.5 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 3,039,030 5.5 ------------------------------------------------------------------------------- Net Assets $ 55,698,471 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 5 WORLDWIDE PRIVATIZATION PORTFOLIO COUNTRY DIVERSIFICATION DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF COUNTRY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ France $ 7,037,610 12.6% ------------------------------------------------------------------------------- Japan 6,344,418 11.4 ------------------------------------------------------------------------------- United Kingdom 6,092,544 10.9 ------------------------------------------------------------------------------- South Korea 2,812,597 5.0 ------------------------------------------------------------------------------- Brazil 2,807,422 5.0 ------------------------------------------------------------------------------- Spain 2,768,464 5.0 ------------------------------------------------------------------------------- Italy 2,153,515 3.9 ------------------------------------------------------------------------------- Peoples Republic of China 2,125,920 3.8 ------------------------------------------------------------------------------- Taiwan 2,072,527 3.7 ------------------------------------------------------------------------------- Germany 1,755,962 3.2 ------------------------------------------------------------------------------- Russia 1,671,116 3.0 ------------------------------------------------------------------------------- South Africa 1,609,995 2.9 ------------------------------------------------------------------------------- Mexico 1,485,342 2.7 ------------------------------------------------------------------------------- Finland 1,476,711 2.7 ------------------------------------------------------------------------------- India 1,334,923 2.4 ------------------------------------------------------------------------------- Australia 1,266,706 2.3 ------------------------------------------------------------------------------- Netherlands 1,211,421 2.2 ------------------------------------------------------------------------------- Greece 733,069 1.3 ------------------------------------------------------------------------------- Israel 685,842 1.2 ------------------------------------------------------------------------------- Hungary 680,200 1.2 ------------------------------------------------------------------------------- Czech Republic 583,578 1.0 ------------------------------------------------------------------------------- Norway 537,901 1.0 ------------------------------------------------------------------------------- Other* 3,411,658 6.1 ------------------------------------------------------------------------------- Total Investments** 52,659,441 94.5 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 3,039,030 5.5 ------------------------------------------------------------------------------- Net Assets $ 55,698,471 100.0% ------------------------------------------------------------------------------- * The Portfolio's country breakdown is expressed as a percentage of net assets and may vary over time. "Other" represents less than 1% weightings in the following countries: Austria, Chile, Egypt, Indonesia, Ireland, Luxembourg, Malaysia, Peru, Singapore, Sweden, Thailand and Turkey. ** Excludes short-term investments. 6 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- COMMON & PREFERRED STOCKS-94.5% AUSTRALIA-2.3% CSL Ltd. 33,035 $ 758,712 Qantas Airways Ltd. 65,981 192,419 Telestra Corp., Ltd. 81,990 315,575 ------------- 1,266,706 ------------- AUSTRIA-0.5% Bank Austria Creditanstalt 3,343 301,665 ------------- BRAZIL-5.0% Cia Siderurgica Nacional, SA 9,800 187,376 Companhia Energetica de Minas Gerais (ADR) 5,700 139,878 Companhia Vale do Rio Doce (ADR) 3,400 82,892 Companhia Vale do Rio Doce (ADR) (a) 18,600 539,586 Embratel Participacoes, SA (ADR) 6,100 64,172 Itausa-Investimentos Itau, SA pfd. 406,388 703,835 Petroleo Brasilerio, SA (ADR) 18,300 662,643 Telesp Celular Participacoes, SA (ADR) (a) 62,800 427,040 ------------- 2,807,422 ------------- CHILE-0.1% Enersis, SA (ADR)(a) 6,000 51,060 ------------- CZECH REPUBLIC-1.0% Komercni Banka AS 3,962 583,578 ------------- EGYPT-0.6% Egyptian Co. for Mobile Services 15,618 330,319 ------------- FINLAND-2.7% Fortum Oyj 26,988 498,260 Sampo Oyj 31,457 434,420 TietoEnator Oyj 17,140 544,031 ------------- 1,476,711 ------------- FRANCE-12.6% BNP Paribas, SA 9,997 724,578 Dassault Systemes, SA 8,500 428,983 France Telecom, SA 34,475 1,139,042 Maroc Telecom (a) 8,814 100,755 Renault, SA 11,605 971,993 Sanofi-Synthelabo, SA 10,552 843,647 Societe des Autoroutes Paris-Rhin-Rhone (a) 3,507 211,888 Societe Television Francaise 1 14,079 458,500 TotalFinaElf, SA 4,688 1,026,731 Veolia Environnement 31,251 1,131,493 ------------- 7,037,610 ------------- GERMANY-3.2% Deutsche Lufthansa AG (a) 13,537 193,688 Deutsche Postbank AG (a) 5,734 253,147 Deutsche Telekom AG (a) 19,263 435,316 Fraport AG 14,363 613,214 Rhon-Klinikum AG 4,211 260,597 ------------- 1,755,962 ------------- GREECE-1.3% Greek Organization of Football Prognostics 16,070 444,602 Public Power Corp. 10,310 288,467 ------------- 733,069 ------------- HUNGARY-1.2% BorsodChem Rt. 22,647 231,702 OTP Bank Rt. 14,552 448,498 ------------- 680,200 ------------- INDIA-2.4% Canara Bank Ltd. 81,972 400,463 Icici Bank Ltd. 35,643 304,124 ITC Ltd. 9,111 274,913 Oil & Natural Gas Corp. 18,862 355,423 ------------- 1,334,923 ------------- INDONESIA-0.6% Bank Rakyat Indonesia 689,500 213,899 Telekomunikasi Indonesia 247,000 128,332 ------------- 342,231 ------------- IRELAND-0.4% Eircom Group Plc (a) 102,395 242,174 ------------- ISRAEL-1.2% Bank Hapoalim Ltd. 203,200 685,842 ------------- ITALY-3.9% ENI S.p.A. 32,618 817,614 Telecom Italia Mobile SpA 101,747 758,649 Telecom Italia SpA 74,619 304,624 Terna SpA (a) 95,058 272,628 ------------- 2,153,515 ------------- JAPAN-11.4% East Japan Railway Co. 198 1,102,957 Electric Power Development Co., Ltd. 15,700 439,729 Inpex Corp. 8 40,363 Japan Airlines System Corp. 72,000 208,875 Japan Tobacco, Inc. 77 878,767 JSAT Corp. 46 133,197 KDDI Corp. 107 577,103 Mitsubishi Tokyo Financial Group, Inc. 137 1,403,126 7 WORLDWIDE PRIVATIZATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- Nippon Telegraph & Telephone Corp. 115 $ 520,497 Nomura Holdings, Inc. 66,000 965,314 NTT Urban Development Corp. 17 74,490 ------------- 6,344,418 ------------- LUXEMBOURG-0.9% SES Global 36,825 474,846 ------------- MALAYSIA-0.2% Astro All Asia Networks Plc (a) 76,500 108,711 ------------- MEXICO-2.7% America Movil, SA de CV Series L (ADR) 16,000 837,600 Grupo Aeroportuario del Sureste, SA de CV Series B (ADR) 3,000 82,050 Grupo Financiero Banorte, SA de CV Cl.B 52,100 328,108 Telefonos de Mexico, SA de CV Cl.L (ADR) 6,200 237,584 ------------- 1,485,342 ------------- NETHERLANDS-2.2% ING Groep NV 40,058 1,211,421 ------------- NORWAY-1.0% Norsk Hydro ASA 6,840 537,901 ------------- PEOPLES REPUBLIC OF CHINA-3.8% China Petroleum and Chemical Corp. (Sinopec) 726,000 297,100 China Telecommunication Corp. 1,256,000 460,497 CNOOC Ltd. 784,000 419,801 Datang Power Generation Co., Ltd. 352,000 264,789 Huaneng Power International, Inc. 300,000 224,611 Sinotrans Ltd. 692,000 202,209 ZTE Corp. (a) 79,400 256,913 ------------- 2,125,920 ------------- PERU-0.3% Explosivios, SA Cl.C (b) 248,990 159,463 ------------- RUSSIA-3.0% AO VimpelCom (ADR) (a) 15,300 552,941 JSC MMC Norilsk Nickel (ADR) 4,881 270,896 Lukoil Holdings (ADR) 2,422 294,031 Mechel Steel Group OAO (ADR) (a) 10,500 234,675 Mobile Telesystems (ADR) 2,300 318,573 ------------- 1,671,116 ------------- SINGAPORE-0.7% DBS Group Holdings Ltd. 40,172 396,022 ------------- SOUTH AFRICA-2.9% Anglogold Ashanti Ltd. (ADR) 11,503 418,134 MTN Group Ltd. (a) 103,670 800,470 Telkom South Africa Ltd. 22,500 391,391 ------------- 1,609,995 ------------- SOUTH KOREA-5.0% Kookmin Bank (a) 16,235 634,464 Kookmin Bank (ADR) (a) 15,120 591,611 POSCO 4,280 770,231 SK Telecom Co., Ltd. (a) 2,660 507,016 SK Telecom Co., Ltd. (ADR) (a) 13,900 309,275 ------------- 2,812,597 ------------- SPAIN-5.0% Amadeus Global Travel Distribution, SA 38,928 399,404 Banco Bilbao Vizcaya Argentaria, SA 65,081 1,154,260 Indra Sistemas, SA 16,416 279,781 Red Electrica de Espana 13,870 310,781 Telefonica, SA 33,193 624,238 ------------- 2,768,464 ------------- SWEDEN-0.4% Eniro AB 22,916 234,240 ------------- TAIWAN-3.7% Cathay Financial Holding Co., Ltd. (GDR) (a) 30,359 622,700 Chunghwa Telecom Co., Ltd. (ADR) 27,700 583,085 Mega Financial Holding Co., Ltd. 182,000 125,675 Taiwan Semiconductor Co. 409,433 652,346 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 10,450 88,721 ------------- 2,072,527 ------------- THAILAND-0.9% Airports of Thailand (a) 171,500 227,575 PTT Public Co., Ltd. 61,700 274,752 ------------- 502,327 ------------- TURKEY-0.5% Turkiye Is Bankasi 48,618,470 268,600 ------------- UNITED KINGDOM-10.9% Associated British Ports Holding Plc 27,599 251,690 BAE Systems Plc (a) 237,577 1,049,544 BP p.l.c. (ADR) 40,281 391,953 8 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- British American Tobacco Plc 22,023 $ 380,533 Capita Group Plc 58,770 411,516 Centrica Plc 136,548 618,379 Group 4 Securicor Plc (a) 144,438 388,229 MMO2 Plc (a) 365,500 860,658 National Grid Transco Plc 116,200 1,106,510 Vodafone Group Plc 192,472 523,669 Wolfson Microelectronics Plc (a) 39,601 109,863 ------------- 6,092,544 ------------- Total Common & Preferred Stocks (cost $36,618,635) 52,659,441 ------------- PRINCIPAL AMOUNT COMPANY (000) U.S. $ VALUE ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT-5.2% TIME DEPOSIT-5.2% The Bank of New York 1.50%, 1/03/05 (cost $2,898,000) $ 2,898 $ 2,898,000 ------------- TOTAL INVESTMENTS-99.7% (cost $39,516,635) 55,557,441 Other assets less liabilities-0.3% 141,030 ------------- NET ASSETS-100% $ 55,698,471 ============= (a) Non-income producing security. (b) Illiquid security, valued at fair value. Glossary of Terms: ADR - American Depositary Receipt GDR - Global Depositary Receipt pfd. - Preferred Stock See Notes to Financial Statements. 9 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $39,516,635) $ 55,557,441 Cash 4,142 Foreign cash, at value (cost $375,106) 377,786 Dividends and interest receivable 113,186 Receivable for capital stock sold 188 ------------- Total assets 56,052,743 ------------- LIABILITIES Payable for capital stock redeemed 165,396 Foreign capital gain tax payable 38,054 Advisory fee payable 34,167 Administrative fee payable 17,500 Distribution fee payable 2,975 Transfer agent fee payable 60 Accrued expenses 96,120 ------------- Total liabilities 354,272 ------------- NET ASSETS $ 55,698,471 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 2,762 Additional paid-in capital 43,909,532 Undistributed net investment income 242,738 Accumulated net realized loss on investment and foreign currency transactions (4,418,871) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 15,962,310 ------------- $ 55,698,471 ============= CLASS A SHARES Net assets $ 41,197,520 ============= Shares of capital stock outstanding 2,041,076 ============= Net asset value per share. $ 20.18 ============= CLASS B SHARES Net assets $ 14,500,951 ============= Shares of capital stock outstanding 720,955 ============= Net asset value per share $ 20.11 ============= See Notes to Financial Statements. 10 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $134,452) $ 1,005,341 Interest 16,960 ------------- Total investment income 1,022,301 ------------- EXPENSES Advisory fee 404,823 Distribution fee -- Class B 25,192 Custodian 244,870 Administrative 69,000 Audit 41,750 Printing 26,543 Legal 12,098 Directors' fees 1,000 Transfer agency 859 Miscellaneous 1,897 ------------- Total expenses 828,032 Less: expenses waived and reimbursed by the Adviser (see Note B) (71,720) ------------- Net expenses 756,312 ------------- Net investment income 265,989 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions 3,891,366 Foreign currency transactions (17,840) Net change in unrealized appreciation/depreciation of: Investments 6,284,910 Foreign currency denominated assets and liabilities 72,968 ------------- Net gain on investment and foreign currency transactions 10,231,404 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 10,497,393 ============= See Notes to Financial Statements. 11 WORLDWIDE PRIVATIZATION PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 265,989 $ 99,709 Net realized gain on investment and foreign currency transactions 3,873,526 1,228,799 Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 6,357,878 11,164,967 ------------- ------------- Net increase in net assets from operations 10,497,393 12,493,475 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (80,328) (314,453) Class B (10,540) (50,361) CAPITAL STOCK TRANSACTIONS Net increase (decrease) 3,613,557 (1,195,358) ------------- ------------- Total increase 14,020,082 10,933,303 NET ASSETS Beginning of period 41,678,389 30,745,086 ------------- ------------- End of period (including undistributed net investment income of $242,738 and $85,457, respectively) $ 55,698,471 $ 41,678,389 ============= ============= See Notes to Financial Statements. 12 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Worldwide Privatization Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 13 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $71,720. 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 $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $141,472, 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 27,733,514 $ 25,541,272 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 $ 39,604,125 ============= Gross unrealized appreciation $ 16,288,060 Gross unrealized depreciation (334,744) ------------- Net unrealized appreciation $ 15,953,316 ============= 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 WORLDWIDE PRIVATIZATION 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. 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, 2004, the Portfolio had no securities on loan. For the year ended December 31, 2004, the Portfolio earned fee income of $2,654 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 463,506 248,320 $ 8,099,441 $ 3,364,408 Shares issued in reivestment of dividends 4,857 24,741 80,327 314,453 Shares redeemed (534,726) (528,562) (9,095,169) (6,616,864) ----------- ----------- ------------- ------------- Net decrease (66,363) (255,501) $ (915,401) $ (2,938,003) =========== =========== ============= ============= CLASS B Shares sold 412,639 1,379,770 $ 7,077,333 $ 16,268,671 Shares issued in reivestment of dividends 639 3,965 10,540 50,361 Shares redeemed (146,584) (1,244,071) (2,558,915) (14,576,387) ----------- ----------- ------------- ------------- Net increase 266,694 139,664 $ 4,528,958 $ 1,742,645 =========== =========== ============= ============= NOTE G: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO Concentration of Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ============= ============= Distributions paid from: Ordinary income $ 90,868 $ 364,814 ------------- ------------- Total taxable distributions 90,868 364,814 ------------- ------------- Total distributions paid $ 90,868 $ 364,814 ============= ============= 17 WORLDWIDE PRIVATIZATION PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 242,738 Accumulated capital and other losses (4,331,381)(a) Unrealized appreciation/(depreciation) 15,874,820(b) ------------- Total accumulated earnings/(deficit) $ 11,786,177 ============= (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $4,331,381, 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 fiscal year, the fund utilized capital loss carryforwards of $3,908,914. (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 tax treatment of foreign currency gains and losses, resulted in a net decrease in undistributed net investment income and a net decrease in accumulated net realized loss on investment and foreign currency transactions. The reclassification had no effect on net assets. NOTE J: LEGAL PROCEEDINGS As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capi- 18 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ tal Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 19 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, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $16.28 $11.48 $12.18 $15.64 $21.74 INCOME FROM INVESTMENT OPERATIONS Net investment income (a) .11(b) .04 .07(b) .20(b) .05(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.83 4.91 (.56) (2.82) (4.81) Net increase (decrease) in net asset value from operations 3.94 4.95 (.49) (2.62) (4.76) LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.04) (.15) (.21) (.03) (.12) Distributions from net realized gain on investment transactions -0- -0- -0- (.81) (1.22) Total dividends and distributions (.04) (.15) (.21) (.84) (1.34) Net asset value, end of period $20.18 $16.28 $11.48 $12.18 $15.64 TOTAL RETURN Total investment return based on net asset value (c) 24.27% 43.46% (4.19)% (17.29)% (23.00)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $41,198 $34,302 $27,136 $37,411 $56,181 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.65% 2.17% 1.54% .95% .95% Expenses, before waivers and reimbursements 1.81% 2.17% 1.98% 1.65% 1.43% Net investment income .65%(b) .34% .61%(b) 1.50%(b) .29%(b) Portfolio turnover rate 60% 44% 46% 35% 65%
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 5, YEAR ENDED DECEMBER 31, 2000 (d) TO -------------------------------------------------- DECEMBER 31, 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $16.24 $11.47 $12.17 $15.62 $19.09 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (a) .07(b) .02 .03(b) .10(b) (.04)(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions 3.82 4.88 (.53) (2.71) (3.43) Net increase (decrease) in net asset value from operations 3.89 4.90 (.50) (2.61) (3.47) LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.02) (.13) (.20) (.03) -0- Distributions from net realized gain on investment transactions -0- -0- -0- (.81) -0- Total dividends and distributions (.02) (.13) (.20) (.84) -0- Net asset value, end of period $20.11 $16.24 $11.47 $12.17 $15.62 TOTAL RETURN Total investment return based on net asset value (c) 23.97% 43.07% (4.26)% (17.28)% (18.43)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $14,501 $7,376 $3,609 $1,092 $238 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.90% 2.41% 1.79% 1.19% 1.20%(e) Expenses, before waivers and reimbursements 2.06% 2.41% 2.23% 1.93% 1.80%(e) Net investment income (loss) .41%(b) .13% .28%(b) .80%(b) (.26)%(b)(e) Portfolio turnover rate 60% 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 distribution. (e) Annualized. 21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 of the AllianceBernstein Worldwide Privatization Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 TAX INFORMATION (UNAUDITED) _______________________________________________________________________________ For corporate shareholders, 13% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2004 qualifies for the corporate dividends received deduction. 22 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 23 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ----------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of the Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 24 WORLDWIDE PRIVATIZATION PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
PRINCIPAL NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer - Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Edward D. Baker III(1) Vice President Senior Vice President and Chief Investment Officer - 2/4/51 Emerging Markets of ACMC**, with which he has been associated since prior to 2000. Russell Brody Vice President Vice President of ACMC**, with which he has been 11/14/66 associated since prior to 2000. Michael Levy(1) Vice President Assistant Vice President of ACMC**, with which he has 3/27/70 been associated since prior to 2000. Jean Van de Walle Vice President Senior Vice President of ACMC**, with which he has 1/8/59 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. 25 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. GLOBAL BOND PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ LETTER TO INVESTORS February 10, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Citigroup World Government Bond Index (unhedged) for the one-, five- and 10-year periods ended December 31, 2004. The Portfolio posted a strong absolute return for the annual period ended December 31, 2004, but underperformed the benchmark during the annual reporting period. The primary detractor from relative performance was the Portfolio's overweighted allocation to the U.S. dollar, a result of the Portfolio's guidelines requiring a minimum of 25% in U.S. dollar holdings. During the year, the U.S. dollar weakened significantly relative to other major currencies due to the burgeoning federal and current account deficits, as well as concern over terrorism. An overall shorter duration than that of the benchmark also detracted from the Portfolio's performance. The Portfolio was substantially shorter in interest rate risk on expectations that U.S. interest rates would rise. However, lower consumer confidence and sluggish employment growth during the summer of 2004 delayed rate hikes by the U.S. Federal Reserve and kept interest rates relatively low. The Portfolio's country allocation and security selection added to the Portfolio's performance during the annual reporting period. MARKET REVIEW AND INVESTMENT STRATEGY The global economy grew more than 4% in real terms in 2004. However, bond markets during the annual reporting period were marked by intra-period volatility as changing perceptions of the direction of the U.S. and global economy impacted global bond performance. Global bond markets rebounded strongly in the first quarter of 2004, as escalating geopolitical tensions and concerns regarding the sustainability of the U.S. economic recovery began to surface, primarily due to a weak job market. Early in April 2004, however, bond markets sold off on news of a surprisingly strong 308,000 gain in March payroll employment, as well as less dovish comments from the U.S. Federal Reserve. Global yields moved up across the maturity spectrum as markets began to price in an eventual interest rate hike. By late June 2004, weak economic data and the prospects of slower, more measured U.S. Federal Reserve tightenings bolstered the bond markets back into positive territory as the U.S. economy hit a mid-year slowdown. The European Central Bank did not raise interest rates during 2004 in light of weak economic data and a rising euro. The euro hit a record high against the Japanese yen and the U.S. dollar during the year, raising considerable doubts about Europe's ability to create jobs and provide sufficient income to finance a meaningful recovery in consumer spending growth. The Citigroup European Government Bond Index returned 16.00% for the year, in unhedged U.S. dollar terms. The Bank of England also held back on raising interest rates, as official data suggested that growth was running below trend and the housing market slowed down significantly. United Kingdom government bonds, as represented by the United Kingdom component of the Citigroup World Government Bond Index (unhedged), returned 14.34% in 2004, in unhedged U.S. dollar terms. In Japan, the economic picture grew dimmer during 2004. Industrial production declined for two consecutive quarters. Deepening consumer price index (CPI) deflation and tighter fiscal discipline contributed to a slowdown in Japanese growth and stable-to-falling Japanese yields. During the annual reporting period, the Portfolio shifted from hedged European to hedged Japanese debt, as a sharp slowdown in Japanese growth is anticipated. The Portfolio also remained underweight in the United Kingdom during the year, as the Bank of England appeared to be nearing the end of its rate-tightening cycle. A modest position in inflation-protected Treasuries was added to the Portfolio, in anticipation of healthy economic growth and higher core inflation IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Global Bond Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 GLOBAL BOND PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE THE UNMANAGED 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. A WORD ABOUT RISK A majority of the Portfolio's assets will be invested in foreign fixed-income securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments. In addition, because the Portfolio will invest in foreign currency denominated securities, fluctuations in the value of the Portfolio's investments may be magnified by changes in foreign exchange rates. The Portfolio may at times use certain types of investment derivatives, such as futures contracts and options on futures contracts. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. Also, at the discretion of the Investment Manager, the Portfolio can invest up to 10% of its total assets in illiquid securities. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 GLOBAL BOND PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________
RETURNS THE PORTFOLIO VS. ITS BENCHMARK ------------------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------------------------------- AllianceBernstein Global Bond Portfolio Class A 9.63% 7.93% 7.66% ------------------------------------------------------------------------------------------------- Citigroup World Government Bond Index (unhedged) 10.35% 8.79% 7.60% -------------------------------------------------------------------------------------------------
ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO CLASS A: $20,929 CITIGROUP WORLD GOVERNMENT BOND INDEX (UNHEDGED): $20,794 [THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.] AllianceBernstein Citigroup World Global Bond Government Bond Index Portfolio Class A (unhedged) ------------------------------------------------------------------------------- 12/31/94 $ 10,000 $ 10,000 12/31/95 $ 12,473 $ 11,904 12/31/96 $ 13,248 $ 12,335 12/31/97 $ 13,336 $ 12,364 12/31/98 $ 15,219 $ 14,256 12/31/99 $ 14,290 $ 13,647 12/31/00 $ 14,457 $ 13,860 12/31/01 $ 14,418 $ 13,723 12/31/02 $ 16,856 $ 16,398 12/31/03 $ 19,091 $ 18,843 12/31/04 $ 20,929 $ 20,794 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Global Bond Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 3 GLOBAL BOND PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED GLOBAL BOND PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,111.74 $4.62 0.87% Hypothetical (5% return before expenses) $1,000 $1,020.76 $4.42 0.87% CLASS B Actual $1,000 $1,110.10 $5.94 1.12% Hypothetical (5% return before expenses) $1,000 $1,019.51 $5.69 1.12%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 GLOBAL BOND PORTFOLIO SECURITY TYPE BREAKDOWN DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF SECURITY TYPE U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Government Obligations $ 63,988,306 91.4% ------------------------------------------------------------------------------- Corporate Obligations 3,733,916 5.3 ------------ ----- ------------------------------------------------------------------------------- Total Investments* 67,722,222 96.7 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities 2,318,170 3.3 ------------ ----- ------------------------------------------------------------------------------- Net Assets $ 70,040,392 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 5 GLOBAL BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE ------------------------------------------------------------------------------- LONG-TERM INVESTMENTS-96.7% AUSTRIA-4.9% GOVERNMENT OBLIGATION-4.9% Republic of Austria 3.80%, 10/20/13 (a) EUR 2,500 $ 3,449,133 ------------- BELGIUM-4.7% GOVERNMENT OBLIGATION-4.7% Kingdom of Belgium 4.25%, 9/28/14 (a) 2,300 3,268,273 ------------- DENMARK-3.4% GOVERNMENT OBLIGATION-3.4% Kingdom of Denmark 7.00%, 11/15/07 (a) DKK 11,650 2,376,504 ------------- FINLAND-4.8% GOVERNMENT OBLIGATION-4.8% Government of Finland 5.375%, 7/04/13 (a) EUR 2,175 3,356,802 ------------- GERMANY-7.8% BANKING-0.2% Deutsche Ausgleichbank 7.00%, 6/23/05 (a) 150 153,120 ------------- GOVERNMENT OBLIGATION-7.6% Bundesobligation 3.25%, 4/17/09 (a) 500 687,699 Deutschland Bundesrepublik 4.25%, 1/04/14 (a) 3,260 4,648,848 ------------- 5,336,547 ------------- 5,489,667 ------------- IRELAND-5.1% GOVERNMENT OBLIGATION-5.1% Republic of Ireland 4.25%, 10/18/07 (a) 2,525 3,576,268 ------------- ITALY-4.2% GOVERNMENT OBLIGATION-4.2% Republic of Italy 6.75%, 2/01/07 (a) 2,000 2,951,676 ------------- JAPAN-24.6% GOVERNMENT OBLIGATIONS-24.6% Government of Japan 1.40%, 6/20/11 JPY 106,600 1,075,277 1.50%, 9/20/14 363,400 3,579,414 1.70%, 3/22/10-9/20/10 525,000 5,406,104 1.80%, 9/20/10 232,600 2,407,831 1.90%, 6/21/10-12/20/10 455,500 4,739,736 ------------- 17,208,362 ------------- NETHERLANDS-5.1% GOVERNMENT OBLIGATION-5.1% Kingdom of Netherlands 3.75%, 7/15/09 (a) EUR 2,550 3,578,412 ------------- SPAIN-5.3% GOVERNMENT OBLIGATION-5.3% Kingdom of Spain 6.15%, 1/31/13 (a) 2,278 3,667,078 ------------- SWEDEN-0.9% GOVERNMENT OBLIGATION-0.9% Government of Sweden 6.50%, 5/05/08 (a) SEK 3,910 653,334 ------------- UNITED KINGDOM-0.2% BANKING-0.2% Scotland International Finance II BV 4.25%, 5/23/13 (b) USD 160 153,583 ------------- UNITED STATES-4.9% FINANCIAL-3.3% Berkshire Hathaway, Inc. 4.20%, 12/15/10 USD 350 347,753 Genworth Financial, Inc. 1.60%, 6/20/11 (a) JPY 75,000 733,077 International Lease Finance Corp. 3.50%, 4/01/09 USD 350 340,803 Pershing Road Development Co. 2.80%, 9/01/26 (b)(c) 660 660,000 SunTrust Bank Series CD 2.53%, 6/02/09 (c) 250 249,975 ------------- 2,331,608 ------------- INDUSTRIAL-0.5% General Electric Co. 5.00%, 2/01/13 330 338,568 ------------- RETAIL-1.1% Wal-Mart Stores, Inc. 4.55%, 5/01/13 750 757,037 ------------- 3,427,213 ------------- U. S. GOVERNMENT AND GOVERNMENT SPONSORED AGENCY OBLIGATIONS-20.8% Federal Home Loan Mortgage Corp. 5.125%, 11/07/13 1,000 1,004,000 Federal National Mortgage Association 4.125%, 4/15/14 1,525 1,478,042 6 GLOBAL BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE ------------------------------------------------------------------------------- U.S. Treasury Notes 2.00%, 7/15/14 USD 1,383 $ 1,426,883 3.50%, 11/15/09 6,930 6,897,512 3.625%, 7/15/09 1,700 1,704,915 4.25%, 8/15/14 2,050 2,054,565 ------------- 14,565,917 ------------- Total Long-term Investments (cost $59,663,340) 67,722,222 ------------- SHORT-TERM INVESTMENT-0.7% UNITED STATES-0.7% TIME DEPOSIT-0.7% Societe Generale 2.25%, 1/03/05 (cost $500,000) 500 500,000 ------------- TOTAL INVESTMENTS-97.4% (cost $60,163,340) 68,222,222 Other assets less liabilities-2.6% 1,818,170 ------------- NET ASSETS-100% $ 70,040,392 ============= 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: British Pound, settling 1/19/05 1,835 $3,393,827 $3,519,758 $125,931 Canadian Dollar, settling 2/9/05 268 221,186 223,242 2,056 Canadian Dollar, settling 2/9/05 556 448,796 463,782 14,986 Canadian Dollar, settling 2/9/05 855 697,594 713,656 16,062 Euro, settling 1/07/05 539 717,268 732,584 15,316 Japanese Yen, settling 1/6/05 224,754 2,183,479 2,193,685 10,206 Japanese Yen, settling 1/6/05 107,173 1,024,708 1,046,050 21,342 Japanese Yen, settling 1/6/05 37,223 362,470 363,304 834 SALE CONTRACTS: Danish Krone, settling 2/17/05 7,907 1,414,886 1,445,205 (30,319) Euro, settling 1/07/05 1,050 1,382,057 1,427,420 (45,363) Japanese Yen, settling 1/06/05 192,455 1,848,978 1,878,428 (29,450) Swedish Krona, settling 2/16/05 462 68,861 69,522 (661)
(a) Positions, or portion thereof, with an aggregate market value of $ 33,100,224, have been segregated to collateralize forward exchange currency contracts. (b) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2004, the aggregate market value of these securities amounted to $813,583 or 1.2% of net assets. (c) Floating rate security. Stated interest rate was in effect at December 31, 2004. Currency Abbreviations: DKK - Danish Krona EUR - Euro JPY - Japanese Yen SEK - Swedish Krona USD - United States Dollar See Notes to Financial Statements. 7 GLOBAL BOND PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $60,163,340) $ 68,222,222 Cash 350,314 Foreign cash, at value (cost $416) 430 Unrealized appreciation of forward exchange currency contracts 206,733 Interest receivable 941,954 Receivable for investment securities sold 707,895 Receivable for capital stock sold 9,524 ------------- Total assets 70,439,072 ------------- LIABILITIES Unrealized depreciation of forward exchange currency contracts 105,793 Payable for capital stock redeemed 140,133 Advisory fee payable 26,467 Administrative fee payable 17,500 Distribution fee payable 2,938 Transfer agent fee payable 56 Accrued Expenses 105,793 ------------- Total liabilities 398,680 ------------- NET ASSETS $ 70,040,392 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 5,149 Additional paid-in capital 59,526,766 Undistributed net investment income 2,954,030 Accumulated net realized loss on investment and foreign currency transactions (676,541) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 8,230,988 ------------- $ 70,040,392 ============= CLASS A SHARES Net assets $ 56,043,476 ============= Shares of capital stock outstanding 4,113,273 ============= Net asset value per share $ 13.63 ============= CLASS B SHARES Net assets $ 13,996,916 ============= Shares of capital stock outstanding 1,036,175 ============= Net asset value per share $ 13.51 ============= See Notes to Financial Statements. 8 GLOBAL BOND PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ INVESTMENT INCOME Interest (net of foreign taxes withheld of $16,328) $ 1,906,584 ------------- EXPENSES Advisory fee 397,217 Distribution fee -- Class B 32,164 Custodian 149,534 Administrative 69,000 Audit 41,750 Printing 20,157 Legal 5,000 Directors' fees 1,000 Transfer agency 859 Miscellaneous 5,077 ------------- Total expenses 721,758 Less: expenses waived and reimbursed by the Adviser (see Note B) (92,199) ------------- Net expenses 629,559 ------------- Net investment income 1,277,025 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on: Investment transactions 3,868,160 Foreign currency transactions 996,848 Net change in unrealized appreciation/depreciation of: Investments 53,392 Foreign currency denominated assets and liabilities (11,243) ------------- Net gain on investment and foreign currency transactions 4,907,157 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,184,182 ============= See Notes to Financial Statements. 9 GLOBAL BOND PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 1,277,025 $ 1,289,455 Net realized gain on investment and foreign currency transactions 4,865,008 4,071,774 Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities 42,149 3,103,651 ------------- ------------- Net increase in net assets from operations 6,184,182 8,464,880 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (3,156,752) (3,476,111) Class B (714,608) (610,949) Net realized gain on investment transactions Class A (1,105,271) -0- Class B (258,556) -0- CAPITAL STOCK TRANSACTIONS Net increase (decrease) (964,959) 1,034,328 ------------- ------------- Total increase (decrease) (15,964) 5,412,148 NET ASSETS Beginning of period 70,056,356 64,644,208 ------------- ------------- End of period (including undistributed net investment income of $2,954,030 and $1,605,827, respectively) $ 70,040,392 $ 70,056,356 ============= ============= See Notes to Financial Statements. 10 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Global Bond Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek a high level of return from a combination of current income and capital appreciation by investing in a globally diversified portfolio of high-quality debt securities denominated in the U.S. dollar and a range of foreign currencies. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. 11 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 7. REPURCHASE AGREEMENTS It is the policy of the Portfolio that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .65% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .45% of the 12 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ first $2.5 billion, .40% of the next $2.5 billion and .35% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $92,199. 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 $69,000 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, 2004. 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 50,698,398 $ 52,714,569 U.S. government securities 22,128,696 13,015,756 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows: Cost $ 60,202,933 ============= Gross unrealized appreciation $ 8,037,710 Gross unrealized depreciation (18,421) ------------- Net unrealized appreciation $ 8,019,289 ============= 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 differ- 13 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ence 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. 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 367,754 680,667 $ 4,820,375 $ 8,767,973 Shares issued in reinvestment of dividends and distributions 350,207 264,343 4,262,023 3,476,111 Shares redeemed (949,280) (1,044,491) (12,372,797) (13,455,988) ----------- ----------- ------------- ------------- Net decrease (231,319) (99,481) $ (3,290,399) $ (1,211,904) =========== =========== ============= ============= CLASS B Shares sold 328,716 1,557,003 $ 4,248,238 $ 19,931,078 Shares issued in reinvestment of dividends and distributions 80,560 46,745 973,164 610,949 Shares redeemed (223,733) (1,431,327) (2,895,962) (18,295,795) ----------- ----------- ------------- ------------- Net increase 185,543 172,421 $ 2,325,440 $ 2,246,232 =========== =========== ============= ============= 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. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. 15 GLOBAL BOND 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, 2004 and December 31, 2003 were as follows: 2004 2003 ============= ============= Distributions paid from: Ordinary income $ 4,585,985 $ 4,087,060 Net long-term capital gains 649,202 -0- ------------- ------------- Total distributions paid $ 5,235,187 $ 4,087,060 ============= ============= As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 6,154,798 Undistributed long term capital gains 645,921 Accumulated capital and other losses (4,352,378)(a) Unrealized appreciation/(depreciation) 8,060,136(b) ------------- Total accumulated earnings/(deficit) $ 10,508,477 ============= (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $1,391,822, all of which expires in the year 2008. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. Based on certain provisions in the Internal Revenue Code, various limitations regarding the future utilization of these carryforwards, brought forward as a result of the Fund's merger with Brinson Series Trust Strategic Income Portfolio, may apply. During the current fiscal year, the fund utilized capital loss carryforwards of $126,701. For the year ended December 31, 2004, the Portfolio deferred losses on straddles of $2,960,556. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of gains/losses on certain derivative instruments. 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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. 16 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons 17 GLOBAL BOND PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 18 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, --------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $13.50 $12.63 $10.93 $10.96 $11.25 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .25(c) .25 .25 .35 .45(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions .93 1.40 1.58 (.38) (.32) Net increase (decrease) in net asset value from operations 1.18 1.65 1.83 (.03) .13 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.78) (.78) (.13) -0- (.42) Distributions from net realized gain on investment transactions (.27) -0- -0- -0- -0- Total dividends and distributions (1.05) (.78) (.13) -0- (.42) Net asset value, end of period $13.63 $13.50 $12.63 $10.93 $10.96 TOTAL RETURN Total investment return based on net asset value (d) 9.63% 13.26% 16.91% (.27)% 1.17% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $56,043 $58,658 $56,137 $48,221 $50,325 Ratio to average net assets of: Expenses, net of waivers and reimbursements .88% 1.15% 1.17% 1.07% 1.02% Expenses, before waivers and reimbursements 1.02% 1.15% 1.17% 1.07% 1.06% Net investment income 1.93%(c) 1.93% 2.18% 3.28% 4.13%(c) Portfolio turnover rate 107% 197% 220% 101% 372%
See footnote summary on page 20. 19 GLOBAL BOND PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B --------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $13.40 $12.54 $10.86 $10.92 $11.23 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .22(c) .21 .22 .32 .41(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions .91 1.41 1.57 (.38) (.31) Net increase (decrease) in net asset value from operations 1.13 1.62 1.79 (.06) .10 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.75) (.76) (.11) -0- (.41) Distributions from net realized gain on investment transactions (.27) -0- -0- -0- -0- Total dividends and distributions (1.02) (.76) (.11) -0- (.41) Net asset value, end of period $13.51 $13.40 $12.54 $10.86 $10.92 TOTAL RETURN Total investment return based on net asset value (d) 9.33% 13.08% 16.59% (.55)% .98% RATIOS/SUPPLEMENTAL DATA Net assets, end of period, (000's omitted) $13,997 $11,399 $8,507 $7,150 $6,145 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.13% 1.40% 1.42% 1.32% 1.31% Expenses, before waivers and reimbursements 1.27% 1.40% 1.42% 1.32% 1.35% Net investment income 1.72%(c) 1.66% 1.92% 3.00% 3.82%(c) Portfolio turnover rate 107% 197% 220% 101% 372%
(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 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. 20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Global Bond Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 21 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 22 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of the Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico, (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 23 GLOBAL BOND PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
PRINCIPAL NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 President and Independent Officer--Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Douglas J. Peebles(1) Vice President Executive Vice President of ACMC**, with which he 8/10/65 has been associated since prior to 2000. Jeffrey L. Phlegar Vice President Executive Vice President of ACMC**, with which he 6/28/66 has been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. 24 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ------------------------------------------------------------------------------- ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. Investment Products Offered > Are Not FDIC Insured > May Lose Value > Are Not Bank Guaranteed You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. GLOBAL DOLLAR GOVERNMENT PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 10, 2005 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, 2004. 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 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 The table on page 4 shows the Portfolio's performance compared to its benchmark, the J.P. Morgan Emerging Markets Bond Index Plus (JPM EMBI+) for the one-, five- and 10-year periods ended December 31, 2004. The Portfolio posted strong absolute returns, but underperformed its benchmark, the JPM EMBI+, for the annual reporting period ended December 31, 2004. The Portfolio's overall individual country weighting decisions for the year have contributed positively to the Portfolio's absolute performance. The Portfolio's security selection, however, was too defensive relative to U.S. interest rates, resulting in its underperformance versus the benchmark. The Portfolio's duration was shortened during the spring and summer of 2004, as interest rates were expected to rise and dampen overall emerging market returns. However, lower consumer confidence and sluggish employment growth in the U.S. delayed rate hikes by the U.S. Federal Reserve and kept interest rates relatively low, providing a continued favorable environment for emerging market debt. Emerging market debt has recently become more correlated to movements in U.S. Treasury rates. MARKET REVIEW AND INVESTMENT STRATEGY The emerging market debt class, as represented by the JPM EMBI+, returned a strong 11.77% during the annual reporting period. All emerging market countries represented within the Index posted positive returns. The emerging debt markets benefited throughout the annual period from lower global interest rates, higher commodity prices and improving emerging country fundamentals. Emerging markets experienced some volatility in the spring of 2004, however. After posting very strong gains in 2003 and early 2004, emerging debt markets sold off dramatically in April 2004, in response to a surprisingly strong gain in reported March U.S. payroll employment. Worries surfaced that the U.S. Federal Reserve would begin tightening interest rates sooner-than-expected. In April and May 2004, emerging market debt returns fell by a total of 7.37%. Later in the reporting period, soft consumer confidence readings, weak inflation data and lower payroll numbers allowed emerging market debt to rebound as the U.S. economy hit a mid-year slowdown. The prospects of slower, more measured U.S. Federal Reserve tightenings moved emerging market debt returns back into positive territory. For the annual period under review, the Latin region gained 13.26% and outpaced non-Latin markets which gained 9.51%, as several Latin countries benefited from export demand and strong commodity prices, particularly oil. Sustained growth in the Latin region and a resulting decline in fiscal deficits improved their macroeconomic fundamentals. Countries within the JPM EMBI+ that outperformed for the annual period included oil-producing countries Venezuela, which returned 23.25%, Ecuador at 21.15%, and Brazil at 14.31%. Brazil was upgraded by both Moody's Investor Service and Standard & Poor's rating agencies. Countries within the JPM EMBI+ that underperformed during the annual period ended December 31, 2004 were Morocco at 2.45%, Malaysia at 4.62% and Poland at 6.74%. During the annual reporting period, the Portfolio maintained allocations to its core emerging market countries (Brazil, Russia, Colombia, Mexico, Peru, Turkey and Venezuela); however, the Portfolio's interest rate duration exposure was reduced later in the reporting period as global liquidity tightened and interest rates were poised to move higher. The Portfolio generally maintained an overweighted position in Russian debt early in the period as credit statistics continued to improve and Russia benefited from higher oil prices. In July, however, the Portfolio's Russian holdings were reduced as positive economic fundamentals were offset by administrative paralysis and 1 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO the Yukos affair. Russia's Justice Ministry had seized the assets of Yukos, the country's largest oil producer, and was preparing to sell its main oil-producing unit in Siberia to recover payment of back taxes. Furthermore, there was a significant negative change in Russia's sovereign supply and demand technicals. The Portfolio's exposure in Brazil was reduced as concerns surfaced that political scandal and the Central Bank's inability to lower interest rates would hurt economic growth. Those concerns proved to be misplaced; however, so Brazilian holdings have subsequently begun to be added back to the Portfolio's investment portfolio. Furthermore, gross domestic product growth in Brazil has remained high, easing worries about debt sustainability. Brazil's stronger economy led to statements released by their Central Bank President, that a renewal of their funding agreement with the International Monetary Fund may not be needed. Public debt in Brazil has fallen to less than 54% of gross domestic product, with a decreased amount of debt linked to the dollar, allowing Brazil to be less exposed to international volatility. The Portfolio's position in the Ukraine was increased during the period due to strong economic growth and prospects for rating upgrades. Toward the end of the annual reporting period, the Portfolio's Argentinean debt was also increased due to significant indications that a new, final restructuring offer would benefit investors. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Global Dollar Government Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 2 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO HISTORICAL PERFORMANCE An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure 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. A Word About Risk The Portfolio invests a significant amount of its assets in foreign securities, which may magnify fluctuations and can invest a significant portion of its assets in the securities of a single issuer, which may present greater risk than a more diversified portfolio. Price fluctuation in the Portfolio's securities may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater negative effect on bonds with longer maturities than on those with shorter maturities. Investments in the Portfolio are not guaranteed because of fluctuation in the net asset value of the underlying fixed-income related investments. These fluctuations can also be due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. Similar to direct bond ownership, bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the Portfolio. Portfolio purchasers should understand that, in contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. While the Portfolio invests principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. (Historical Performance continued on next page) 3 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) THE PORTFOLIO VS. ITS BENCHMARK Returns PERIODS ENDED DECEMBER 31, 2004 1 Year 5 Years 10 Years ------------------------------------------------------------------------------- AllianceBernstein Global Dollar Government Portfolio Class A 10.12% 16.31% 13.84% JPM EMBI+ 11.77% 13.55% 15.06% ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94 - 12/31/04 JPM EMBI+: $40,648 AllianceBernstein Global Dollar Government Portfolio Class A: $36,541 [THE FOLLOWING DATA WAS REPRESENTED BY A CHART IN THE PRINTED MATERIAL] AllianceBernstein Global Dollar Government Portfolio Class A JPM EMBI+ ---------------------------------------------------- 12/31/94 10000 10000 12/31/95 12298 12677 12/31/96 15360 17660 12/31/97 17392 19959 12/31/98 13616 17095 12/31/99 17168 21536 12/31/00 19581 24909 12/31/01 21416 24712 12/31/02 24873 28231 12/31/03 33183 36368 12/31/04 36541 40648 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Global Dollar Government Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 4 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO FUND EXPENSES As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized Global Dollar Government Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* --------------------------------------------------------------------------------------------------------------------- Class A Actual $1,000 $1,141.20 $11.03 2.05% Hypothetical (5% return before expenses) $1,000 $1,014.83 $12.48 2.05% Class B Actual $1,000 $1,139.99 $12.48 2.32% Hypothetical (5% return before expenses) $1,000 $1,013.47 $11.74 2.32%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 5 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO SECURITY TYPE BREAKDOWN December 31, 2004 SECURITY TYPE U.S. $ VALUE PERCENT OF NET ASSETS ------------------------------------------------------------------------------- Sovereign Debt Obligations $22,493,304 80.6% Corporate Debt Obligations 1,491,741 5.3 ---------- ------ Total Investments* 23,985,045 85.9 Cash and receivables, net of liabilities 3,925,855 14.1 ---------- ------ Net Assets $27,910,900 100.0% * Excludes short-term investments. 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------ SOVEREIGN DEBT OBLIGATIONS-80.6% NON-COLLATERALIZED BRADY BONDS-4.7% BRAZIL-4.7% Federal Republic of Brazil 3.125%, 4/15/12 (a) $ 309 $294,558 C-Bonds 8.00%, 4/15/14 824 844,078 DCB Series L 3.125%, 4/15/12 (a) 184 175,654 ------------ Total Non-Collateralized Brady Bonds (cost $974,287) 1,314,290 SOVEREIGN DEBT SECURITIES-75.9% ARGENTINA-4.3% Republic of Argentina 1.98%, 8/03/12(a) (b) 766 651,100 11.375%, 3/15/10 (b) 40 13,600 11.75%, 6/15/15 (b) 125 40,938 12.00%, 6/19/31 (b) 276 90,948 12.25%, 6/19/18 (b) 705 232,541 15.50%, 12/19/08 (b) 552 180,780 ------------ 1,209,907 BRAZIL-11.4% Federal Republic of Brazil 9.25%, 10/22/10 50 55,900 10.50%, 7/14/14 405 479,925 11.00%, 8/17/40 (c) 1,333 1,580,937 12.00%, 4/15/10 250 309,250 12.75%, 1/15/20 555 750,915 ------------ 3,176,927 BULGARIA-1.0% Republic of Bulgaria 8.25%, 1/15/15 (d) 212 266,480 COLOMBIA-2.7% Republic of Colombia 8.25%, 12/22/14 106 110,505 10.75%, 1/15/13 88 105,072 11.75%, 2/25/20 425 545,700 ------------ 761,277 ECUADOR-3.2% Republic of Ecuador 0.00% 10/11/05 194 185,402 8.00%, 8/15/30 (d) (e) 831 717,984 ------------ 903,386 EL SALVADOR-0.7% Republic of El Salvador 7.625%, 9/21/34 (d) 72 74,160 8.50%, 7/25/11 (d) 100 112,900 ------------ 187,060 INDONESIA-0.9% Republic of Indonesia 6.75%, 3/10/14 (d) 260 260,650 JAMAICA-0.6% Government of Jamaica 11.75%, 5/15/11 (d) 120 141,600 12.75%, 9/01/07 (d) 30 35,205 ------------ 176,805 MEXICO-14.4% United Mexican States 7.50%, 1/14/12 225 255,150 8.125%, 12/30/19 1,135 1,331,923 11.375%, 9/15/16 364 535,990 Series A 6.375%, 1/16/13 42 44,730 8.00%, 9/24/22 1,057 1,220,835 9.875%, 2/01/10 503 618,439 ------------ 4,007,067 PANAMA-2.8% Republic of Panama 8.875%, 9/30/27 25 27,600 9.375%, 7/23/12-4/01/29 70 82,700 9.625%, 2/08/11 223 264,255 10.75%, 5/15/20 275 357,500 IRB 2.75%, 7/17/14 (a) 64 62,428 ------------ 794,483 PERU-3.2% Republic of Peru 8.375%, 5/03/16 237 265,440 8.75%, 11/21/33 80 86,800 9.125%, 2/21/12 231 268,538 9.875%, 2/06/15 215 265,525 ------------ 886,303 PHILIPPINES-3.0% Republic of Philippines 9.00%, 2/15/13 300 306,000 9.875%, 1/15/19 125 128,125 10.625%, 3/16/25 377 402,448 ------------ 836,573 RUSSIA-13.0% Russia Ministry of Finance Series V 3.00%, 5/14/08 515 478,744 Series VII 3.00%, 5/14/11 890 750,537 Russian Federation 5.00%, 3/31/30 (d) (e) 2,308 2,387,079 ------------ 3,616,360 7 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------ TURKEY-4.6% Republic of Turkey 11.00%, 1/14/13 $ 195 $ 248,138 11.50%, 1/23/12 580 745,851 11.75%, 6/15/10 100 125,650 12.375%, 6/15/09 125 156,885 ------------ 1,276,524 UKRAINE-4.5% Government of Ukraine 6.875%, 3/04/11 (d) 500 512,980 7.65%, 6/11/13 (d) 550 586,875 11.00%, 3/15/07 149 160,194 ------------ 1,260,049 URUGUAY-1.1% Republic of Uruguay 7.875%, 1/15/33 333 295,703 VENEZUELA-4.5% Republic of Venezuela 3.09%, 4/20/11 (e) 170 154,275 5.375%, 8/07/10 320 300,480 8.50%, 10/08/14 115 121,900 9.25%, 9/15/27 651 686,805 ------------ 1,263,460 Total Sovereign Debt Securities (cost $19,166,535) 21,179,014 Total Sovereign Debt Obligations (cost $20,140,822) 22,493,304 CORPORATE DEBT OBLIGATIONS-5.3% BANKING-0.4% Kazkommerts International BV (Kazakhstan) 8.50%, 4/16/13 (d) 100 104,500 COMMUNICATIONS - MOBILE-1.3% Kyivstar (Ukraine) 10.375%, 8/17/09 (d) 100 110,000 MobiFon Holdings BV (Romania) 12.50%, 7/31/10 100 118,625 Mobile Telesystems Finance (Russia) 9.75%, 1/30/08 (d) 125 131,875 ------------ 360,500 CONTAINERS-0.7% Vitro Envases (Mexico) 10.75%, 7/23/11 (d) 200 207,500 ENERGY-0.6% Gazprom Oao (Russia) 9.625%, 3/01/13 (d) 100 118,000 Monterrey Power, SA De C.V. (Mexico) 9.625%, 11/15/09 (d) 45 53,237 ------------ 171,237 METALS/MINING-0.6% Freeport-McMoran Copper & Gold (Indonesia) 10.125%, 2/01/10 150 171,375 PETROLEUM PRODUCTS-1.7% Pemex Project Funding Master Trust (Mexico) 8.00%, 11/15/11 250 287,749 PF Export Receivables Master Trust (Brazil) 6.436%, 6/01/15 (d) 127 126,317 Tyumen Oil (Russia) 11.00%, 11/06/07 (d) 55 62,563 ------------ 476,629 Total Corporate Debt Obligations (cost $1,342,595) 1,491,741 SHORT-TERM INVESTMENT-10.8% TIME DEPOSIT-10.8% Societe Generale 2.125%, 1/03/05 (cost $3,000,000) 3,000 3,000,000 TOTAL INVESTMENTS-96.7% (cost $24,483,417) 26,985,045 Other assets less liabilities-3.3% 925,855 ------------ NET ASSETS-100% $27,910,900 ------------ 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ CALL OPTION WRITTEN (see Note D)
Description Contracts (f) Exercise Price Expiration Month U.S. $ Value ------------------------------------------------------------------------------------------------------------- Federal Republic of Brazil 11.00%, 8/17/40 125,000 $117.65 Jan '05 $ (2,000) Federal Republic of Brazil 11.00%, 8/17/40 100,000 118.10 Jan '05 (1,400) Federal Republic of Brazil 11.00%, 8/17/40 115,000 118.15 Jan '05 (1,495) Federal Republic of Brazil 11.00%, 8/17/40 100,000 118.50 Jan '05 (1,300) Federal Republic of Brazil 11.00%, 8/17/40 50,000 118.75 Jan '05 (600) ---------- (premiums received $7,113) $ (6,795) ----------
CREDIT DEFAULT SWAP CONTRACTS (see Note D)
Notional Unrealized Swap Counterparty Amount Interest Termination Appreciation/ & Referenced Obligation (000's) Rate Date (Depreciation) -------------------------------------------------------------------------------------------------------------- Buy Contracts: Citigroup Global Markets, Inc. Republic of Colombia 8.375%, 2/15/27 150 3.02% 1/20/10 $ (1,071) Citigroup Global Markets, Inc. Republic of Philippines 10.625%, 3/16/25 130 5.60 3/20/14 (768) Citigroup Global Markets, Inc. Republic of Hungary 4.50%, 2/06/13 75 0.50 11/26/13 (1,410) Sale Contracts: Citigroup Global Markets, Inc. Federal Republic of Brazil 12.25%, 3/06/30 200 4.40 5/20/06 10,338 Citigroup Global Markets, Inc. Federal Republic of Brazil 12.25%, 3/06/30 400 6.35 8/20/05 24,494 Citigroup Global Markets, Inc. Republic of Colombia 8.375%, 2/15/27 250 1.13 1/20/07 354 Citigroup Global Markets, Inc. Republic of Philippines 10.625%, 3/16/25 130 4.95 3/20/09 2,787 Credit Suisse First Boston Federal Republic of Brazil 12.25%, 3/06/30 175 6.90 6/20/07 15,418 Morgan Stanley Federal Republic of Brazil 12.25%, 3/06/30 160 3.80 8/20/06 9,476
(a) Floating rate security. Stated interest rate was in effect at December 31, 2004. (b) Security is in default and is non-income producing. (c) A position or portion of the underlying security has been segregated by the Portfolio for the written call options outstanding at December 31, 2004. The value of this security amounted to $581,140 at December 31, 2004. (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2004, the aggregate market value of /these securities amounted to $6,009,905 or 21.5% of net assets. (e) Coupon increases periodically based upon a predetermined schedule. Stated interest rate in effect at December 31,2004. (f) One contract relates to principal amount of $1.00. Glossary: DCB - Debt Conversion Bonds IRB - Interest Rate Reduction Bond See Notes to Financial Statements. 9 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 ASSETS Investments in securities, at value (cost $24,483,417) $26,985,045 Cash 384,526 Unrealized appreciation of swap contracts 62,867 Interest receivable 530,248 Receivable for investment securities sold 324,075 Receivable for capital stock sold 24,989 ----------- Total assets 28,311,750 ----------- LIABILITIES Outstanding call options written, at value (premiums received $7,113) 6,795 Unrealized depreciation of swap contracts 3,249 Payable for investment securities purchased 273,817 Administrative fee payable 17,500 Advisory fee payable 11,637 Distribution fee payable 1,047 Payable for capital stock redeemed 346 Transfer agent fee payable 60 Accrued expenses 86,399 ----------- Total liabilities 400,850 ----------- NET ASSETS $27,910,900 ----------- COMPOSITION OF NET ASSETS Capital stock, at par $1,888 Additional paid-in capital 22,451,441 Undistributed net investment income 1,674,385 Accumulated net realized gain on investment transactions 1,221,622 Net unrealized appreciation of investments 2,561,564 ----------- $27,910,900 ----------- Class A Shares Net assets $22,932,254 ----------- Shares of capital stock outstanding 1,550,667 ----------- Net asset value per share $14.79 ----------- Class B Shares Net assets $4,978,646 ----------- Shares of capital stock outstanding 337,684 ----------- Net asset value per share $14.74 ----------- See Notes to Financial Statements. 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 INVESTMENT INCOME Interest $2,141,693 ----------- EXPENSES Advisory fee 183,580 Distribution fee-Class B 10,677 Custodian 207,617 Administrative 69,000 Audit 41,750 Legal 10,408 Printing 7,572 Directors' fees 1,000 Transfer agency 859 Miscellaneous 6,400 ----------- Total expenses before interest 538,863 Interest expense 2,477 ----------- Total expenses 541,340 Less: expenses waived and reimbursed by the Adviser (see Note B) (46,812) ----------- Net expenses 494,528 ----------- Net investment income 1,647,165 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized gain on: Investment transactions 1,827,344 Written options 62,472 Swap contracts 326,655 Net change in unrealized appreciation/depreciation of: Investments (1,158,417) Written options 318 Swap contracts (209,615) ----------- Net gain on investment transactions 848,757 ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $2,495,922 ----------- See Notes to Financial Statements. 11 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS Year Ended Year Ended December 31, December 31, 2004 2003 -------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $1,647,165 $1,945,850 Net realized gain on investment transactions 2,216,471 3,971,000 Net change in unrealized appreciation/ depreciation of investments (1,367,714) 1,632,673 -------------- ------------- Net increase in net assets from operations 2,495,922 7,549,523 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (1,636,884) (1,368,257) Class B (308,029) (63,134) CAPITAL STOCK TRANSACTIONS Net increase (decrease) (2,234,889) 1,053,177 -------------- ------------- Total increase (decrease) (1,683,880) 7,171,309 NET ASSETS Beginning of period 29,594,780 22,423,471 -------------- ------------- End of period (including undistributed net investment income of $1,674,385 and $1,940,706, respectively) $27,910,900 $29,594,780 -------------- ------------- See Notes to Financial Statements. 12 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE A: Significant Accounting Policies The AllianceBernstein Global Dollar Government Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek a high level of current income and, secondarily, capital appreciation. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the 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 Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. 13 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO 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 investments transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the Portfolio's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 7. Repurchase Agreements It is the policy of the Portfolio that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .50% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $46,812. 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 $69,000 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, 2004. 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: Purchases Sales ----------- ----------- Investment securities (excluding U.S. government securities) $47,558,157 $52,734,507 U.S. government securities -0- -0- The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding the written option and swap contracts) are as follows: Cost $25,543,899 ----------- Gross unrealized appreciation $2,441,925 Gross unrealized depreciation (779) ----------- Net unrealized appreciation $2,441,146 ----------- 15 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) 1. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not 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 written options for the year ended December 31, 2004 were as follows: Number of Premiums Contracts Received ----------- ---------- Options outstanding at December 31, 2003 -0- $ -0- Options written 2,955,000 53,000 Options terminated in closing purchase transactions (1,300,000) (22,365) Options expired (1,165,000) (23,522) ----------- ---------- Options outstanding at December 31, 2004 490,000 $ 7,113 ----------- ---------- 2. Swap Agreements The Portfolio may enter into swaps on sovereign debt obligations to protect itself from interest rate fluctuations on the underlying debt instruments and for investment purposes. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the underlying value of the securities. As of November 1, 2003, the Portfolio has adopted the method of accounting for interim payments on swap contracts in accordance with Financial Accounting Standards Board Statement No. 133. The Portfolio accrues for the interim payments on swap contracts on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap contracts on the statement of assets and liabilities. Once the interim payments are settled in cash, the net amount is recorded as realized gain/loss on swaps, in addition to realized gain/loss recorded upon the termination of swap contracts on the statements of operations. Prior to November 1, 2003, these interim payments were reflected within interest income/expense in the statement of operations. Fluctuations in the value of swap contracts are recorded as a component of net change in unrealized appreciation/depreciation of investments. 16 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ The Portfolio may enter into credit default swaps. The Portfolio may purchase credit protection on the referenced obligation of the credit default swap ("Buy Contract") or provide credit protection on the referenced obligation of the credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap provides upon the occurrence of a credit event, as defined in the swap agreement, for the Portfolio to buy/(sell) from/(to) the counterparty at the notional amount (the "Notional Amount") and receive/(deliver) the principal amount of the referenced obligation. If a credit event occurs, the maximum payout amount for a Sale Contract is limited to the Notional Amount of the swap contract ("Maximum Payout Amount"). During the term of the swap agreement, the Portfolio receives/(pays) semi-annual fixed payments from/(to) the respective counterparty, calculated at the agreed upon interest rate applied to the Notional Amount. These interim payments are recorded within unrealized appreciation/depreciation of swap contracts on the statement of assets and liabilities. Credit default swaps may involve greater risks than if a Portfolio had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Portfolio is a buyer and no credit event occurs, it will lose its investment. In addition, if the Portfolio is a seller and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a loss to the Portfolio At December 31, 2004, the Portfolio had Sale Contracts outstanding with Maximum Payout Amounts aggregating $1,315,000, with net unrealized appreciation of $62,867 and terms ranging from 1 to 10 years, as reflected in the portfolio of investments. In certain circumstances, the Portfolio may hold Sale Contracts on the same referenced obligation and with the same counterparty it has purchased credit protection, which may reduce its obligation to make payments on Sale Contracts, if a credit event occurs. The Portfolio had Buy Contracts outstanding with a Notional Amount of $280,000 with respect to the same referenced obligations and same counterparties of certain Sale Contracts outstanding, which reduced its obligation to make payments on Sale Contracts to $1,035,000 as of December 31, 2004. 3. Reverse Repurchase Agreements Under a reverse repurchase agreement, the Portfolio sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Portfolio enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value at least equal to the repurchase price. For the year ended December 31, 2004, the average amount of reverse repurchase agreements outstanding was $1,188,894 and the daily weighted average interest rate was .33%. 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, 2004, the Portfolio had no securities on loan. For the year ended December 31, 2004, the Portfolio earned fee income of $129 which is included in interest income in the accompanying statement of operations. 17 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) 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 AMOUNTS --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- Shares sold 281,328 676,545 $ 4,025,798 $ 8,656,711 Shares issued in reinvestment of dividends 127,285 99,946 1,636,88 41,368,257 Shares redeemed (677,105) (900,148) (9,595,145) (11,632,275) ------------ ------------ -------------- -------------- Net decrease (268,492) (123,657) $ (3,932,463) $ (1,607,307) ------------ ------------ -------------- -------------- Class B Shares sold 193,217 226,684 $ 2,745,198 $ 3,029,568 Shares issued in reinvestment of dividends 23,990 4,615 308,029 63,133 Shares redeemed (97,415) (33,182) (1,355,653) (432,217) ------------ ------------ -------------- -------------- Net increase 119,792 198,117 $ 1,697,574 $ 2,660,484 ------------ ------------ -------------- -------------- 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. Indemnification Risk-In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE I: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ---------- -------- Distributions paid from: Ordinary income $1,944,913 $1,431,391 Total taxable distributions 1,944,913 1,431,391 Total distributions paid $1,944,913 $1,431,391 As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $1,793,219 Undistributed long-term capital gains 1,176,508(a) Unrealized appreciation/(depreciation) 2,487,844(b) Total accumulated earnings/(deficit) $5,457,571 (a) During the current fiscal year, the Portfolio utilized $833,622 of capital loss carryforwards. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the difference between the book and tax treatment of swap income. During the current fiscal year, permanent differences, primarily due to the tax treatment of swap income, resulted in a net increase in undistributed net investment income and a corresponding decrease in accumulated net realized gain on investment transactions. This reclassification had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. 19 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pur- 20 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ suant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 21 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO FINANCIAL HIGHLIGHTS Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A ----------------------------------------------------------------- Year Ended December 31, 2004(a) 2003 2002 2001(b) 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $14.53 $11.43 $10.63 $10.76 $10.79 Income From Investment Operations Net investment income (c) .86(d) .95 .94(d) 1.11(d) 1.27(d) Net realized and unrealized gain (loss) on investment transactions .45 2.83 .70 (.10) .14 Net increase in net asset value from operations 1.31 3.78 1.64 1.01 1.41 Less: Dividends Dividends from net investment income (1.05) (.68) (.84) (1.14) (1.44) Net asset value, end of period $14.79 $14.53 $11.43 $10.63 $10.76 Total Return Total investment return based on net asset value (e) 10.12% 33.41% 16.14% 9.37% 14.06% Ratios/Supplemental Data Net assets, end of period (000's omitted) $22,932 $26,433 $22,198 $11,249 $9,423 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.76% 1.90% 1.40% .95% .95% Expenses, before waivers and reimbursements 1.93% 1.90% 2.00% 2.37% 2.42% Expenses, before waivers and reimbursements excluding interest expense 1.92% 1.88% 2.00% 2.37% 2.42% Net investment income 6.07%(d) 7.20% 8.83%(d) 10.63%(d) 11.71%(d) Portfolio turnover rate 188% 150% 142% 176% 148%
See footnote summary on page 23. 22 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B ------------------------------------------------ Year Ended July 22, December 31, 2002(f) to ----------------------------- December 31, 2004(a) 2003 2002 ------------- -------------- ----------- Net asset value, beginning of period $14.51 $11.42 $10.20 Income From Investment Operations Net investment income (c) .82(d) 0.88 .35(d) Net realized and unrealized gain on investment transactions .45 2.89 .87 Net increase in net asset value from operations 1.27 3.77 1.22 Less: Dividends Dividends from net investment income (1.04) (.68) -0- Net asset value, end of period $14.74 $14.51 $11.42 Total Return Total investment return based on net asset value (e) 9.81% 33.34% 11.96% Ratios/Supplemental Data Net assets, end of period (000's omitted) $4,979 $3,162 $226 Ratio to average net assets of: Expenses, net of waivers and reimbursements 2.07% 2.14% 1.63%(g) Expenses, before waivers and reimbursements 2.24% 2.14% 1.99%(g) Expenses, before waivers and reimbursements excluding interest expense 2.23% 2.12% 1.99%(g) Net investment income 5.74%(d) 6.67% 9.12%(d)(g) Portfolio turnover rate 188% 150% 142%
(a) As of November 1, 2003, the Portfolio has adopted the method of accounting for interim payments on swap contracts in accordance with Financial Accounting Standards Board Statement No. 133. These interim payments are reflected within net realized and unrealized gain (loss) on swap contracts, however, prior to November 1, 2003, these interim payments were reflected within interest income/expense on the statement of operations. The effect of this change for the year ended December 31, 2004, was to decrease net investment income per share by $.02 and increase net realized and unrealized gain (loss) on investment transactions per share by $.02 for Class A and B. Consequently, the ratios of net investment income to average net assets were decreased by 0.17% for Class A and B respectively. (b) As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities. For the year ended December 31, 2001, the effect of this change to Class A was to decrease net investment income by less than $.01 per share, decrease net realized and unrealized loss on investments by less than $.01 per share, and decrease the ratio of net investment income to average net assets from 10.65% to 10.63%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (c) Based on average shares outstanding. (d) Net of expenses waived or reimbursed by the Adviser. (e) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (f) Commencement of distribution. (g) Annualized. 23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein Global Dollar Government Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Global Dollar Government Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP --------------------- New York, New York February 4, 2005 24 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO BOARD OF DIRECTORS William H. Foulk, Jr. (1), Chairman Ruth Block (1) David H. Dievler (1) John H. Dobkin (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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 25 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR -------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of the Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 26 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ GLOBAL DOLLAR GOVERNMENT PORTFOLIO Officer Information Certain information concerning Fund's Officers is listed below. PRINCIPAL NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer - Mutual Funds of ACMC,** with which he has Compliance Officer been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Paul J. DeNoon(1) Vice President Senior Vice President of ACMC** with which 4/18/62 he has been associated since prior to 2000. Jeffrey L. Phlegar Vice President Executive Vice President of ACMC**, 8/28/66 with which he has been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General 10/23/62 Counsel and Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has 8/3/51 been associated since prior to 2000.
(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. 27 ALLIANCEBERNSTEIN ----------------------- VARIABLE PRODUCTS ----------------------- SERIES FUND ----------------------- ALLIANCEBERNSTEIN ----------------------- HIGH YIELD ----------------------- PORTFOLIO ----------------------- ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED ------------------------- o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED ------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS January 26, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Credit Suisse First Boston High Yield (CSFBHY) Index, for the one- and five-year periods ended December 31, 2004, and since inception of the Portfolio's Class A shares on October 27, 1997. The Portfolio provided strong absolute returns for the year; however it underperformed relative to the CSFBHY Index. For the year, the Portfolio's relative underperformance was due primarily to security selection, particularly holdings within the utilities and wireless-communications sectors. The Portfolio's underweighted position in the chemical sector, which outperformed during the year, also detracted from performance. Positive security selection within the cable and health care sectors positively impacted performance during the year. Performance also benefited from the Portfolio's underweighted positions in the technology and retail sectors. MARKET REVIEW AND INVESTMENT STRATEGY High yield was one of the best performing asset classes in 2004, according to the CSFBHY Index. After a volatile first half of the year in which investors worried about the speed of imminent Federal Reserve tightening, official interest rate hikes commenced at a measured pace and market volatility subsided. This resulted in an inflow of funds into the asset class from yield-seeking investors. During the annual reporting period ended December 31, 2004, the average high-yield spread over Treasuries tightened over 100 basis points to its tightest level since April of 1998. This came on the heels of almost 500 basis points of spread tightening in 2003. On December 31, 2004, the high-yield market, as measured by the CSFBHY Index, was yielding 6.99%, for a spread of 346 basis points over Treasuries. All of the major high yield industry sectors recorded gains in 2004. As the economy continued to expand, so did the prospects for the more cyclical sectors, as higher demand for their products more than offset rising raw materials costs. The best performing sectors for the year were the metals/mining, consumer non-durables and chemical sectors. Aerospace, which includes airlines, was the worst performing sector, as high energy prices and uncompetitive cost structures weighed on the financial performance of the industry. The late year rally in airlines seemed to be driven by an easing of market concerns regarding oil prices. Lower-rated debt continued to outperform during 2004 amidst strong economic growth and a plunging default rate. During the annual period, the Portfolio was positioned to have a more neutral risk profile, or beta. Given expectations for rising rates in 2005, the Portfolio was underweighted in lower-spread tiers, which offer not only a smaller yield cushion, but which also tend to be more sensitive to changes in interest rates. The Portfolio had a neutral position in the higher-spread tiers, where research showed that we were not being adequately compensated for taking risk, but where securities tend to be less interest-rate sensitive. Spreads have compressed to historically tight levels across most industries. As a result, the Portfolio's management team is focused on identifying the best security-specific total-return opportunities. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund High Yield Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. ------------------------------------------------------------------------------- 1 HIGH YIELD PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure 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. A Word About Risk The Portfolio can invest in foreign securities, including emerging markets, which may magnify fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. Price fluctuation in the underlying Portfolio's securities may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater negative effect on bonds with longer maturities than on those with shorter maturities. Investments in the Portfolio are not guaranteed because of fluctuation in the net asset value of the underlying fixed-income related investments. Similar to direct bond ownership, bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the Portfolio. Investors should understand that, in contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. While the Portfolio invests principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. (Historical Performance continued on next page) ------------------------------------------------------------------------------- 2 HIGH YIELD PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ THE PORTFOLIO VS. ITS BENCHMARK Returns PERIODS ENDED DECEMBER 31, 2004 ---------------------------------------- 1 Year 5 Years Since Inception* ------------------------------------------------------------------------------- AllianceBernstein High Yield Portfolio Class A 7.98% 4.61% 2.74% ------------------------------------------------------------------------------- Credit Suisse First Boston High Yield (CSFBY) Index 11.96% 8.17% 6.44% ------------------------------------------------------------------------------- * Since Inception Date: 10/27/97 for Class A shares. ALLIANCEBERNSTEIN HIGH YIELD PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 10/27/97* - 12/31/04 ALLIANCEBERNSTEIN HIGH YIELD PORTFOLIO CLASS A: $12,144 CSFBHY INDEX: $15,637 [Graphic ommitted, data below] AllianceBernstein CSFB High Yield Portfolio High Yield Class A Index ------------------------------------------------------- 10/27/97* 10000 10000 12/31/97 10330 10163 12/31/98 9949 10222 12/31/99 9692 10557 12/31/00 9193 10007 12/31/01 9472 10588 12/31/02 9185 10916 12/31/03 11247 13966 12/31/04 12144 15637 * 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. 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 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. ------------------------------------------------------------------------------- 3 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ HIGH YIELD PORTFOLIO FUND EXPENSES As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized High Yield Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* --------------------------------------------------------------------------------------------------------------------- Class A Actual $1,000 $1,077.03 $5.43 1.04% Hypothetical (5% return before expenses) $1,000 $1,019.91 $5.28 1.04% --------------------------------------------------------------------------------------------------------------------- Class B Actual $1,000 $1,075.78 $6.78 1.30% Hypothetical (5% return before expenses) $1,000 $1,018.60 $6.60 1.30% ---------------------------------------------------------------------------------------------------------------------
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). ------------------------------------------------------------------------------- 4 HIGH YIELD PORTFOLIO SECURITY TYPE BREAKDOWN December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF SECURITY TYPE U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- Corporate Debt Obligations $ 52,600,625 95.0% Preferred Stocks and Warrant 691,455 1.2 Sovereign Debt Obligations 288,180 0.5 ------------ ----- Total Investments* 53,580,260 96.7 Cash and receivables, net of liabilities 1,820,200 3.3 ------------ ----- Net Assets $ 55,400,460 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. ------------------------------------------------------------------------------- 5 HIGH YIELD PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- CORPORATE DEBT OBLIGATIONS-95.0% AEROSPACE/DEFENSE-1.3% Bombardier, Inc. (Canada) 6.30%, 5/01/14 (a) $ 200 $ 173,500 L-3 Communications Corp. 5.875%, 1/15/15 (a) 195 194,513 Sequa Corp. 9.00%, 8/01/09 70 78,925 Transdigm, Inc. 8.375%, 7/15/11 260 278,850 ------------ 725,788 ------------ AIR TRANSPORTATION-0.5% ATA Airlines, Inc. 6.99%, 4/15/16 (a)(b) 289 247,378 ------------ AUTOMOTIVE-1.7% Affinia Group, Inc. 9.00%, 11/30/14 (a) 85 88,613 Cooper Standard Auto 7.00%, 12/15/12 (a) 165 167,475 HLI Operating Co., Inc. 10.50%, 6/15/10 260 278,850 Keystone Automotive Operations, Inc. 9.75%, 11/01/13 213 227,910 TRW Automotive 9.375%, 2/15/13 93 107,880 11.00%, 2/15/13 67 80,735 ------------ 951,463 ------------ BROADCASTING/MEDIA-2.4% Allbritton Communications Co. 7.75%, 12/15/12 170 175,950 Corus Entertainment, Inc. (Canada) 8.75%, 3/01/12 120 131,700 Emmis Operating Co. 6.875%, 5/15/12 180 188,325 Paxson Communications Corp. 12.25%, 1/15/09 (c) 135 126,225 10.750%, 7/15/08 140 147,000 PRIMEDIA, Inc. 8.875%, 5/15/11 135 142,763 Radio One, Inc. 8.875%, 7/01/11 100 108,875 Sinclair Broadcast Group, Inc. 8.00%, 3/15/12 210 223,124 8.75%, 12/15/11 90 97,988 ------------ 1,341,950 ------------ BUILDING/REAL ESTATE-3.2% Associated Materials, Inc. 11.25%, 3/01/14 (c) 640 460,799 D.R. Horton, Inc. 6.875%, 5/01/13 190 205,675 KB HOME 7.75%, 2/01/10 190 205,675 Meritage Corp. 9.75%, 6/01/11 195 215,475 Nortek, Inc. 8.50%, 9/01/14 (a) 180 188,100 Schuler Homes, Inc. 10.50%, 7/15/11 155 176,313 Williams Lyon Homes, Inc. 10.75%, 4/01/13 285 320,268 ------------ 1,772,305 ------------ CABLE-8.1% Cablevision Systems Corp. 8.00%, 4/15/12 (a) 380 405,649 Charter Communications Holdings LLC 10.75%, 5/15/11 (c) 1,245 915,074 CSC Holdings, Inc. 6.75%, 4/15/12 (a) 190 195,700 7.625%, 7/15/18 195 206,213 DirecTV Holdings LLC 8.375%, 3/15/13 125 140,156 EchoStar DBS Corp. 6.375%, 10/01/11 260 265,850 Innova S. de R.L., SA (Mexico) 9.375%, 9/19/13 225 255,938 12.875%, 4/01/07 48 48,107 Insight Communications Co., Inc. 12.25%, 2/15/11 (c) 265 257,713 Insight Midwest LP/Insight Capital, Inc. 9.75%, 10/01/09 190 199,025 PanAmSat Holding Corp. 10.375%, 11/01/14 (a)(c) 465 319,688 Rainbow National Services LLC 8.75%, 9/01/12 (a) 260 285,350 10.375%, 9/01/14 (a) 630 710,324 Rogers Cable, Inc. (Canada) 6.75%, 3/15/15 (a) 275 281,188 ------------ 4,485,975 ------------ CHEMICALS-3.2% Equistar Chemical Funding LP 10.125%, 9/01/08 185 213,213 10.625%, 5/01/11 130 150,800 Huntsman Advanced Materials LLC 11.00%, 7/15/10 (a) 140 166,600 Huntsman ICI Chemicals LLC 10.125%, 7/01/09 124 130,510 Huntsman International Holdings LLC zero coupon, 12/31/09 500 280,000 Huntsman LLC 11.50%, 7/15/12 (a) 260 307,450 Quality Distribution LLC 9.00%, 11/15/10 (a) 365 364,087 ------------------------------------------------------------------------------- 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- Westlake Chemical Corp. 8.75%, 7/15/11 $ 125 $ 141,250 ------------ 1,753,910 ------------ COMMUNICATIONS-FIXED-5.4% Cincinnati Bell, Inc. 8.375%, 1/15/14 345 349,313 Citizens Communications Co. 6.25%, 1/15/13 270 272,025 Eircom Funding (Ireland) 8.25%, 8/15/13 245 270,725 FairPoint Communications, Inc. 11.875%, 3/01/10 80 93,600 MCI, Inc. 7.688%, 5/01/09 150 155,250 8.735%, 5/01/14 155 166,625 Qwest Capital Funding, Inc. 7.25%, 2/15/11 385 377,300 Qwest Communications International 7.50%, 2/15/14 (a) 125 126,250 Qwest Corp. 9.125%, 3/15/12 (a) 190 219,450 Qwest Services Corp. 14.00%, 12/15/10 (a) 568 683,019 Time Warner Telecom, Inc. 10.125%, 2/01/11 265 260,363 ------------ 2,973,920 ------------ COMMUNICATIONS-MOBILE-7.8% American Cellular Corp. Series B 10.00%, 8/01/11 225 192,938 Inmarsat Finance Plc (United Kingdom) 7.625%, 6/30/12 295 306,800 10.375%, 11/15/12 (a)(c) 205 147,600 Iridium LLC/Capital Corp. Series B 14.00%, 7/15/05 (b)(d) 550 94,875 KYIVSTAR (Denmark) 10.375%, 8/17/09 (a) 500 549,999 MobiFon Holdings BV (Netherlands) 12.50%, 7/31/10 505 599,055 Nextel Communications, Inc. 5.95%, 3/15/14 130 134,550 6.875%, 10/31/13 265 287,525 Nextel Partners, Inc. 8.125%, 7/01/11 145 160,950 12.50%, 11/15/09 72 81,540 Oskar Mobil AS (Czech) 7.50%, 10/15/11 (a) 205 304,421 PanAmSat Corp. 9.00%, 8/15/14 (a) 260 290,225 Rogers Wireless, Inc. (Canada) 7.25%, 12/15/12 (a) 155 164,300 Rural Cellular Corp. 9.75%, 1/15/10 405 366,525 9.875%, 2/01/10 130 132,275 Triton PCS, Inc. 8.50%, 6/01/13 175 168,875 8.75%, 11/15/11 105 82,950 9.375%, 2/01/11 90 72,000 Western Wireless Corp. 9.25%, 7/15/13 175 190,313 ------------ 4,327,716 ------------ CONSUMER MANUFACTURING-2.7% Broder Brothers Co. 11.25%, 10/15/10 (a) 12 12,540 11.25%, 10/15/10 270 282,150 Jostens IH Corp. 7.625%, 10/01/12 (a) 190 197,600 Jostens, Inc. 12.75%, 5/01/10 270 294,637 K2, Inc. 7.375%, 7/01/14 (a) 185 202,575 Playtex Products, Inc. 8.00%, 3/01/11 190 207,575 Simmons Co. 7.875%, 1/15/14 90 93,150 10.00%, 12/15/14 (a)(c) 195 118,950 St. John Knits International, Inc. 12.50%, 7/01/09 90 95,963 ------------ 1,505,140 ------------ ENERGY-4.0% Amerada Hess Corp. 7.30%, 8/15/31 250 278,900 Belden & Blake Corp. 8.75%, 7/15/12 (a) 180 182,700 Chesapeake Energy Corp. 7.75%, 1/15/15 195 212,063 Grant Prideco, Inc. 9.00%, 12/15/09 115 127,363 HilCorp Energy 10.50%, 9/01/10 (a) 445 502,849 Premcor Refining Group, Inc. 9.50%, 2/01/13 115 133,400 Pride International, Inc. 7.375%, 7/15/14 210 229,425 Reliant Energy, Inc. 6.75%, 12/15/14 185 185,000 9.50%, 7/15/13 240 272,700 Universal Compression, Inc. 7.25%, 5/15/10 80 85,400 ------------ 2,209,800 ------------ ENTERTAINMENT/LEISURE-2.3% NCL Corp. (Bermuda) 10.625%, 7/15/14 (a) 360 360,000 ------------------------------------------------------------------------------- 7 HIGH YIELD PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- Royal Caribbean Cruises Ltd. (Liberia) 8.00%, 5/15/10 $ 85 $ 96,050 8.75%, 2/02/11 240 283,500 Six Flags, Inc. 9.50%, 2/01/09 245 254,800 Universal City Development 11.75%, 4/01/10 195 230,344 Universal City Florida Holding Co. 8.375%, 5/01/10 (a) 60 62,250 ------------ 1,286,944 ------------ FINANCIAL-2.0% Crum & Forster Holdings Corp. 10.375%, 6/15/13 105 117,075 Fairfax Financial Holdings Ltd. (Canada) 7.75%, 4/26/12 290 295,800 8.25%, 10/01/15 75 76,500 Markel Capital Trust I Series B 8.71%, 1/01/46 260 273,000 PXRE Capital Trust I 8.85%, 2/01/27 45 45,675 Royal & Sun Alliance Insurance (United Kingdom) 8.95%, 10/15/29 80 101,025 Western Financial Bank 9.625%, 5/15/12 195 222,300 ------------ 1,131,375 ------------ FOOD/BEVERAGE-1.4% Del Monte Corp. 8.625%, 12/15/12 115 128,800 Series B 9.25%, 5/15/11 110 120,450 DIMON, Inc. Series B 9.625%, 10/15/11 195 213,524 Dole Food Co., Inc. 8.625%, 5/01/09 105 114,188 8.875%, 3/15/11 65 70,688 Merisant Co. 9.50%, 7/15/13 (a) 135 120,150 ------------ 767,800 ------------ GAMING-4.8% Ameristar Casinos, Inc. 10.75%, 2/15/09 95 105,925 Argosy Gaming Co. 9.00%, 9/01/11 100 111,500 Boyd Gaming Corp. 7.75%, 12/15/12 110 120,038 Harrahs Operating Co., Inc. 7.875%, 12/15/05 100 104,000 Mandalay Resort Group 6.375%, 12/15/11 155 161,975 10.25%, 8/01/07 165 186,450 MGM Mirage, Inc. 8.375%, 2/01/11 260 293,149 Mohegan Tribal Gaming Authority 6.375%, 7/15/09 60 61,650 7.125%, 8/15/14 255 268,387 Park Place Entertainment Corp. 7.00%, 4/15/13 50 55,125 7.875%, 3/15/10 90 101,363 9.375%, 2/15/07 120 132,300 Riviera Holdings Corp. 11.00%, 6/15/10 155 173,213 Seneca Gaming Corp. 7.25%, 5/01/12 405 426,262 Turning Stone Casino Resort Enterprises 9.125%, 12/15/10 (a) 140 151,550 Venetian Casino/LV Sands, Inc. 11.00%, 6/15/10 195 222,544 ------------ 2,675,431 ------------ HEALTHCARE-5.3% Concentra Operating Corp. 9.125%, 6/01/12 (a) 95 107,350 9.50%, 8/15/10 145 163,850 Extendicare Health Services, Inc. 9.50%, 7/01/10 145 162,400 Genesis HealthCare Corp. 8.00%, 10/15/13 180 195,300 Hanger Orthopedic Group, Inc. 10.375%, 2/15/09 260 268,450 HCA, Inc. 6.375%, 1/15/15 355 356,437 Iasis Healthcare Corp. 8.75%, 6/15/14 245 267,050 PacifiCare Health Systems, Inc. 10.75%, 6/01/09 182 210,210 Select Medical Corp. 7.50%, 8/01/13 365 412,450 Triad Hospitals, Inc. 7.00%, 11/15/13 220 224,950 Universal Hospital Services, Inc. 10.125%, 11/01/11 240 249,600 Vanguard Health Holdings 11.25%, 10/01/15 (a)(c) 465 304,575 ------------ 2,922,622 ------------ HOTEL/LODGING-2.8% Corrections Corp. of America 7.50%, 5/01/11 45 48,094 9.875%, 5/01/09 155 172,050 Gaylord Entertainment Co. 8.00%, 11/15/13 175 189,000 ------------------------------------------------------------------------------- 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- Host Marriott LP Series G 9.25%, 10/01/07 $ 160 $ 178,400 Series I 9.50%, 1/15/07 125 136,875 Intrawest Corp. (Canada) 7.50%, 10/15/13 105 111,694 La Quinta Properties, Inc. 8.875%, 3/15/11 185 206,274 Starwood Hotels Resorts 7.875%, 5/01/12 175 199,938 Sun International Hotels Ltd. 8.875%, 8/15/11 105 114,713 Vail Resorts, Inc. 6.75%, 2/15/14 210 213,674 ------------ 1,570,712 ------------ INDUSTRIAL-7.3% Amsted Industries, Inc. 10.25%, 10/15/11 (a) 255 288,150 Amtrol, Inc. 10.625%, 12/31/06 205 184,500 Case New Holland, Inc. 9.25%, 8/01/11 (a) 350 389,375 Dayton Superior Corp. 10.75%, 9/15/08 90 96,300 13.00%, 6/15/09 140 145,600 FastenTech, Inc. 11.50%, 5/01/11 (a) 120 138,000 Fimep, SA (France) 10.50%, 2/15/13 115 136,275 Flowserve Corp. 12.250%, 8/15/10 160 176,800 Goodman Global Holdings 7.875%, 12/15/12 (a) 270 268,988 Milacron Escrow Corp. 11.50%, 5/15/11 265 280,900 Mueller Group, Inc. 10.00%, 5/01/12 190 207,100 NMHG Holdings Co. 10.00%, 5/15/09 105 116,025 Sensus Metering Systems, Inc. 8.625%, 12/15/13 360 369,000 Terex Corp. Series B 10.375%, 4/01/11 195 218,400 TriMas Corp. 9.875%, 6/15/12 295 312,700 Trinity Industries 6.50%, 3/15/14 305 305,000 Williams Scotsman, Inc. 9.875%, 6/01/07 385 385,000 ------------ 4,018,113 ------------ MINING & METALS-2.3% AK Steel Corp. 7.875%, 2/15/09 210 213,938 Freeport-McMoRan Copper & Gold, Inc. Cl. B 10.125%, 2/01/10 120 137,100 International Steel Group 6.50%, 4/15/14 234 250,965 Ispat Inland ULC 9.75%, 4/01/14 201 248,235 Peabody Energy Corp. 6.875%, 3/15/13 220 238,150 Russel Metals, Inc. (Canada) 6.375%, 3/01/14 200 203,000 ------------ 1,291,388 ------------ NON-AIR TRANSPORTATION-0.2% Horizon Lines LLC 9.00%, 11/01/12 (a) 105 112,875 ------------ PAPER/PACKAGING-5.7% Berry Plastics Corp. 10.75%, 7/15/12 185 211,825 Crown Euro Holdings, SA (France) 9.50%, 3/01/11 215 245,100 Georgia-Pacific Corp. 8.875%, 5/15/31 130 162,500 9.375%, 2/01/13 285 332,025 Graphic Packaging International Corp. 9.50%, 8/15/13 365 415,187 Greif Brothers Corp. 8.875%, 8/01/12 140 155,750 Huntsman Packaging Corp. 13.00%, 6/01/10 125 121,875 Jefferson Smurfit Corp. 8.25%, 10/01/12 140 152,600 MDP Acquisitions Plc 9.625%, 10/01/12 205 228,575 Owens-Brockway Glass Container 8.875%, 2/15/09 395 429,068 Pliant Corp. 11.125%, 9/01/09 60 65,400 13.00%, 6/01/10 330 320,100 Russell-Stanley Holdings, Inc. 9.00%, 11/30/08 (a)(e)(f) 87 8,737 Stone Container Corp. 9.25%, 2/01/08 25 27,625 9.75%, 2/01/11 125 136,875 Vitro Envases (Mexico) 10.75%, 7/23/11 (a) 155 160,813 ------------ 3,174,055 ------------ PUBLIC UTILITIES-ELECTRIC & GAS-7.7% AES Corp. 8.75%, 5/15/13 (a) 55 62,494 9.00%, 5/15/15 (a) 100 114,500 ------------------------------------------------------------------------------- 9 HIGH YIELD PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- Allegheny Energy, Inc. 7.75%, 8/01/05 $ 245 $ 248,981 Calpine Corp. 8.50%, 7/15/10 (a) 445 381,587 DPL Capital Trust II 8.125%, 9/01/31 180 203,922 DPL, Inc. 6.875%, 9/01/11 125 136,517 Dynegy Holdings, Inc. 10.125%, 7/15/13 (a) 345 395,024 Dynegy-Roseton Danskamme Series B 7.67%, 11/08/16 240 230,400 Northwest Pipeline Corp. 8.125%, 3/01/10 105 116,156 NRG Energy, Inc. 8.00%, 12/15/13 (a) 255 277,950 Ormat Funding Corp. 8.25%, 12/30/20 (a) 229 229,381 SEMCO Energy, Inc. 7.125%, 5/15/08 65 69,568 7.75%, 5/15/13 120 131,775 Southern Natural Gas Co. 7.35%, 2/15/31 245 254,188 8.875%, 3/15/10 130 145,600 Texas Genco LLC 6.875%, 12/15/14 (a) 165 170,569 TXU Corp. 5.55%, 11/15/14 (a) 190 188,748 Williams Cos., Inc. 7.625%, 7/15/19 545 599,499 7.875%, 9/01/21 255 284,325 ------------ 4,241,184 ------------ PUBLISHING-2.9% American Media Operation 8.875%, 1/15/11 100 106,375 10.25%, 5/01/09 155 163,331 Dex Media, Inc. 8.00%, 11/15/13 250 270,625 Dex Media East LLC 9.875%, 11/15/09 50 56,938 12.125%, 11/15/12 91 110,906 Dex Media West LLC Series B 8.50%, 8/15/10 80 89,000 9.875%, 8/15/13 314 361,885 Primedia, Inc. 8.00%, 5/15/13 210 216,038 WMG Holdings Corp. 9.50%, 12/15/14 (a)(c) 345 220,369 ------------ 1,595,467 ------------ RESTAURANTS-0.6% Domino's, Inc. 8.25%, 7/01/11 127 138,748 Sbarro, Inc. 11.00%, 9/15/09 179 180,790 ------------ 319,538 ------------ RETAIL-0.5% Petro Stopping Center 9.00%, 2/15/12 142 150,165 United Auto Group, Inc. 9.625%, 3/15/12 115 127,075 ------------ 277,240 ------------ SERVICE-2.8% Allied Waste North America, Inc. 6.375%, 4/15/11 225 217,688 8.50%, 12/01/08 40 42,400 8.875%, 4/01/08 125 133,750 H & E Equipment Services, Inc. 11.125%, 6/15/12 295 324,500 National Waterworks, Inc. 10.50%, 12/01/12 115 129,375 Service Corp. International 6.00%, 12/15/05 4 4,070 6.50%, 3/15/08 260 268,450 7.70%, 4/15/09 160 172,800 United Rentals North America, Inc. 6.50%, 2/15/12 292 284,700 ------------ 1,577,733 ------------ SUPERMARKET/DRUG-2.5% Couche-Tard US/Finance Corp. 7.50%, 12/15/13 169 181,253 Duane Reade, Inc. 9.75%, 8/01/11 (a) 380 345,799 Rite Aid Corp. 9.25%, 6/01/13 100 101,000 9.50%, 2/15/11 140 153,650 11.25%, 7/01/08 130 141,050 Roundy's, Inc. Series B 8.875%, 6/15/12 110 120,175 Stater Brothers Holdings, Inc. 8.125%, 6/15/12 315 333,113 ------------ 1,376,040 ------------ TECHNOLOGY-3.6% Amkor Technologies, Inc. 7.75%, 5/15/13 640 601,600 Celestica, Inc. (Canada) 7.875%, 7/01/11 345 370,013 Fairchild Semiconductor Corp. 10.50%, 2/01/09 210 221,550 Flextronics International, Ltd. (Singapore) 6.50%, 5/15/13 250 256,250 ------------------------------------------------------------------------------- 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- Magnachip Semiconductor 5.76%, 12/15/11 (a)(g) $ 140 $ 143,850 8.00%, 12/15/14 (a) 120 125,100 SCG Holding Corp. zero coupon, 8/04/11 (a) 70 103,950 Unisys Corp. 6.875%, 3/15/10 135 144,450 ------------ 1,966,763 ------------ Total Corporate Debt Obligations (cost $50,082,197) 52,600,625 ------------ SOVEREIGN DEBT OBLIGATIONS-0.5% Government of Ukraine 11.00%, 3/15/07 28 30,036 Republic of Brazil 10.50%, 7/14/14 100 118,500 Russian Federation 5.00%, 3/31/30 135 139,644 ------------ Total Sovereign Debt Obligations (cost $276,111) 288,180 ------------ Shares U.S. $ Value ------------------------------------------------------------------------------- PREFERRED STOCKS-1.2% BROADCASTING/MEDIA-0.3% Paxson Communications Corp. 14.25%, 11/15//06 (e) 24 $ 183,929 ------------ FINANCIAL-0.9% Sovereign REIT Series A 12.00%, 5/16/20 (a) 335 507,525 ------------ Total Preferred Stocks (cost $556,229) 691,454 ------------ WARRANT-0.0% Pliant Corp. Warrants, expiring 6/01/10 (d)(f) (cost $1,820) 50 1 ------------ TOTAL INVESTMENTS-96.7% (cost $50,916,357) 53,580,260 Other assets less liabilities-3.3% 1,820,200 ------------ NET ASSETS-100% $ 55,400,460 ============ (a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2004 , the aggregate market value of these securities amounted to $13,537,752 or 24.4 % of net assets. (b) Security is in default. (c) 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. (d) Non-income producing security. (e) PIK (Paid-in-Kind) preferred quarterly stock payments. (f) Illiquid security, valued at fair value (see Note A). (g) Variable rate coupon, rate shown as of December 31, 2004. See Notes to Financial Statements. ------------------------------------------------------------------------------- 11 HIGH YIELD PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $50,916,357) $53,580,260 Cash 816,692 Foreign cash, at value (cost $20,202) 19,007 Dividends and interest receivable 1,136,264 Receivable for capital stock sold 136,980 ----------- Total assets 55,689,203 ----------- LIABILITIES Payable for investment securities purchased 173,192 Advisory fee payable 23,213 Administrative fee payable 17,500 Distribution fee payable 2,618 Transfer agent fee payable 56 Accrued expenses 72,164 ----------- Total liabilities 288,743 ----------- NET ASSETS $55,400,460 =========== COMPOSITION OF NET ASSETS Capital stock, at par $6,955 Additional paid-in capital 63,741,193 Undistributed net investment income 4,113,779 Accumulated net realized loss on investment and foreign currency transactions (15,124,354) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 2,662,887 ----------- $55,400,460 =========== Class A Shares Net assets $42,841,889 =========== Shares of capital stock outstanding 5,376,149 =========== Net asset value per share $ 7.97 =========== Class B Shares Net assets $12,558,571 =========== Shares of capital stock outstanding 1,579,108 =========== Net asset value per share $ 7.95 =========== See Notes to Financial Statements. ------------------------------------------------------------------------------- 12 HIGH YIELD PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $4,659,238 Dividends 76,543 ----------- Total investment income 4,735,781 ----------- EXPENSES Advisory fee 360,978 Distribution fee--Class B 25,437 Custodian 158,658 Administrative 69,000 Audit 41,750 Printing 14,852 Legal 5,000 Directors' fees 1,000 Transfer agency 859 Miscellaneous 1,274 ----------- Total expenses 678,808 Less: expenses waived and reimbursed by the Adviser (see Note B) (91,464) ----------- Net expenses 587,344 ----------- Net investment income 4,148,437 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions 990,006 Foreign currency transactions (21,186) Net change in unrealized appreciation/depreciation of: Investments (1,034,259) Foreign currency denominated assets and liabilities (1,016) ----------- Net loss on investment and foreign currency transactions (66,455) ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,081,982 =========== See Notes to Financial Statements. ------------------------------------------------------------------------------- 13 HIGH YIELD PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Year Ended Year Ended December 31, December 31, 2004 2003 ============ ============ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 4,148,437 $ 3,468,368 Net realized gain on investment and foreign currency transactions 968,820 964,757 Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities (1,035,275) 4,679,646 ------------ ------------ Net increase in net assets from operations 4,081,982 9,112,771 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (2,827,523) (2,439,115) Class B (641,967) (149,865) CAPITAL STOCK TRANSACTIONS Net increase (decrease) (1,249,760) 14,382,819 ------------ ------------ Total increase (decrease) (637,268) 20,906,610 NET ASSETS Beginning of period 56,037,728 35,131,118 ------------ ------------ End of period (including undistributed net investment income of $4,113,779 and $3,456,018, respectively) $ 55,400,460 $ 56,037,728 ============ ============ See Notes to Financial Statements. ------------------------------------------------------------------------------- 14 HIGH YIELD PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein High Yield Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek to earn the highest level of current income without assuming undue risk by investing principally in high yielding, fixed-income securities rated Baa or lower by Moody's or BBB or lower by S&P Duff &Phelps or Fitch or, if unrated of comparable quantity. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. ------------------------------------------------------------------------------- 15 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. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .50% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $91,464. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. ------------------------------------------------------------------------------- 16 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004 amounted to $292, 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolios to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: Purchases Sales ----------- ----------- Investment securities (excluding U.S. government securities) $42,346,266 $41,835,686 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 $50,966,833 =========== Gross unrealized appreciation $ 3,794,460 Gross unrealized depreciation (1,181,033) ----------- Net unrealized appreciation $ 2,613,427 =========== ------------------------------------------------------------------------------- 17 HIGH YIELD PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 1. Forward Exchange Currency Contracts The Portfolio may enter into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency on a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as 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, 2004, the Portfolio had no securities on loan. For the year ended December 31, 2004, the Portfolio earned fee income of $1,614 which is included in interest income in the accompanying statement of operations. ------------------------------------------------------------------------------- 18 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 AMOUONT --------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- Class A Shares sold 525,294 2,095,774 $4,086,863 $15,413,642 Shares issued in reinvestment of dividends 385,221 334,126 2,827,523 2,439,115 Shares redeemed (1,613,919) (1,437,649) (12,584,467) (10,591,185) ------------ ------------ -------------- -------------- Net increase (decrease) (703,404) 992,251 $(5,670,081) $7,261,572 =========== ============ ============== ============== Class B Shares sold 866,850 2,209,656 $6,776,998 $16,338,500 Shares issued in reinvestment of dividends 87,581 20,501 641,967 149,866 Shares redeemed (382,523) (1,276,488) (2,998,644) (9,367,119) ------------ ------------ -------------- -------------- Net increase 571,908 953,669 $4,420,321 $7,121,247 =========== ============ ============== ============== 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. Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. ------------------------------------------------------------------------------- 19 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, 2004 and December 31, 2003 were as follows: 2004 2003 ----------- ----------- Distributions paid from: Ordinary income $3,469,490 $2,588,980 ----------- ----------- Total taxable distributions 3,469,490 2,588,980 ----------- ----------- Total distributions paid $3,469,490 $2,588,980 =========== =========== As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $4,127,823 Accumulated capital and other losses (15,087,922)(a) Unrealized appreciation/(depreciation) 2,612,411(b) ----------- Total accumulated earnings/(deficit) $(8,347,688) =========== (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $15,073,878 of which $2,200,265 expires in the year 2007, $5,774,960 expires in the year 2008, $2,890,265 expires in the year 2009 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. 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, 2004, the Portfolio deferred to January 1, 2005, post-October foreign currency losses of $14,044. During the current fiscal year, the Portfolio utilized capital loss carryforwards of $1,006,377. (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 decrease to undistributed net investment income and a net decrease in accumulated net realized loss on investment and foreign currency transactions. The reclassification had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and ------------------------------------------------------------------------------- 20 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the ------------------------------------------------------------------------------- 21 HIGH YIELD PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. ------------------------------------------------------------------------------- 22 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, -------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $7.91 $6.83 $7.51 $7.91 $9.14 -------- -------- -------- -------- -------- Income From Investment Operations Net investment income (b) .60(c) .55 .54(c) .63(c) .74(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions (.01) .95 (.76) (.38) (1.18) -------- -------- -------- -------- -------- Net increase (decrease) in net asset value from operations .59 1.50 (.22) .25 (.44) -------- -------- -------- -------- -------- Less: Dividends Dividends from net investment income (.53) (.42) (.46) (.65) (.79) -------- -------- -------- -------- -------- Net asset value, end of period $7.97 $7.91 $6.83 $7.51 $7.91 ======== ======== ======== ======== ======== Total Return Total investment return based on net asset value (d) 7.98% 22.44% (3.03)% 3.04% (5.15)% Ratios/Supplemental Data Net assets, end of period (000's omitted) $42,842 $48,076 $34,765 $31,283 $22,333 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.04% 1.46% 1.18% .95% .95% Expenses, before waivers and reimbursements 1.21% 1.46% 1.45% 1.51% 1.42% Net investment income 7.74%(c) 7.48% 7.78%(c) 8.08%(c) 8.68%(c) Portfolio turnover rate 80% 105% 83% 95% 175%
See footnote summary on page 24. ------------------------------------------------------------------------------- 23 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B --------------------------------------- July 22, Year Ended December 31, 2002(e) to ---------------------- December 31, 2004 2003 2002 ---------- ---------- ---------- Net asset value, beginning of period $7.91 $6.84 $6.45 -------- -------- -------- Income From Investment Operations Net investment income (b) .58(c) .52 .15(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions (.02) .97 .24 -------- -------- -------- Net increase in net asset value from operations .56 1.49 .39 -------- -------- -------- Less: Dividends Dividends from net investment income (.52) (.42) -0- -------- -------- -------- Net asset value, end of period $7.95 $7.91 $6.84 ======== ======== ======== Total Return Total investment return based on net asset value (d) 7.62% 22.24% 6.05% Ratios/Supplemental Data Net assets, end of period (000's omitted) $12,558 $7,962 $366 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.30% 1.70% 1.42%(f) Expenses, before waivers and reimbursements 1.47% 1.70% 1.63%(f) Net investment income 7.51%(c) 7.19% 8.39%(c)(f) Portfolio turnover rate 80% 105% 83%
(a) As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities. For the year ended December 31, 2001, the effect of this change was to decrease net investment income by less than $.01 per share, decrease net realized and unrealized loss on investments by less than $.01 per share and decrease the ratio of net investment income to average net assets from 8.14% to 8.08%. 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. ------------------------------------------------------------------------------- 24 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 of the AllianceBernstein High Yield Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 ------------------------------------------------------------------------------- 25 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. ------------------------------------------------------------------------------- 26 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR -------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 CHAIRMAN OF THE BOARD associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. ------------------------------------------------------------------------------- 27 HIGH YIELD PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. James E. Kennedy(1) Vice President Senior Vice President of ACMC, with which he has 5/24/60 been associated since prior to 2000. Michael A. Snyder(1) Vice President Senior Vice President of ACMC since May, 2001. 4/18/62 Previously, he was a Managing Director in the high yield asset management group at Donaldson, Lufkin & Jenrette Corporation since 2000. Jeffrey L. Phlegar Vice President Senior Vice President of ACMC**, with which he has 6/28/66 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President Deputy General Counsel 8/3/51 and Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. ------------------------------------------------------------------------------- 28 (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN AMERICAS GOVERNMENT INCOME PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. AMERICAS GOVERNMENT INCOME PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2005 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, 2004. 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 The table on page 4 shows the Portfolio's performance compared to its benchmarks, the Lehman Brothers (LB) U.S. Aggregate Index and the LB Intermediate-Term Government Index, for the one-, five- and 10-year periods ended December 31, 2004. For the annual reporting period ended December 31, 2004, the Portfolio outperformed both the LB U.S. Aggregate Index and the LB Intermediate-Term Government Index. The Portfolio's non-U.S. holdings substantially outperformed U.S. Treasuries and the components of both LB benchmarks, which are comprised of only U.S. holdings. Within the Portfolio's government allocation, Canadian holdings contributed positively to relative returns, outperforming U.S. governments. Canadian government bonds, hedged into U.S. dollars, returned 6.33% versus only 3.54% for U.S. Treasuries, according to the J.P. Morgan Global Bond Index. An additional positive contributor to performance was the Portfolio's allocation to Canadian Real Return Bonds. Real Return Bonds (inflation-linked securities) outperformed as the Bank of Canada reduced rates to fuel growth and return inflation to its 2% target. The Portfolio's Mexican holdings also contributed positively to relative performance. According to the J.P. Morgan Global Bond Index, Mexican debt returned 8.56%, also outpacing fixed-income market sectors in the U.S. Mexico was bolstered by an upgrade by Moody's rating agency as well as recent positive inflation data. Improved inflation expectations in Mexico were viewed as offsetting the negative effect of anticipated rising U.S. interest rates. MARKET REVIEW AND INVESTMENT STRATEGY Assured that the U.S. economy was back on track, the Federal Reserve began to remove its exceptionally accommodative policy stance during the annual reporting period. Between June and December, the Federal Reserve hiked the Fed Funds rate five times for a total of 125 basis points, bringing the Fed Funds target from its all-time low of 1% to a still-accommodative 2.25%. At its most recent meeting, the Central Bank affirmed its policy of measured tightening, citing moderate growth in total output, continued improvement in labor-market conditions, and robust productivity growth, alongside of balanced inflation risks. The U.S. Treasury market posted a very modest return of 3.54% for the year as Treasury prices reflected mixed economic news throughout the annual reporting period. In April, the Treasury market sold off sharply in response to strong payroll employment data. Subsequently, the Treasury market rebounded somewhat as the U.S. economy experienced a mid-year economic slowdown. Although short-term U.S. interest rates followed the Fed higher, longer-term rates failed to increase as expected. Instead, the yield on the 10-year Treasury ended the year roughly where it began and longer-maturity yields ended about 25 basis points lower. This resulted in a significantly flatter yield curve. The yield spread between two- and 30-year Treasuries narrowed more than 150 basis points during the year. Canadian government bonds outperformed U.S. government bond markets. The Canadian dollar strengthened significantly against the U.S. dollar which hurt exports to the U.S. and slowed the Canadian economy. The U.S. accounts for approximately 85% of Canadian exports. The strengthening Canadian dollar and slowdown in the Canadian economy reduced the need for Canada to raise interest rates, thereby supporting Canadian government bond prices. Within the Portfolio, the core holdings were maintained while modest adjustments were made. Local Mexican debt was increased in the Portfolio's position as the yield curve steepened and Mexican yields became attractive. The duration of the Portfolio's local Mexican holdings was lengthened with the purchase of longer maturities, including a newly issued 20-year bond. The Portfolio's positions in market and duration terms to U.S. Treasuries 1 AMERICAS GOVERNMENT INCOME PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ were reduced in anticipation of higher interest rates. The Portfolio's Canadian government bond position was also trimmed after a cycle of strong performance. Additionally, Canadian Tips were slowly added and the Portfolio's position in U.S. Treasury Tips was maintained as a protection against stronger growth and inflation. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Americas Government Income Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 2 AMERICAS GOVERNMENT INCOME PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE THE UNMANAGED LEHMAN BROTHERS (LB) U.S. AGGREGATE INDEX AND THE UNMANAGED LB INTERMEDIATE-TERM GOVERNMENT INDEX DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT OF A MUTUAL FUND PORTFOLIO. The LB U.S. Aggregate Index is composed of the LB Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the LB Government/Credit Index. The LB Intermediate-Term Government 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. A WORD ABOUT RISK The Portfolio invests a significant amount of its assets in foreign securities which may magnify fluctuations due to changes in foreign exchange rates and the possibility of political and economic uncertainties in foreign countries. These risks may be magnified for investments in emerging markets. To increase yield, the Portfolio can use leverage, a speculative technique, which may increase share price fluctuation. Price fluctuation may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater effect on bonds with longer maturities than on those with shorter maturities. While the Portfolio invests principally in bonds and other fixed-income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 3 AMERICAS GOVERNMENT INCOME PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________
RETURNS THE PORTFOLIO VS. ITS BENCHMARKS ----------------------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR 5 YEARS 10 YEARS ------------------------------------------------------------------------------------------------- AllianceBernstein Americas Government Income Portfolio Class A 4.89% 7.79% 10.16% ------------------------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Index 4.34% 7.71% 7.72% ------------------------------------------------------------------------------------------------- Lehman Brothers Intermediate-Term Government Index 2.33% 6.57% 6.75% -------------------------------------------------------------------------------------------------
ALLIANCEBERNSTEIN AMERICAS GOVERNMENT INCOME PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94-12/31/04 ALLIANCEBERNSTEIN AMERICAS GOVERNMENT INCOME PORTFOLIO CLASS A: $26,329 LEHMAN BROTHERS U.S. AGGREGATE INDEX: $21,036 LEHMAN BROTHERS INTERMEDIATE-TERM GOVERNMENT INDEX: $19,218 [THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.] AllianceBernstein Americas Lehman Brothers Lehman Brothers Government Income U.S. Aggregate Intermediate-Term Portfolio Class A Index Government Index ------------------------------------------------------------------------------- 12/31/94 $ 10,000 $ 10,000 $ 10,000 12/31/95 $ 12,271 $ 11,847 $ 11,441 12/31/96 $ 14,566 $ 12,277 $ 11,906 12/31/97 $ 15,967 $ 13,462 $ 12,825 12/31/98 $ 16,617 $ 14,632 $ 13,913 12/31/99 $ 18,096 $ 14,512 $ 13,982 12/31/00 $ 20,338 $ 16,199 $ 15,445 12/31/01 $ 21,068 $ 17,567 $ 16,746 12/31/02 $ 23,383 $ 19,367 $ 18,360 12/31/03 $ 25,102 $ 20,161 $ 18,781 12/31/04 $ 26,329 $ 21,036 $ 19,218 This chart illustrates the total value of an assumed $10,000 investment in AllianceBernstein Americas Government Income Portfolio Class A shares (from 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmarks. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 4 AMERICAS GOVERNMENT INCOME PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED AMERICAS GOVERNMENT INCOME PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,060.80 $5.34 1.03% Hypothetical (5% return before expenses) $1,000 $1,019.96 $5.23 1.03% CLASS B ACTUAL $1,000 $1,059.98 $6.73 1.30% Hypothetical (5% return before expenses) $1,000 $1,018.60 $6.60 1.30%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 5 AMERICAS GOVERNMENT INCOME PORTFOLIO SECURITY TYPE BREAKDOWN DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF SECURITY TYPE U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Government/Agency Obligations $ 36,876,548 64.5% ------------------------------------------------------------------------------- U.S. TREASURY SECURITIES 29,573,379 51.7 ------------ ----- ------------------------------------------------------------------------------- Total Investments* 66,449,927 116.2 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities (9,281,398) (16.2) ------------ ----- ------------------------------------------------------------------------------- Net Assets $ 57,168,529 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. 6 AMERICAS GOVERNMENT INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PRINCIPAL AMOUNT (000) U.S. $ VALUE ------------------------------------------------------------------------------- LONG-TERM INVESTMENTS-116.2% CANADA-7.8% GOVERNMENT/AGENCY OBLIGATIONS-7.8% Government of Canada 3.25%, 12/01/06 (a) CAD $ 1,900 $ 1,593,390 4.25%, 12/01/21 (a) 569 631,887 8.75%, 12/01/05 (a) 1,414 1,243,869 10.25%, 3/15/14 (a) 590 717,149 Province of Ontario 5.60%, 6/02/35 (a) 300 262,372 ------------- Total Canadian Securities (cost $3,890,372) 4,448,667 ------------- MEXICO-24.4% GOVERNMENT/AGENCY OBLIGATIONS-24.4% Mexican Government Bonds 8.00%, 12/07/23 (a) MXP 53,830 3,898,331 9.00%, 12/24/09-12/20/12 (a) 69,212 6,064,022 Series M7 8.00%, 12/24/08 (a) 46,242 4,014,839 ------------- Total Mexican Securities (cost $13,813,346) 13,977,192 ------------- UNITED STATES-84.0% U.S. GOVERNMENT SPONSORED AGENCY OBLIGATIONS-32.3% Federal Home Loan Mortgage Corp. 3.625%, 9/15/08 US $ 5,800 5,801,995 Federal National Mortgage Association 4.125%, 4/15/14 2,000 1,938,416 5.375%, 11/15/11 5,000 5,325,595 7.00%, 3/01/32 181 192,367 Government National Mortgage Association 6.00%, TBA 5,000 5,179,690 9.00%, 9/15/24 11 12,626 ------------- 18,450,689 ------------- U.S. TREASURY SECURITIES-51.7% U.S. Treasury Bonds 6.25%, 5/15/30 (B) 4,700 5,619,254 8.125%, 8/15/19 (c) 2,000 2,729,844 U.S. Treasury Notes 3.50%, 11/15/09 4,915 4,891,958 4.25%, 8/15/13- 11/15/13 (b) 3,570 3,597,370 4.875%, 2/15/12 150 158,543 5.75%, 8/15/10 2,080 2,290,032 U.S. Treasury Strips 0.00%, 5/15/13-11/15/21 20,700 10,286,378 ------------- 29,573,379 ------------- Total United States Securities (cost $46,082,074) 48,024,068 ------------- Total Long-Term Investments (cost $63,785,792) 66,449,927 ------------- SHORT-TERM INVESTMENT-2.6% TIME DEPOSIT-2.6% Societe Generale 2.125%, 1/03/05 (cost $1,500,000) 1,500 1,500,000 ------------- TOTAL INVESTMENTS-118.8% (cost $65,285,792) 67,949,927 Other assets less liabilities-(18.8%) (10,781,398) ------------- NET ASSETS-100% $ 57,168,529 ============= 7 AMERICAS GOVERNMENT INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ FORWARD EXCHANGE CURRENCY CONTRACTS (SEE NOTE D)
U.S. $ CONTRACT VALUE ON U.S. $ UNREALIZED AMOUNT ORIGINATION CURRENT APPRECIATION/ (000) DATE VALUE (DEPRECIATION) -------------------------------------------------------------------------------------------------- BUY CONTRACTS Canadian Dollar, settling 2/09/05 4,026 $3,281,685 $3,359,706 $ 78,021 SALE CONTRACTS Canadian Dollar, settling 2/09/05 5,348 4,410,248 4,462,637 (52,389) Mexican Peso, settling 1/21/05 96,144 8,461,851 8,598,200 (136,349)
FINANCIAL FUTURES CONTRACTS SOLD (SEE NOTE D)
VALUE AT NUMBER OF EXPIRATION ORIGINAL DECEMBER 31, UNREALIZED TYPE CONTRACTS MONTH VALUE 2004 DEPRECIATION -------------------------------------------------------------------------------------------------- U.S. Treasury Note March 10 Year Futures 119 2005 $13,180,179 $13,320,562 $(140,383)
REVERSE REPURCHASE AGREEMENTS (SEE NOTE D) BROKER INTEREST RATE MATURITY AMOUNT --------------------------------------------------------------------------- Deutsche Bank 2.15% 1/18/05 $ 1,036,747 Deutsche Bank 2.20% 1/18/05 5,682,279 ----------- $ 6,719,026 =========== (a) Positions, or portion thereof, with an aggregate market value of $18,425,859 have been segregated to collateralize open forward exchange currency contracts (b) Position, or portions thereof, with an aggregate market value of $6,681,906 has been segregated to collateralize reverse repurchase agreements. (c) Position with a market value of $279,259 has been segregated to collateralize margin requirement for open futures contracts. Currency Abbreviations: CAD - Canadian Dollar MXP - Mexican Peso US$ - United States Dollar 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 AMERICAS GOVERNMENT INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $65,285,792) $ 67,949,927 Cash 115,420 Foreign cash, at value (cost $655,632) 655,760 Unrealized appreciation of forward exchange currency contracts 78,021 Interest receivable 386,239 Receivable for capital stock sold 230,479 ------------ Total assets 69,415,846 ------------ LIABILITIES Unrealized depreciation of forward exchange currency contracts 188,738 Reverse repurchase agreements 6,719,026 Payable for investment securities purchased 5,197,083 Payable for variation margin on futures contracts 31,609 Advisory fee payable 24,210 Administration fee payable 17,500 Distribution fee payable 1,938 Transfer agent fee payable 56 Accrued expenses 67,157 ------------ Total liabilities 12,247,317 ------------ NET ASSETS $ 57,168,529 ============ COMPOSITION OF NET ASSETS Capital stock, at par $ 4,428 Additional paid-in capital 52,216,948 Undistributed net investment income 2,834,641 Accumulated net realized loss on investment and foreign currency transactions (301,555) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 2,414,067 ------------ $ 57,168,529 ============ CLASS A SHARES Net assets $ 47,775,653 ============ Shares of capital stock outstanding 3,699,868 ============ Net asset value per share $ 12.91 ============ CLASS B SHARES Net assets $ 9,392,876 ============ Shares of capital stock outstanding 728,363 ============ Net asset value per share $ 12.90 ============ See Notes to Financial Statements. 9 AMERICAS GOVERNMENT INCOME PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ INVESTMENT INCOME Interest $ 3,685,618 ------------ EXPENSES Advisory fee 366,765 Distribution fee -- Class B 19,426 Custodian 132,890 Administrative 69,000 Audit 41,750 Printing 16,254 Legal 11,929 Directors' fees 1,000 Transfer agency 859 Miscellaneous 18,705 ------------ Total expenses before interest 678,578 Interest expense 14,137 ------------ Total expenses 692,715 Less: expenses waived and reimbursed by the adviser (see Note B) (63,425) ------------ Net expenses 629,290 ------------ Net investment income 3,056,328 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions 1,160,769 Written options 11,488 Futures (362,702) Foreign currency transactions (176,894) Net change in unrealized appreciation/depreciation of: Investments (1,259,439) Futures (131,477) Foreign currency denominated assets and liabilities 117,592 ------------ Net loss on investment and foreign currency transactions (640,663) ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,415,665 ============ See Notes to Financial Statements. 10 AMERICAS GOVERNMENT INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 3,056,328 $ 3,458,433 Net realized gain on investment and foreign currency transactions 632,661 1,263,571 Net change in unrealized appreciation/ depreciation of investments and foreign currency denominated assets and liabilities (1,273,324) 422,898 ------------- ------------- Net increase in net assets from operations 2,415,665 5,144,902 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (2,720,329) (3,245,231) Class B (347,443) (143,433) CAPITAL STOCK TRANSACTIONS Net decrease (8,427,958) (8,050,736) ------------- ------------- Total decrease (9,080,065) (6,294,498) NET ASSETS Beginning of period 66,248,594 72,543,092 ------------- ------------- End of period (including undistributed net investment income of $2,834,641 and $3,005,815, respectively) $ 57,168,529 $ 66,248,594 ============= ============= See Notes to Financial Statements. 11 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein Americas Government Income Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc., (the "Fund"). The Portfolio's investment objective is to seek the highest level of current income, consistent with what 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-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign 12 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 7. REPURCHASE AGREEMENTS It is the policy of the Portfolio that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. 13 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .65% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .50% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $63,425. 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 $69,000 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, 2004. 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 17,270,702 $ 23,117,013 U.S. government securities 26,135,660 24,237,438 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 $ 65,285,792 ============= Gross unrealized appreciation $ 3,071,261 Gross unrealized depreciation (407,126) ------------- Net unrealized appreciation $ 2,664,135 ============= 14 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ 1. FINANCIAL FUTURES CONTRACTS The Portfolio may buy or sell financial futures contracts for the purpose of hedging its portfolio against adverse affects of anticipated movements in the market. The Portfolio bears the market risk that arises from changes in the value of these financial instruments and the imperfect correlation between movements in the price of the futures contracts and movements in the price of the securities hedged or used for cover. At the time the Portfolio enters into a futures contract, the Portfolio deposits and maintains as collateral an initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of a contract. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. 2. FORWARD EXCHANGE CURRENCY CONTRACTS The Portfolio may enter into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency on a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as unrealized appreciation and depreciation by the Portfolio. The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having a value at least equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of the counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars reflects the total exposure the Portfolio has in that particular currency contract. 3. OPTION TRANSACTIONS For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Portfolio. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. 15 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ Transactions in written options for the year ended December 31, 2004 were as follows: NUMBER OF PREMIUMS CONTRACTS RECEIVED ============= ============= OPTIONS OUTSTANDING AT DECEMBER 31, 2003 -0- $ -0- Options written 10,112,100 11,488 Options expired (10,112,100) (11,488) ------------- ------------- OPTIONS OUTSTANDING AT DECEMBER 31, 2004 -0- $ -0- ============= ============= 4. REVERSE REPURCHASE AGREEMENTS Under a reverse repurchase agreement, the Portfolio sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Portfolio enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value at least equal to the repurchase price. For the year ended December 31, 2004, the average amount of reverse repurchase agreements outstanding was $5,079,208 and the daily weighted average interest rate was 2.09%. 5. DOLLAR ROLLS The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the Portfolio of securities for delivery in the current month and the Portfolio's simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Portfolio is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques and may be considered to be borrowings by the Portfolio. For the year ended December 31, 2004, the Portfolio earned income of $90,024 from dollar rolls. 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. For the year ended December 31, 2004, the Portfolio had no securities on loan. 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 392,302 948,584 $ 5,147,031 $ 12,158,631 Shares issued in reinvestment of dividends 225,566 242,725 2,720,329 3,245,231 Shares redeemed (1,572,400) (2,252,158) (20,172,752) (28,915,805) ----------- ----------- ------------- ------------- Net decrease (954,532) (1,060,849) $ (12,305,392) $ (13,511,943) =========== =========== ============= ============= 16 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SHARES AMOUNT --------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS B Shares sold 589,281 557,837 $ 7,708,605 $ 7,212,518 Shares issued in reinvestment of dividends 28,810 10,720 347,443 143,433 Shares redeemed (327,735) (149,149) (4,178,614) (1,894,744) ----------- ----------- ------------- ------------- Net increase 290,356 419,408 $ 3,877,434 $ 5,461,207 =========== =========== ============= ============= 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. Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. NOTE I: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ============= ============= Distributions paid from: Ordinary income $ 3,067,772 $ 3,388,664 Net long-term capital gains -0- -0- ------------- ------------- Total taxable distributions 3,067,772 3,388,664 ------------- ------------- Total distributions paid $ 3,067,772 $ 3,388,664 ============= ============= 17 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 3,957,977 Accumulated capital and other losses (1,675,991)(a) Unrealized appreciation/(depreciation) 2,665,167(b) ------------- Total accumulated earnings/(deficit) $ 4,947,153 ============= (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $27,392, 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 $1,075,460. 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, 2004, the Portfolio deferred to January 1, 2005, post-October foreign currency losses of $683,074 and post-October capital losses of $110,120. For the year ended December 31, 2004, the Portfolio deferred losses on straddles of $855,406. (b) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the realization for tax purposes of gains/losses on certain derivative instruments. During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses and the tax character of paydown losses 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, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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. 18 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. 19 AMERICAS GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 20 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, --------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $13.01 $12.65 $12.17 $12.72 $12.42 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .65(c) .61 .67(c) .92(c) 1.08(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions (.06) .34 .61 (.43) .37 Net increase in net asset value from operations .59 .95 1.28 .49 1.45 LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (.69) (.59) (.73) (.91) (.96) Distributions from net realized gain on investment transactions -0- -0- (.07) (.13) (.19) Total dividends and distributions (.69) (.59) (.80) (1.04) (1.15) Net asset value, end of period $12.91 $13.01 $12.65 $12.17 $12.72 TOTAL RETURN Total investment return based on net asset value (d) 4.89% 7.35% 10.99% 3.59% 12.39% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $47,776 $60,550 $72,307 $51,146 $33,154 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.00% 1.04% .93% .95% .95% Expenses, before waivers and reimbursements 1.11% 1.04% 1.05% 1.15% 1.24% Expenses, excluding interest expense .98% 1.04% .93% .95% .95% Net investment income 5.07%(c) 4.75% 5.45%(c) 7.35%(c) 8.68%(c) Portfolio turnover rate 69% 73% 60% 57% 0%
See footnote summary on page 22. 21 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 DECEMBER 31, to ------------------------ DECEMBER 31, 2004 2003 2002 ----------- ----------- ----------- Net asset value, beginning of period $13.01 $12.67 $12.04 INCOME FROM INVESTMENT OPERATIONS Net investment income (b) .62(c) .57 .42(c) Net realized and unrealized gain (loss) on investment and foreign currency transactions (.06) .36 .21 Net increase in net asset value from operations .56 .93 .63 LESS: DIVIDENDS Dividends from net investment income (.67) (.59) -0- Net asset value, end of period $12.90 $13.01 $12.67 TOTAL RETURN Total investment return based on net asset value (d) 4.67% 7.18% 5.23% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $9,393 $5,698 $236 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.27% 1.30% 1.36%(f) Expenses, before waivers and reimbursements 1.37% 1.30% 1.48%(f) Expenses, excluding interest expense 1.24% 1.30% 1.36%(f) Net investment income 4.88%(c) 4.42% 4.72%(c)(f) Portfolio turnover rate 69% 73% 60% (a) As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began amortizing premium on debt securities. For the year ended December 31, 2001, the effect of this change was to decrease net investment income per share by $.04, increase net realized and unrealized (loss) on investments per share by $.04, and decrease the ratio of net investment income to average net assets from 7.61% to 7.35%. 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 oustanding. (c) Net of expenses waived or reimbursed by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) Commencement of distribution. (f) Annualized. 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN AMERICAS GOVERNMENT INCOME PORTFOLIO: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Americas Government Income Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 23 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 24 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ----------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of the Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 25 AMERICAS GOVERNMENT INCOME PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital Management 10/2/57 Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Paul J. DeNoon(1) Vice President Senior Vice President of ACMC** with which he has 4/18/62 been associated since prior to 2000. Michael Mon(1) Vice President Vice President of ACMC**, with which he has been 3/2/69 associated since prior to 2000. Douglas J. Peebles(1) Vice President Executive Vice President of ACMC**, with which he has 8/10/65 been associated since prior to 2000. Jeffrey L. Phlegar Vice President Executive Vice President of ACMC**, with which he has 6/28/66 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and Chief 10/23/62 Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. 26 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN ----------------------- VARIABLE PRODUCTS ----------------------- SERIES FUND ----------------------- ALLIANCEBERNSTEIN ----------------------- U.S. GOVERNMENT/ ----------------------- HIGH GRADE SECURITIES ----------------------- PORTFOLIO ----------------------- ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED ------------------------- o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED ------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 11, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Lehman Brothers (LB) U.S. Aggregate Index, for the one-, five- and 10-year periods ended December 31, 2004. For the annual reporting period ended December 31, 2004, the Portfolio underperformed the LB U.S. Aggregate Index. The Portfolio's overweighted position in investment grade corporates, particularly the focus in BBB-rated issuers, contributed positively to performance. Offsetting the positives during the annual period was the Portfolio's yield curve positioning; more specifically, the Portfolio's shorter-than-benchmark duration. MARKET REVIEW AND INVESTMENT STRATEGY In the context of a tightening Federal Reserve (125 basis points for the year) and a falling dollar, the bond market performed surprisingly during the annual reporting period ended December 31, 2004. For the second year in a row, fixed-income investors earned moderate returns on their investment-grade holdings--essentially equal to the bonds' yields. Despite a 50-basis-point increase in the Fed Funds rate in the last two months of the year, fourth-quarter returns were modestly positive, thanks to stable yields on longer-maturity bonds. Treasuries were the weakest sector on a duration-adjusted basis. Among investment-grade sectors, credit delivered the strongest excess returns versus Treasuries during the annual period. Corporate bonds benefited from healthy economic growth, ample liquidity, strong credit fundamentals, limited supply and robust foreign demand. As a result, credit spreads ground tighter, reaching levels not seen in more than six years. Most of the spread tightening occurred in the second half of the year. Within the corporate market, BBB-rated debt significantly outperformed the higher-quality tiers, posting excess returns of 2.0%, compared to 1.4% for A-rated corporates and 0.8% for AA-rated debt. This pattern of performance held for the fourth quarter, as well. In a stellar year for mortgages, the sector's excess returns nearly matched those of investment-grade credit. Performance was buoyed by persistently strong demand from foreign investors, declining volatility and virtually non-existent new supply as homeowner refinancings slowed to a trickle. Relative performance for the quarter was similarly very strong. During the annual reporting period, the Portfolio was concentrated in high coupon mortgages which provided an attractive yield advantage. Within the corporate sector, the Portfolio generally maintained a greater-than-neutral exposure to investment-grade credit with an overweighted position in long-maturity and BBB-rated debt. The Portfolio also maintained a modestly shorter-than-benchmark duration in anticipation of higher interest rates. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund U.S. Government/High Grade Securities Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. ------------------------------------------------------------------------------- 1 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Lehman Brothers (LB) U.S. Aggregate Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The LB U.S. Aggregate Index covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage pass through securities, asset-backed securities and commercial mortgage-backed securities. 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. A Word About Risk Price fluctuation in the Portfolio's securities may be caused by changes in the general level of interest rates or changes in bond credit quality ratings. Changes in interest rates have a greater negative effect on bonds with longer maturities than on those with shorter maturities. Investments in the Portfolio are not guaranteed because of fluctuation in the net asset value for the underlying fixed-income related investments. Similar to direct bond ownership, bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the Portfolio. Portfolio purchasers should understand that, in contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. While the Portfolio invests principally in bonds and other fixed income securities, in order to achieve its investment objectives, the Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These types of transactions include the purchase and sale of futures contracts or options on futures contracts. Also, at the discretion of the Investment Manager, the Portfolio can invest up to 10% of its total assets in illiquid securities or make loans of portfolio securities of up to 30% of its total assets. In addition, the Portfolio may also enter into repurchase agreements. These financial instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. (Historical Performance continued on next page) ------------------------------------------------------------------------------- 2 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ THE PORTFOLIO VS. ITS BENCHMARK Returns PERIODS ENDED DECEMBER 31, 2004 ------------------------------------- 1 Year 5 Years 10 Years ------------------------------------------------------------------------------- AllianceBernstein U.S. Government/ High Grade Securities Portfolio Class A 3.77% 6.84% 6.93% ------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Index 4.34% 7.71% 7.72% ------------------------------------------------------------------------------- ALLIANCEBERNSTEIN U.S. GOV'T/HIGH GRADE SECURITIES PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 12/31/94 - 12/31/04 LEHMAN BROTHERS U.S. AGGREGATE INDEX: $21,036 ALLIANCEBERNSTEIN U.S. GOVERNMENT/ HIGH GRADE SECURITIES PORTFOLIO CLASS A: $19,540 [Graphic ommitted, data below] AllianceBernstein U.S. Government/ High Grade Securities Lehman Brothers Portfolio Class A U.S. Aggregate Index ------------------------------------------------------- 12/31/94 10000 10000 12/31/95 11926 11847 12/31/96 12230 12277 12/31/97 13292 13462 12/31/98 14384 14632 12/31/99 14032 14512 12/31/00 15587 16199 12/31/01 16815 17567 12/31/02 18125 19367 12/31/03 18830 20161 12/31/04 19540 21036 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 12/31/94 to 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. ------------------------------------------------------------------------------- 3 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending U.S. Government/ Account Value Account Value Expenses Paid Annualized High Grade Securities Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* --------------------------------------------------------------------------------------------------------------------- Class A Actual $1,000 $1,038.04 $3.48 0.68% Hypothetical (5% return before expenses) $1,000 $1,037.48 $3.46 0.68% --------------------------------------------------------------------------------------------------------------------- Class B Actual $1,000 $1,037.48 $4.81 0.94% Hypothetical (5% return before expenses) $1,000 $1,020.41 $4.77 0.94% ---------------------------------------------------------------------------------------------------------------------
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). ------------------------------------------------------------------------------- 4 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO SECURITY TYPE BREAKDOWN December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ SECURITY TYPE U.S. $ VALUE PERCENT OF NET ASSETS ------------------------------------------------------------------------------- Government/Agency Obligations $75,431,216 58.8% Corporate Debt Obligations 27,737,278 21.6 Commercial Mortgage Backed Securities 7,929,079 6.2 Asset Backed Securities 2,678,790 2.1 Non-Agency Collateralized Mortgage Obligations 1,126,404 0.9 Sovereign Debt Obligation 331,008 0.3 ------------ ----- Total Investments* 115,233,775 89.9 Cash and receivables, net of liabilities 13,053,247 10.1 ------------ ----- Net Assets $128,287,022 100.0% ------------------------------------------------------------------------------- * Excludes short-term investments. ------------------------------------------------------------------------------- 5 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- U. S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-58.8% FEDERAL AGENCY-10.9% Federal Home Loan Mortgage Corp. 3.75%, 8/03/07 $ 1,730 $ 1,732,344 4.25%, 7/15/09 3,220 3,275,967 5.125%, 11/07/13 1,300 1,305,200 Federal National Mortgage Association 3.25%, 6/28/06 2,705 2,704,080 3.41%, 8/30/07 2,660 2,651,025 3.55%, 1/16/07 975 975,698 5.25%, 8/01/12 1,325 1,374,860 ------------ 14,019,174 ------------ MORTGAGE PASS- THROUGHS-40.3% Federal Gold Loan Mortgage Corp. 6.00%, TBA 1,745 1,802,257 Federal National Mortgage Association 4.50%, TBA 5,910 5,889,681 5.00%, 2/01/34 2,587 2,571,946 5.00%, TBA 4,655 4,617,178 5.50%, TBA 18,210 18,562,629 6.00%, 11/01/16 535 560,622 6.00%, TBA 4,660 4,817,275 6.50%, 4/01/28-11/01/29 407 429,551 6.50%, TBA 7,665 8,036,278 Government National Mortgage Association 5.00%, TBA 2,710 2,709,154 6.00%, TBA 1,575 1,631,602 ------------ 51,628,173 ------------ U.S. TREASURY SECURITIES-7.6% U.S. Treasury Bond 5.375%, 2/15/31 1,100 1,189,461 U.S. Treasury Notes 2.00%, 7/15/14 2,052 2,117,331 3.50%, 8/15/09-11/15/09 6,495 6,477,077 ------------ 9,783,869 ------------ Total U. S. Government & Government Sponsored Agency Obligations (cost $75,491,791) 75,431,216 ------------ CORPORATE DEBT OBLIGATIONS-21.6% AEROSPACE/ DEFENSE-0.1% Boeing Capital Corp. 4.75%, 8/25/08 115 118,938 ------------ AUTOMOTIVE-1.4% Ford Motor Co. 6.375%, 2/01/29 95 85,494 7.45%, 7/16/31 40 40,230 Ford Motor Credit Co. 5.70%, 1/15/10 40 40,364 7.00%, 10/01/13 125 132,517 7.375%, 2/01/11 480 517,320 General Motors Acceptance Corp. 6.875%, 9/15/11 315 322,810 7.75%, 1/19/10 235 252,229 General Motors Corp. 8.375%, 7/15/33 450 466,237 ------------ 1,857,201 ------------ BANKING-2.8% Bank of America Corp. 6.25%, 4/15/12 125 138,051 Barclays Bank Plc (United Kingdom) 8.55%, 9/29/49 (a)(b) 365 444,453 Capital One Bank 6.50%, 6/13/13 90 98,342 Huntington National Bank 4.375%, 1/15/10 250 250,844 JPMorgan Chase & Co. 6.75%, 2/01/11 425 477,447 Mizuho Finance (Cayman Islands) 8.375%, 12/29/49 395 432,881 RBS Capital Trust I pfd. 4.709%, 12/29/49 (b) 570 555,292 RBS Capital Trust III 5.512%, 9/29/49 530 541,772 Suntrust Bank Series CD 2.53%, 6/02/09 (b) 190 189,981 UFJ Finance Aruba AEC (Aruba) 6.75%, 7/15/13 240 267,449 Wells Fargo Company 4.20%, 1/15/10 195 195,792 ------------ 3,592,304 ------------ ------------------------------------------------------------------------------- 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- BROADCASTING/ MEDIA-1.4% AOL Time Warner, Inc. 7.70%, 5/01/32 $ 320 $ 391,398 News America, Inc. 6.55%, 3/15/33 305 324,614 Time Warner Entertainment Co. 8.375%, 3/15/23 670 839,984 WPP Finance (UK) Corp. 5.875%, 6/15/14 (a) 175 182,129 ------------ 1,738,125 ------------ CABLE-0.9% AT&T Broadband 9.455%, 11/15/22 220 304,271 British Sky Broadcasting (United Kingdom) 6.875%, 2/23/09 100 109,800 Comcast Cable Communications, Inc. 6.875%, 6/15/09 525 583,246 Comcast Corp. 7.05%, 3/15/33 125 143,029 ------------ 1,140,346 ------------ COMMUNICATIONS-1.6% British Telecommunications Plc (United Kingdom) 8.875%, 12/15/30 180 241,024 Deutsche Telekom International Finance BV (Netherlands) 8.75%, 6/15/30 135 178,262 SBC Communications, Inc. 5.10%, 9/15/14 285 287,649 5.625%, 6/15/16 50 51,653 Sprint Capital Corp. 8.75%, 3/15/32 605 806,046 Telecom Italia Captial 4.00%, 1/15/10(a) 540 529,463 ------------ 2,094,097 ------------ COMMUNICATIONS- MOBILE-0.7% AT&T Wireless Services, Inc. 8.75%, 3/01/31 430 579,775 Telus Corp. (Canada) 7.50%, 6/01/07 330 358,545 ------------ 938,320 ------------ CONGLOMERATES/ MISCELLANEOUS-0.3% Hutchison Whampoa International Ltd. (Cayman Islands) 7.45%, 11/24/33(a) 385 426,729 ------------ CONSUMER MANUFACTURING-0.1% Fortune Brands, Inc. 2.875%, 12/01/06 175 173,360 ------------ ENERGY-0.5% Conoco, Inc. 6.95%, 4/15/29 225 265,692 Valero Energy Corp. 7.50%, 4/15/32 330 398,040 ------------ 663,732 ------------ FINANCIAL-4.2% American General Finance Corp. 4.625%, 5/15/09 510 518,977 Berkshire Hathaway, Inc. 4.20%, 12/15/10 270 268,267 Capital One Financial Corp. 6.25%, 11/15/13 125 134,399 CBA Capital Trust I pfd. 5.805%, 12/31/49 (a) 235 244,642 CIT Group, Inc. 2.53%, 5/18/07 (b) 210 210,001 Citigroup, Inc. 2.59%, 6/09/09 (b) 175 175,266 Countrywide Home Loans, Inc. 4.00%, 3/22/11 360 350,014 Credit Suisse First Boston 5.50%, 8/15/13 255 267,022 Duke Capital LLC 8.00%, 10/01/19 230 280,678 General Electric Capital Corp. 3.50%, 8/15/07 645 643,694 4.375%, 11/21/11 35 34,792 6.75%, 3/15/32 440 514,998 Goldman Sachs Group, Inc. 4.75%, 7/15/13 230 227,593 6.125%, 2/15/33 380 394,771 Household Finance Corp. 6.50%, 11/15/08 425 462,220 7.00%, 5/15/12 195 222,686 MBNA Corp. 4.625%, 9/15/08 290 294,540 Merrill Lynch & Co. 5.00%, 1/15/15 165 164,353 ------------ 5,408,913 ------------ FOOD/BEVERAGE-0.7% Kraft Foods, Inc. 4.125%, 11/12/09 540 537,046 5.25%, 10/01/13 380 390,963 ------------ 928,009 ------------ HEALTHCARE-0.3% Humana, Inc. 6.30%, 8/01/18 215 220,516 Wellpoint, Inc. 3.75%, 12/14/07(a) 80 79,958 ------------ 300,474 ------------ ------------------------------------------------------------------------------- 7 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- INDUSTRIALS-0.4% Tyco International Group, SA 6.375%, 10/15/11 $ 440 $ 485,785 ------------ INSURANCE-1.6% Assurant, Inc. 5.625%, 2/15/14 220 227,205 Liberty Mutual Group 5.75%, 3/15/14 (a) 195 191,709 Mangrove Bay Pass-Through Trust 6.102%, 7/15/33 (A)(B) 635 630,086 MetLife, Inc. 5.00%, 11/24/13 225 225,982 Royal Sun & Alliance Insurance (United Kingdom) 8.95%, 10/15/29 215 271,505 Zurich Capital Trust I 8.376%, 6/01/37 (a) 490 550,154 ------------ 2,096,641 ------------ PAPER/PACKAGING-0.8% International Paper Co. 5.30%, 4/01/15 300 303,520 Weyerhaeuser Co. 7.375%, 3/15/32 580 687,791 ------------ 991,311 ------------ PETROLEUM PRODUCTS-0.5% Amerada Hess Corp. 7.125%, 3/15/33 265 291,384 7.875%, 10/01/29 300 354,962 ------------ 646,346 ------------ PUBLIC UTILITIES- ELECTRIC & GAS-2.1% Carolina Power & Light Co. 6.50%, 7/15/12 335 371,579 Consumers Energy Series C 4.25%, 4/15/08 130 131,273 First Energy Corp. Series C 7.375%, 11/15/31 590 673,770 MidAmerican Energy Holdings Co. 5.875%, 10/01/12 195 206,630 NiSource Finance Corp. 7.875%, 11/15/10 190 223,360 Pacific Gas & Electric 6.05%, 3/01/34 355 368,709 Public Service Company of Colorado 7.875%, 10/01/12 200 242,267 TXU Austraila LP (Australia) 6.15%, 11/15/13 (a) 85 91,815 Union Electric Co. 5.10%, 10/01/19 90 89,376 Xcel Energy, Inc. 7.00%, 12/01/10 260 293,080 ------------ 2,691,859 ------------ PUBLIC UTILITIES- TELEPHONE-0.4% Bellsouth Corp. 4.20%, 9/15/09 170 170,444 Telecom Italia Capital (Luxembourg) 6.375%, 11/15/33 350 359,869 ------------ 530,313 ------------ SERVICE-0.3% Waste Management, Inc. 6.875%, 5/15/09 335 371,172 ------------ SUPERMARKETS & DRUGS-0.4% Albertson's, Inc. 7.45%, 8/01/29 190 222,700 Safeway, Inc. 4.95%, 8/16/10 225 229,041 ------------ 451,741 ------------ TECHNOLOGY-0.1% IBM Corp. 4.375%, 6/01/09 90 91,562 ------------ Total Corporate Debt Obligations (cost $26,234,509) 27,737,278 ------------ COMMERCIAL MORTGAGE BACKED SECURITIES-6.2% Banc of America Commercial Mortgage, Inc. Series 2004-1 Cl.A2 4.037%, 11/10/39 495 490,817 Series 2004-1 Cl.A4 4.76%, 11/10/39 645 644,361 Series 2004-3 Cl. A5 5.48%, 6/10/39 675 707,420 Series 2004-4 Cl.A3 4.128%, 7/10/42 410 410,295 Series 2004-6 Cl. A2 4.161%, 12/10/42 525 525,410 Bear Stearns Commercial Mortgage Securities, Inc. Series 2004-PWR5 Cl.A5 4.978%, 7/11/42 655 662,572 CS First Boston Mortgage Securities Corp. Series 2003-CK2 CI.A2 3.861%, 3/15/36 360 359,638 Series 2004-C5 Cl.A2 4.183%, 11/15/37 440 440,299 GE Capital Commercial Mortgage Corp. Series 2004-C3 Cl.A4 5.189%, 7/10/39 470 483,160 ------------------------------------------------------------------------------- 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- Greenwich Capital Commercial Funding Corp. Series 2003-C1 CL.A4 4.111%, 7/05/35 $ 450 $ 434,232 JPMorgan Chase Commercial Mortgage Securities Corp. Series 2004-C1 Cl.A2 4.302%, 1/15/38 95 94,151 LB-UBS Commercial Mortgage Trust Series 2004-C7 Cl.A2 3.992%, 10/15/29 385 383,048 Series 2004-C8 Cl.A2 4.201%, 12/15/29 420 421,252 Merrill Lynch Mortgage Trust Series 2004-Key2 Cl.A2 4.166%, 8/12/39 350 349,601 Morgan Stanley Capital I Series 2003-IQ6 Cl.A4 4.97%, 12/15/41 330 335,629 Series 2004-T13 Cl.A2 3.94%, 9/13/45 690 681,589 Series 2004-HQ4 Cl.A7 4.97%, 4/14/40 500 505,605 ------------ Total Commercial Mortgage Backed Securities (cost $7,668,945) 7,929,079 ------------ ASSET BACKED SECURITIES-2.1% Ameriquest Mortgage Securities, Inc. Series 2004-R4 Cl.A2 2.291%, 6/25/34 (b) 158 157,534 Centex Home Equity Series 2003-C Cl.AV 2.72%, 9/25/33 (b) 193 193,153 Citibank Credit Card Issuance Trust Series 2004 Cl.A8 4.90%, 12/12/16 735 740,057 Equity One ABS, Inc. Series 2004-3 Cl.AF1 2.34%, 7/25/34 (b) 263 262,826 Merrill Lynch Mortgage Investors, Inc. Series 2004-SL1 Cl.A 2.441%, 4/25/35 (b) 140 140,370 RAAC Series Series 2004-SP1 Cl.AI1 2.598%, 6/25/13 (B) 156 156,113 Residential Asset Mortgage Products, Inc. Series 2004-RS2 Cl.AI1 2.548%, 1/25/24 (b) 138 137,833 Series 2004-RS6 Cl.AI1 2.33%, 8/25/22 (b) 173 173,232 Residential Asset Securities Corp. Series 2004-KS7 Cl. A2 2.551%, 11/25/32 (b) 273 273,161 Series 2004-KS7 Cl.AI1 2.33%, 10/25/21 (b) 214 214,044 Residential Funding Mortgage Securities II Series 2004-HS2 Cl. AI1 2.568%, 12/25/18 (b) 231 230,467 ------------ Total Asset Backed Securities (cost $2,868,364) 2,678,790 ------------ NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS-0.9% Countrywide Home Loans Series 2003-49 Cl.A1 1.642%, 12/19/33 195 194,439 Deutsche Mortgage Securities, Inc. Series 2004-4 Cl.1A1 2.391%, 4/25/34 (b) 189 189,274 Washington Mutual Series 2004-AR10 CL.A2C 6.875%, 5/15/11 655 742,691 ------------ Total Non-Agency Collateralized Mortgage Obligations (cost $1,041,186) 1,126,404 ------------ SOVEREIGN DEBT OBLIGATIONS-0.2% Russian Federation 5.00%, 3/31/30 (cost $319,201) 320 331,008 ------------ SHORT-TERM INVESTMENTS-46.8% TIME DEPOSIT-1.5% The Bank of New York 1.50%, 1/03/05 1,989 1,989,000 ------------ ------------------------------------------------------------------------------- 9 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount (000) U.S. $ Value ------------------------------------------------------------------------------- U.S. TREASURY SECURITIES-45.3% U.S Treasury Bill Zero Coupon, 1/06/05-3/10/05 58,185 58,082,505 ------------ Total Short-Term Investments (cost $60,059,259) 60,071,505 ------------ TOTAL INVESTMENTS-136.6% (cost $173,683,255) 175,305,280 Other assets less liabilities-(36.6%) (47,018,258) ------------ NET ASSETS-100% $128,287,022 ============ (a) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2004, the aggregate market value of these securities amounted to $3,371,138 or 2.6 % of net assets. (b) Variable rate coupon, rate shown as of December 31, 2004. Glossary of Terms: TBA - To Be Assigned -Securities are purchased on a forward commitment with an approximate principal amount (generally +/-1.0%) and no definite maturity date. The actual principal amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned. See Notes to Financial Statements. ------------------------------------------------------------------------------- 10 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $173,683,255) $175,305,280 Cash 928 Receivable for investment securities sold 3,516,237 Interest receivable 845,820 Receivable for capital stock sold 540,094 ------------ Total assets 180,208,359 ------------ LIABILITIES Payable for investment securities purchased 51,734,907 Advisory fee payable 49,033 Administrative fee payable 17,500 Payable for capital stock redeemed 6,389 Distribution fee payable 5,459 Transfer agent fee payable 60 Accrued expenses 107,989 ------------ Total liabilities 51,921,337 ------------ NET ASSETS $128,287,022 ============ COMPOSITION OF NET ASSETS Capital stock, at par $10,461 Additional paid-in capital 119,948,488 Undistributed net investment income 3,438,692 Accumulated net realized gain on investment transactions 3,267,356 Net unrealized appreciation of investments 1,622,025 ------------ $128,287,022 ------------ Class A Shares Net assets $102,543,026 ============ Shares of capital stock outstanding 8,347,869 ============ Net asset value per share $ 12.28 ============ Class B Shares Net assets $ 25,743,996 ============ Shares of capital stock outstanding 2,113,113 ============ Net asset value per share $ 12.18 ============ See Notes to Financial Statements. ------------------------------------------------------------------------------- 11 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $ 4,294,807 ------------ EXPENSES Advisory fee 759,666 Distribution fee--Class B 60,942 Custodian 146,130 Administrative 69,000 Audit 41,750 Printing 34,975 Legal 14,126 Directors' fees 1,000 Transfer agency 859 Miscellaneous 4,490 ------------ Total expenses 1,132,938 Less: expenses waived and reimbursed by the Adviser (see Note B) (142,823) ------------ Net expenses 990,115 ------------ Net investment income 3,304,692 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized gain on investment transactions 3,528,992 Net change in unrealized appreciation/depreciation of investments (1,779,525) ------------ Net gain on investment transactions 1,749,467 ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,054,159 ============ See Notes to Financial Statements. ------------------------------------------------------------------------------- 12 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, 2004 2003 =========== ============ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $3,304,692 $3,539,406 Net realized gain on investment transactions 3,528,992 4,234,326 Net change in unrealized appreciation/ depreciation of investments (1,779,525) (1,612,801) ------------ ------------ Net increase in net assets from operations 5,054,159 6,160,931 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (3,152,959) (4,723,237) Class B (649,285) (437,765) Net realized gain on investment transactions Class A (3,170,573) (1,253,621) Class B (695,663) (121,738) CAPITAL STOCK TRANSACTIONS Net decrease (20,274,658) (23,315,147) ------------ ------------ Total decrease (22,888,979) (23,690,577) NET ASSETS Beginning of period 151,176,001 174,866,578 ------------ ------------ End of period (including undistributed net investment income of $3,438,692 and $3,779,005, respectively) $128,287,022 $151,176,001 ============ ============ See Notes to Financial Statements. ------------------------------------------------------------------------------- 13 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein U.S. Government/High Grade Securities Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek high current income consistent with preservation of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. ------------------------------------------------------------------------------- 14 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Investment transactions are accounted for on the date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .60% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .45% of the first $2.5 billion, .40% of the next $2.5 billion and .35% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $142,823. For a more complete discussion of the Adviser's settlement with the NYAG, please see "Legal Proceedings" below. ------------------------------------------------------------------------------- 15 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Pursuant to the advisory agreement, the Portfolio paid $69,000 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, 2004. 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolios to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows: Purchases Sales ============ ============ Investment securities (excluding U.S. government securities) $ 49,682,013 $ 86,308,670 U.S. government securities 808,654,759 805,798,666 The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $173,708,370 ============ Gross unrealized appreciation $ 1,827,497 Gross unrealized depreciation (230,587) ------------ Net unrealized appreciation $ 1,596,910 ============ 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, 2004, the Portfolio had no securities on loan. For the year ended December 31, 2004, the Portfolio earned fee income of $440 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. 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- Class A Shares sold 239,148 1,581,386 $2,928,780 $20,008,752 Shares issued in reinvestment of dividends and distributions 540,011 470,989 6,323,532 5,976,857 Shares redeemed (2,721,343) (4,859,767) (33,760,737) (60,660,994) ------------ ------------ -------------- -------------- Net decrease (1,942,184) (2,807,392) $(24,508,425) $(34,675,385) =========== ============ ============== ============== Class B Shares sold 712,222 2,012,386 $8,734,874 $25,045,603 Shares issued in reinvestment of dividends and distributions 115,645 44,370 1,344,947 559,503 Shares redeemed (478,061) (1,143,636) (5,846,054) (14,244,868) ------------ ------------ -------------- -------------- Net increase 349,806 913,120 $4,233,767 $11,360,238 =========== ============ ============== ============== 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. Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE 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, 2004. ------------------------------------------------------------------------------- 17 U.S. GOVERNMENT/HIGH GRADE SECURITIES 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, 2004 and December 31, 2003 were as follows: 2004 2003 ========== ========== Distributions paid from: Ordinary Income $6,121,986 $6,475,252 Net long-term capital gains 1,546,494 61,109 ---------- ---------- Total taxable distributions 7,668,480 6,536,361 ---------- ---------- Total distributions paid $7,668,480 $6,536,361 ========== ========== As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $5,123,322 Undistributed long-term capital gains 1,607,841 Accumulated capital and other losses -0-(a) Unrealized appreciation/(depreciation) 1,596,910(b) ---------- Total accumulated earnings/(deficit) $8,328,073 ========== (a) During the current fiscal year, $59,901 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 tax treatment of paydown gains/losses, resulted in an increase in undistributed net investment income, and a decrease in accumulated net realized gain on investment transactions. The reclassification had no effect on net assets. NOTE J: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. ------------------------------------------------------------------------------- 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and ------------------------------------------------------------------------------- 19 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. ------------------------------------------------------------------------------- 20 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, -------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $12.56 $12.54 $12.00 $11.68 $11.18 -------- -------- -------- -------- -------- Income From Investment Operations Net investment income (b) .32(c) .26 .42 .57 .67 Net realized and unrealized gain on investment transactions .12 .23 .49 .33 .52 -------- -------- -------- -------- -------- Net increase in net asset value from operations .44 .49 .91 .90 1.19 -------- -------- -------- -------- -------- Less: Dividends and Distributions Dividends from net investment income (.36) (.37) (.37) (.58) (.69) Distributions from net realized gain on investment transactions (.36) (.10) -0- -0- -0- -------- -------- -------- -------- -------- Total dividends and distributions (.72) (.47) (.37) (.58) (.69) -------- -------- -------- -------- -------- Net asset value, end of period $12.28 $12.56 $12.54 $12.00 $11.68 ======== ======== ======== ======== ======== Total Return Total investment return based on net asset value (d) 3.77% 3.88% 7.79% 7.88% 11.08% Ratios/Supplemental Data Net assets, end of period (000's omitted) $102,543 $129,194 $164,265 $104,635 $58,170 Ratio to average net assets of: Expenses, net of waivers and reimbursements .68% .77% .82% .89% .95% Expenses, before waivers and reimbursements .78% .77% .82% .89% .95% Net investment income 2.46%(c) 2.10% 3.49% 4.86% 5.95% Portfolio turnover rate 662% 748% 551% 259% 236%
See footnote summary on page 22. ------------------------------------------------------------------------------- 21 U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B -------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------- 2004 2003 2002 2001(a) 2000 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $12.47 $12.47 $11.94 $11.64 $11.16 -------- -------- -------- -------- -------- Income From Investment Operations Net investment income (b) .28(c) .24 .39 .55 .63 Net realized and unrealized gain on investment transactions .13 .21 .49 .31 .53 -------- -------- -------- -------- -------- Net increase in net asset value from operations .41 .45 .88 .86 1.16 -------- -------- -------- -------- -------- Less: Dividends and Distributions Dividends from net investment income. (.34) (.35) (.35) (.56) (.68) Distributions from net realized gain on investment transactions (.36) (.10) -0- -0- -0- -------- -------- -------- -------- -------- Total dividends and distributions (.70) (.45) (.35) (.56) (.68) -------- -------- -------- -------- -------- Net asset value, end of period $12.18 $12.47 $12.47 $11.94 $11.64 ======== ======== ======== ======== ======== Total Return Total investment return based on net asset value (d) 3.52% 3.61% 7.54% 7.60% 10.84% Ratios/Supplemental Data Net assets, end of period (000's omitted) $25,744 $21,982 $10,602 $7,031 $3,627 Ratio to average net assets of: Expenses, net of waivers and reimbursements .93% 1.03% 1.07% 1.14% 1.20% Expenses, before waivers and reimbursements 1.03% 1.03% 1.07% 1.14% 1.20% Net investment income 2.19%(c) 1.89% 3.25% 4.61% 5.67% Portfolio turnover rate 662% 748% 551% 259% 236%
(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) 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. ------------------------------------------------------------------------------- 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein U.S. Government/High Grade Securities Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein U.S. Government/High Grade Securities Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 ------------------------------------------------------------------------------- 23 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. ------------------------------------------------------------------------------- 24 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR -------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 Chairman of the Board associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. ------------------------------------------------------------------------------- 25 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* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Matthew Bloom(1) Vice President Senior Vice President of ACMC**, with which he has 7/15/56 been associated since prior to 2000. Jeffrey L. Phlegar Vice President Senior Vice President of ACMC**, with which he has 6/28/66 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President Deputy General Counsel 10/23/62 and Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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. ------------------------------------------------------------------------------- 26 (This page left intentionally blank.) (This page left intentionally blank.) (This page left intentionally blank.) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ------------------------------------------------------------------------------- ALLIANCEBERNSTEIN MONEY MARKET PORTFOLIO ------------------------------------------------------------------------------- ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. MONEY MARKET PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Expenses Annualized Money Market Account Value Account Value Paid Expense Portfolio July 1, 2004 December 31, 2004 During Period* Ratio* ---------------------------------------------------------------------------------------------- Class A Actual $1,000 $1,004.74 $3.78 0.75% Hypothetical (5% return before expenses) $1,000 $1,021.37 $3.81 0.75% Class B Actual $1,000 $1,003.48 $4.99 0.99% Hypothetical (5% return before expenses) $1,000 $1,020.16 $5.03 0.99%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 1 MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------------- CORPORATE OBLIGATIONS-2.0% Chase Bank USA FRN 2.34%, 5/11/05 $ 1,300 $ 1,300,000 Total Corporate Obligations (amortized cost $1,300,000) 1,300,000 COMMERCIAL PAPER-90.5% ASB Bank Ltd. 2.42%, 3/07/05 1,500 1,493,446 2.52%, 4/07/05 1,000 993,280 Atlantis One Funding 2.13%, 2/03/05 2,000 1,996,095 Bank of Ireland 1.885%, 1/07/05 1,300 1,299,592 Barclays Bank Plc 2.35%, 2/17/05 2,000 1,993,864 Bear Stearns 2.37%, 3/07/05 2,000 1,991,442 BNP Paribas 2.21%, 2/11/05 1,500 1,496,224 Caisse Centrale Jardins 2.26%, 2/18/05 2,500 2,492,467 Fairway Finance Corp. 2.48%, 5/03/05 2,300 2,280,670 FBC Financial Products Ltd. 2.30%, 3/02/05 1,000 996,167 Galaxy Funding 2.28%, 2/23/05 2,000 1,993,287 General Electric Capital Corp. 2.21%, 1/18/05 3,000 2,996,869 Goldman Sachs 2.25%, 1/27/05 2,500 2,495,937 Greenwich Capital 2.12%, 1/26/05 1,000 998,528 2.20%, 2/08/05 1,000 997,678 HBOS Treasury Services 2.12%, 2/01/05 1,750 1,746,805 2.37%, 3/08/05 1,000 995,655 HSBC 1.98%, 1/25/05 3,500 3,495,380 Kitty Hawk Funding 2.19%, 1/18/05 3,000 2,996,897 Metropolitan Life Insurance 2.39%, 3/10/05 2,000 1,990,971 Morgan Stanley 2.33%, 1/26/05 2,000 1,996,764 Northern Rock Plc 2.23%, 2/02/05 1,000 998,018 Private Export Funding Corp. 2.45%, 5/09/05 2,500 2,478,222 Prudential Plc 2.38%, 3/08/05 3,000 2,986,910 Royal Bank of Scotland 2.30%, 1/19/05 800 799,080 San Paolo U.S. Financial 1.98%, 1/27/05 1,000 998,570 Scaldis Capital, LLC. 2.42%, 3/11/05 1,000 995,362 Sigma Finance Corp. 2.47%, 3/29/05 1,000 994,031 Swedbank 2.18%, 1/19/05 2,500 2,497,275 Toyota Motor Credit 2.22%, 2/11/05 3,200 3,191,909 UBS Finance 2.23%, 1/03/05 1,500 1,499,814 Unicredito Italiano SPA 2.36%, 3/02/05 1,700 1,693,313 Total Commercial Paper (amortized cost $58,870,522) 58,870,522 CERTIFICATES OF DEPOSIT-8.2% Calyon NY 2.41%, 3/02/05 1,000 1,000,000 Danske Bank 2.00%, 1/18/05 1,300 1,300,000 Svenska Handelsbanken 2.25%, 2/09/05 2,000 2,000,000 World Savings Bank 1.97%, 1/03/05 1,000 999,999 Total Certificates of Deposit (amortized cost $5,299,999) 5,299,999 TOTAL INVESTMENTS-100.7% (cost $65,470,521) 65,470,521 Other assets less liabilities-(0.7%) (443,309) NET ASSETS-100% $ 65,027,212 Glossary: FRN - Floting Rate Note See Notes to Financial Statements. 2 MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $65,470,521) $ 65,470,521 Cash 17,451 Receivable for capital stock sold 48,939 Interest receivable 16,384 Total assets 65,553,295 LIABILITIES Payable for capital stock redeemed 423,628 Dividends payable 62,163 Advisory fee payable 25,463 Distribution fee payable 6,192 Administrative fee payable 4,577 Transfer agent fee payable 68 Accrued expenses 3,992 Total liabilities 526,083 NET ASSETS $65,027,212 COMPOSITION OF NET ASSETS Capital stock, at par $ 65,028 Additional paid-in capital 64,962,434 Accumulated net realized loss on investment transactions (250) $ 65,027,212 Class A Shares Net assets $ 36,739,776 Shares of capital stock outstanding 36,738,279 Net asset value per share $ 1.00 Class B Shares Net assets $ 28,287,436 Shares of capital stock outstanding 28,289,532 Net asset value per share $ 1.00 See Notes to Financial Statements. 3 MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS Year Ended December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Interest $ 1,221,488 EXPENSES Advisory fee 436,383 Distribution fee--Class B 102,508 Custodian 80,176 Administrative 69,000 Audit 39,764 Printing 11,712 Legal 10,746 Directors' fees 1,000 Transfer agency 859 Miscellaneous 4,014 Total expenses 756,162 Less: expenses waived and reimbursed by the Adviser (see Note B) (33,054) Net expenses 723,108 Net investment income 498,380 REALIZED LOSS ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions (250) NET INCREASE IN NET ASSETS FROM OPERATIONS $ 498,130 See Notes to Financial Statements. 4 MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Year Ended Year Ended December 31, December 31, 2004 2003 ------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 498,380 $ 570,205 Net realized gain (loss) on investment transactions (250) 324 Net increase in net assets from operations 498,130 570,529 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income Class A (328,341) (411,077) Class B (170,039) (159,585) Net realized gain on investment transactions Class A (140) -0- Class B (130) -0- CAPITAL STOCK TRANSACTIONS Net decrease (37,764,839) (46,739,540) Total decrease (37,765,359) (46,739,673) NET ASSETS Beginning of period 102,792,571 149,532,244 End of period (including undistributed net investment income of $0 and $0, respectively) $65,027,212 $102,792,571 See Notes to Financial Statements. 5 MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein Money Market Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek safety of principal, excellent liquidity and maximum current income to the extent consistent with the first two objectives. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Securities in which the Portfolio invests are valued at amortized cost which approximates fair value, under which method a portfolio instrument is valued at cost and any premium or discount is amortized on a 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. NOTE B: Advisory Fee and Other Transactions with Affiliates Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid Alliance Capital Management L.P. (the "Adviser") an advisory fee at an annual rate of .50% of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .45% of the first $2.5 billion, .40% of the next $2.5 billion and .35% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. 6 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Effective January 1, 2004 through September 6, 2004, in contemplation of the final agreement with the Office of New York Attorney General ("NYAG"), the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $33,054. 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 $69,000 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, 2004. 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions At December 31, 2004, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. 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, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold 28,338,237 36,286,688 $ 28,338,237 $ 36,286,688 Shares issued in reinvestment of dividends 328,481 475,045 328,481 475,045 Shares redeemed (46,773,633) (79,130,806) (46,773,633) (79,130,807) Net decrease (18,106,915) (42,369,073) $ (18,106,915) $ (42,369,074) CLASS B Shares sold 47,869,045 102,776,644 $ 47,869,045 $ 102,776,644 Shares issued in reinvestment of dividends 170,169 180,806 170,169 180,806 Shares redeemed (67,697,138) (107,327,917) (67,697,138) (107,327,916) Net decrease (19,657,924) (4,370,467) $ (19,657,924) $ (4,370,466) 7 MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE F: Risks Involved in Investing in the Portfolio Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit risk rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as "junk bonds") have speculative elements or are predominantly speculative risks. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: Distributions to Shareholders The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 Distributions paid from: Ordinary income $ 498,650 $ 570,662 Total distributions paid $ 498,650 $ 570,662 As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Accumulated capital and other losses $ (250)(a) Total accumulated earnings/(deficit) $ (250) (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $250, all of which expires in the year 2012. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the current fiscal year, permanent differences due to a tax distribution, in excess of earnings, and the tax treatment of distributions, resulted in a net decrease to accumulated net realized loss on investment transactions and a corresponding decrease in additional paid in capital. These reclassifications have no effect on net assets. NOTE H: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement , please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V. ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized 9 MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 10 MONEY MARKET 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, 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .01(a) .01 .01 .04 .06 LESS: DIVIDENDS Dividends from net investment income (.01) (.01) (.01) (.04) (.06) 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 (b) .71% .53% 1.10% 3.57% 5.91% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $36,740 $54,847 $97,216 $128,700 $146,270 Ratio to average net assets of: Expenses, net of waivers and reimbursements .69% .66% .68% .63% .67% Expenses, before waivers and reimbursements .73% .66% .68% .63% .67% Net investment income .68%(a) .55% 1.10% 3.55% 5.73%
See footnote summary on page 12. 11 MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B ----------------------------------------------------------------- Year Ended December 31, 2004 2003 2002 2001 2000 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS Net investment income -0-(a)(c) -0-(c) .01 .03 .05 LESS: DIVIDENDS Dividends from net investment income -0-(c) -0-(c) (.01) (.03) (.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 (b) .46% .28% .85% 3.32% 5.65% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $28,287 $47,946 $52,316 $49,161 $9,758 Ratio to average net assets of: Expenses, net of waivers and reimbursements .94% .91% .93% .90% .95% Expenses, before waivers and reimbursements .98% .91% .93% .90% .95% Net investment income .41%(a) .29% .85% 2.60% 5.64%
(a) Net of expenses reimbursed or waived by the adviser. (b) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (c) Amount is less than $.01 per share. 12 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein Money Market Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Money Market Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 13 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and governance and nominating committee. 14 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ---------------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 CHAIRMAN OF THE BOARD associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and the Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 15 MONEY MARKET PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Officer Information Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC,** with which he Compliance Officer has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. John F. Chiodi(1) Vice President Vice President of ACMC**, with which he has been 4/10/66 associated since prior to 2000. Joseph C. Dona(1) Vice President Vice President of ACMC**, with which he has been 2/12/61 associated since prior to 2000. Raymond J. Papera(1) Vice President Senior Vice President of ACMC**, with which he has 3/12/56 been associated since prior to 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel 10/23/62 and Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 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 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(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 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN U.S. LARGE CAP BLENDED STYLE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 ------------------------------------------------------------------------------- THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. ------------------------------------------------------------------------------- INVESTMENT PRODUCTS OFFERED --------------------------- > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED --------------------------- YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. U.S. LARGE CAP BLENDED STYLE PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ LETTER TO INVESTORS February 10, 2005 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, 2004. 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 The table on page 3 shows the Portfolio's performance compared to its benchmark, the Standard & Poor's (S&P) 500 Stock Index for the annual reporting period ended December 31, 2004 and since inception of the Portfolio's Class A shares on June 6, 2003. The Portfolio underperformed its benchmark during the annual reporting period ended December 31, 2004 and since the Portfolio's inception on June 6, 2003. During the annual period, the Portfolio benefited from strong relative performance in the value portion of the Portfolio. However, this was offset by the continued underperformance of the growth portion of the Portfolio. The Portfolio's performance since its inception was heavily influenced by the latter half of 2003, when small-capitalization, high-beta and low quality stocks dominated. In this environment, our growth team, which maintains a large-cap high-quality bias, underperformed. For the annual period under review, security selection contributed positively to the Portfolio's return, while sector selection detracted from the Portfolio's return. Security selection was most beneficial in the telecommunications sector, where the Portfolio's holdings benefited from corporate restructuring, and in the industrials sector, driven by railroads and selected capital goods manufacturers. The negative sector attribution was primarily due to an overweighted position in the technology sector, which meaningfully underperformed during the second half of the year. MARKET REVIEW AND INVESTMENT STRATEGY The S&P 500 Stock Index returned 10.87% in 2004, with most of the gain coming in the fourth quarter. Energy stocks led the market up, rising more than 31% for the year as record high oil prices lifted industry profits. Technology and consumer growth stocks were the major underperforming sectors during the reporting period. The market again favored value rather than growth in 2004, with the Russell 1000 Value Index gaining 16.49% versus 6.30% for the Russell 1000 Growth Index. Much of this can be attributed to the outsized outperformance for most of the year of commodity- and interest-rate-sensitive sectors, which make up a much bigger proportion of the value index than the growth index. With technology and consumer-growth stocks rallying strongly during the fourth quarter of 2004, however, the gap between the two style indices narrowed significantly, after being extremely wide in the third quarter. In the value portion of the Portfolio, we continue to see a compressed valuation spread between the cheapest and most expensive stocks, reducing the value opportunity, as we measure it. In a relatively benign economic environment, with most companies delivering earnings close to expectations, free cash flow at record highs and balance sheets improving, there are none of the widespread anxieties that typically give rise to major value opportunities. Thus, we continue to take smaller-than-usual positions relative to the broad market, and the Portfolio's risk is below average. In the growth portion of the Portfolio, the anomalous low valuations for rapid growth stocks have afforded us the opportunity to trade up at little or no premium to companies that our research indicates are poised to become growth leaders. Technology and related segments remain a key focus, given pent-up demand on the business side and consumers' continuing excitement about the latest technological advances. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund U.S. Large Cap Blended Style Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 U.S. LARGE CAP BLENDED STYLE PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE THE UNMANAGED S&P 500 STOCK INDEX DOES NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT OF A MUTUAL FUND PORTFOLIO. The 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 U.S. Large Cap Blended Style Portfolio. A WORD ABOUT RISK Neither growth investing nor value investing guarantees a profit or eliminates risk. Growth stocks can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with more modest growth expectations. If a growth stock company should fail to meet these high earnings expectations, the price of these stocks can be severely negatively affected. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ corrective strategies, which would result in stock prices that rise as initially expected. The Portfolio concentrates its investments in a limited number of issues and an investment in the Portfolio is therefore subject to greater risk and volatility than investments in a more diversified portfolio. Because the Portfolio allocates its investments between "growth" and "value" stocks, an investment in the Portfolio is subject to the risk that this allocation will result in lower returns during periods when one style is outperforming another than if the Portfolio had invested entirely in the outperforming style. The costs associated with this systematic rebalancing may be significant over time. The Portfolio may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in the Variable Product prospectus. THERE ARE ADDITIONAL FEES AND EXPENSES ASSOCIATED WITH ALL VARIABLE PRODUCTS. THESE FEES CAN INCLUDE MORTALITY AND EXPENSE RISK CHARGES, ADMINISTRATIVE CHARGES, AND OTHER CHARGES THAT CAN SIGNIFICANTLY REDUCE INVESTMENT RETURNS. THOSE FEES AND EXPENSES ARE NOT REFLECTED IN THIS ANNUAL REPORT. YOU SHOULD CONSULT YOUR VARIABLE PRODUCT PROSPECTUS FOR A DESCRIPTION OF THOSE FEES AND EXPENSES AND SPEAK TO YOUR INSURANCE AGENT OR FINANCIAL REPRESENTATIVE IF YOU HAVE ANY QUESTIONS. YOU SHOULD READ THE PROSPECTUS BEFORE INVESTING OR SENDING MONEY. (Historical Performance continued on next page) 2 U.S. LARGE CAP BLENDED STYLE PORTFOLIO HISTORICAL PERFORMANCE (continued from previous page) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ RETURNS THE PORTFOLIO VS. ITS BENCHMARK ---------------------------- PERIODS ENDED DECEMBER 31, 2004 1 YEAR SINCE INCEPTION* ------------------------------------------------------------------------------- AllianceBernstein U.S. Large Cap Blended Style Portfolio Class A 9.43% 12.27% ------------------------------------------------------------------------------- S&P 500 Stock Index 10.87% 15.88% ------------------------------------------------------------------------------- * Inception Date: 6/6/03 for Class A shares. ALLIANCEBERNSTEIN U.S. LARGE CAP BLENDED STYLE PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 6/6/03*-12/31/04 ALLIANCEBERNSTEIN U.S. LARGE CAP BLENDED STYLE PORTFOLIO CLASS A: $11,994 S&P 500 STOCK INDEX: $12,607 [THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.] AllianceBernstein U.S. Large Cap Blended Style Portfolio Class A S&P 500 Stock Index ------------------------------------------------------------------------------- 6/6/03* $ 10,000 $ 10,000 12/31/03 $ 10,960 $ 11,371 12/31/04 $ 11,994 $ 12,607 * Since inception of the Portfolio's Class A shares on 6/6/03. 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 12/31/04) as compared to the performance of the Portfolio's benchmark. The chart assumes the reinvestment of dividends and capital gains. See Historical Performance and Benchmark disclosures on previous page. 3 U.S. LARGE CAP BLENDED STYLE PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED U.S. LARGE CAP BLENDED STYLE PORTFOLIO JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD* EXPENSE RATIO* ------------------------------------------------------------------------------------------------------------------- CLASS A Actual $1,000 $1,071.55 $6.25 1.20% Hypothetical (5% return before expenses) $1,000 $1,019.10 $6.09 1.20% CLASS B Actual $1,000 $1,070.21 $7.55 1.45% Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.35 1.45%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 U.S. LARGE CAP BLENDED STYLE PORTFOLIO TEN LARGEST HOLDINGS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS _______________________________________________________________________________ General Electric Co. $ 820,338 4.9% ------------------------------------------------------------------------------- Citigroup, Inc. 799,787 4.8 ------------------------------------------------------------------------------- Dell, Inc. 640,528 3.8 ------------------------------------------------------------------------------- eBay, Inc. 581,400 3.5 ------------------------------------------------------------------------------- Yahoo!, Inc. 572,736 3.4 ------------------------------------------------------------------------------- Lowe's Cos., Inc. 506,792 3.0 ------------------------------------------------------------------------------- Electronic Arts, Inc. 493,440 3.0 ------------------------------------------------------------------------------- QUALCOMM, Inc. 453,680 2.7 ------------------------------------------------------------------------------- UnitedHealth Group, Inc. 440,150 2.7 ------------------------------------------------------------------------------- Bank of America Corp. 440,014 2.7 ------------ ---- ------------------------------------------------------------------------------- $ 5,748,865 34.5% ------------------------------------------------------------------------------- SECTOR DIVERSIFICATION DECEMBER 31, 2004 _______________________________________________________________________________ PERCENT OF SECTOR U.S. $ VALUE NET ASSETS _______________________________________________________________________________ Finance $ 3,712,994 22.3% ------------------------------------------------------------------------------- Technology 3,638,899 21.8 ------------------------------------------------------------------------------- Consumer Services 3,002,186 18.0 ------------------------------------------------------------------------------- Healthcare 2,129,944 12.8 ------------------------------------------------------------------------------- Energy 1,273,941 7.6 ------------------------------------------------------------------------------- Capital Goods 1,003,388 6.0 ------------------------------------------------------------------------------- Consumer Staples 783,904 4.7 ------------------------------------------------------------------------------- Utilities 374,167 2.2 ------------------------------------------------------------------------------- Multi-Industry Companies 261,990 1.6 ------------------------------------------------------------------------------- Consumer Manufacturing 256,441 1.5 ------------------------------------------------------------------------------- Transportation 176,352 1.1 ------------------------------------------------------------------------------- Aerospace & Defense 129,425 0.8 ------------ ----- ------------------------------------------------------------------------------- Total Investments 16,743,631 100.4 ------------------------------------------------------------------------------- Cash and receivables, net of liabilities (59,389) (0.4) ------------ ----- ------------------------------------------------------------------------------- Net Assets $ 16,684,242 100.0% ------------------------------------------------------------------------------- 5 U.S. LARGE CAP BLENDED STYLE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- COMMON STOCKS-100.4% FINANCE-22.3% BANKING-MONEY CENTER-1.8% JPMorgan Chase & Co. 7,600 $ 296,476 ------------- BANKING-REGIONAL-5.1% Bank of America Corp. 9,364 440,014 National City Corp. 6,600 247,830 SunTrust Banks, Inc. 2,300 169,924 ------------- 857,768 ------------- INSURANCE-5.7% American International Group, Inc. 6,300 413,721 MetLife, Inc. 3,700 149,887 The Chubb Corp. 2,950 226,855 XL Capital Ltd. 2,000 155,300 ------------- 945,763 ------------- MORTGAGE BANKING-3.1% Fannie Mae 4,700 334,687 Freddie Mac 2,400 176,880 ------------- 511,567 ------------- MISCELLANEOUS-6.6% Citigroup, Inc. 16,600 799,787 MBNA Corp. 10,700 301,633 ------------- 1,101,420 ------------- 3,712,994 ------------- TECHNOLOGY-21.8% COMMUNICATION EQUIPMENT-7.0% Corning, Inc.(a) 23,200 273,064 Juniper Networks, Inc. (a) 16,100 437,759 QUALCOMM, Inc. 10,700 453,680 ------------- 1,164,503 ------------- COMPUTER HARDWARE/STORAGE-6.2% Dell, Inc. (a) 15,200 640,528 Hewlett-Packard Co. 18,900 396,333 ------------- 1,036,861 ------------- CONTRACT MANUFACTURING-1.0% Flextronics International Ltd. (Singapore) (a) 5,100 70,482 Solectron Corp. (a) 18,700 99,671 ------------- 170,153 ------------- SEMI-CONDUCTORS COMPONENTS-1.6% Broadcom Corp. (a) 8,100 261,468 ------------- SOFTWARE-6.0% Electronic Arts, Inc. (a) 8,000 493,440 Microsoft Corp. 13,400 357,914 Symantec Corp. (a) 6,000 154,560 ------------- 1,005,914 ------------- 3,638,899 ------------- CONSUMER SERVICES-18.0% APPAREL-0.9% Jones Apparel Group, Inc. 4,200 153,594 ------------- BROADCASTING & CABLE-4.7% Comcast Corp. Special Cl. A (a) 7,700 252,868 The E.W. Scripps Co. 3,500 168,980 Time Warner, Inc. (a) 18,300 355,752 ------------- 777,600 ------------- PRINTING & PUBLISHING-1.0% The Interpublic Group of Cos., Inc. (a) 12,000 160,800 ------------- RETAIL-GENERAL MERCHANDISE-8.0% eBay, Inc. (a) 5,000 581,400 Lowe's Cos., Inc. 8,800 506,792 Target Corp. 4,800 249,264 ------------- 1,337,456 ------------- MISCELLANEOUS-3.4% Yahoo!, Inc. (a) 15,200 572,736 ------------- 3,002,186 ------------- HEALTHCARE-12.8% BIOTECHNOLOGY-2.4% Amgen, Inc. (a) 6,200 397,730 ------------- DRUGS-1.8% GlaxoSmithKline Plc (ADR) (United Kingdom) 2,600 123,214 Pfizer, Inc. 6,500 174,785 ------------- 297,999 ------------- MEDICAL PRODUCTS-4.3% Alcon, Inc. 3,100 249,860 Boston Scientific Corp. (a) 5,900 209,745 St. Jude Medical, Inc. (a) 6,000 251,580 ------------- 711,185 ------------- MEDICAL SERVICES-4.3% Medco Health Solutions, Inc. (a) 6,800 282,880 UnitedHealth Group, Inc. 5,000 440,150 ------------- 723,030 ------------- 2,129,944 ------------- 6 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ COMPANY SHARES U.S. $ VALUE ------------------------------------------------------------------------------- ENERGY-7.6% DOMESTIC INTEGRATED-0.9% Occidental Petroleum Corp. 2,600 $ 151,736 ------------- INTERNATIONAL-3.9% BP p.l.c. (ADR) (United Kingdom) 4,200 245,280 ChevronTexaco Corp. 7,900 414,829 ------------- 660,109 ------------- MISCELLANEOUS-2.8% ConocoPhillips 2,900 251,807 Nabors Industries, Ltd. (a) 4,100 210,289 ------------- 462,096 ------------- 1,273,941 ------------- CAPITAL GOODS-6.0% ELECTRICAL COMPONENTS & EQUIPMENT-1.1% Hubbell, Inc. CL. B 3,500 183,050 ------------- MISCELLANEOUS-4.9% General Electric Co. 22,475 820,338 ------------- 1,003,388 ------------- CONSUMER STAPLES-4.7% COSMETICS-0.7% Avon Products, Inc. 2,900 112,230 ------------- RETAIL-FOOD & DRUG-2.3% Safeway, Inc. (a) 9,925 195,920 The Kroger Co. (a) 11,100 194,694 ------------- 390,614 ------------- TOBACCO-1.7% Altria Group, Inc. 4,600 281,060 ------------- 783,904 ------------- UTILITIES-2.2% ELECTRIC & GAS UTILITY-1.6% American Electric Power Co., Inc. 5,350 183,719 Entergy Corp. 1,200 81,108 ------------- 264,827 ------------- TELEPHONE UTILITY-0.6% Sprint Corp. (FON Group) 4,400 109,340 ------------- 374,167 ------------- MULTI-INDUSTRY COMPANIES-1.6% Textron, Inc. 3,550 261,990 ------------- CONSUMER MANUFACTURING-1.5% AUTO & RELATED-1.5% Lear Corp. 550 33,556 Magna International, Inc. Cl. A (Canada) 2,700 222,885 ------------- 256,441 ------------- TRANSPORTATION-1.1% RAILROAD-1.1% CSX Corp. 4,400 176,352 ------------- AEROSPACE & DEFENSE-0.8% AEROSPACE-0.8% The Boeing Co. 2,500 129,425 ------------- Total Common Stocks (cost $14,719,837) 16,743,631 ------------- TOTAL INVESTMENTS-100.4% (cost $14,719,837) 16,743,631 ------------- Other assets less liabilities-(0.4%)(59,389) NET ASSETS-100% $ 16,684,242 ============= (a) Non-income producing security. Glossary: ADR - American Depositary Receipt See Notes to Financial Statements. 7 U.S. LARGE CAP BLENDED STYLE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $14,719,837) $ 16,743,631 Receivable for investment securities sold 87,095 Dividends receivable 17,389 Receivable due from Adviser 8,190 ------------- Total assets 16,856,305 ------------- LIABILITIES Due to custodian 80,195 Payable for capital stock redeemed 28,131 Distribution fee payable 3,348 Transfer agent fee payable 56 Accrued expenses 60,333 ------------- Total liabilities 172,063 ------------- NET ASSETS $ 16,684,242 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 1,403 Additional paid-in capital 14,844,550 Undistributed net investment income 47,157 Accumulated net realized loss on investment transactions (232,662) Net unrealized appreciation of investments 2,023,794 ------------- $ 16,684,242 ============= CLASS A SHARES Net assets $ 1,199,500 ============= Shares of capital stock outstanding 100,109 ============= Net asset value per share $ 11.98 ============= CLASS B SHARES Net assets $ 15,484,742 ============= Shares of capital stock outstanding 1,302,607 ============= Net asset value per share $ 11.89 ============= See Notes to Financial Statements. 8 U.S. LARGE CAP BLENDED STYLE PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $1,082) $ 233,979 Interest 840 ------------- Total investment income 234,819 ------------- EXPENSES Advisory fee 108,107 Distribution fee -- Class B 29,594 Custodian 101,069 Administrative 69,000 Audit 41,750 Legal 15,148 Printing 8,386 Directors' fees 1,000 Transfer agency 859 Miscellaneous 4,236 ------------- Total expenses 379,149 Less: expenses waived and reimbursed by the Adviser (see Note B) (194,231) ------------- Net expenses 184,918 ------------- Net investment income 49,901 ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS Net realized loss on investment transactions (218,290) Net change in unrealized appreciation/depreciation of investments 1,539,867 ------------- Net gain on investment transactions 1,321,577 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,371,478 ============= See Notes to Financial Statements. 9 U.S. LARGE CAP BLENDED STYLE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ MAY 2, YEAR ENDED 2003(a) TO DECEMBER 31, DECEMBER 31, 2004 2003 ============= ============= INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 49,901 $ 7,358 Net realized loss on investment transactions (218,290) (14,372) Net change in unrealized appreciation/ depreciation of investments 1,539,867 483,927 ------------- ------------- Net increase in net assets from operations 1,371,478 476,913 DIVIDENDS TO SHAREHOLDERS FROM Net investment income Class A (1,200) -0- Class B (8,902) -0- CAPITAL STOCK TRANSACTIONS Net increase 7,626,418 7,219,535 ------------- ------------- Total increase 8,987,794 7,696,448 NET ASSETS Beginning of period 7,696,448 -0- ------------- ------------- End of period (including undistributed net investment income of $47,157 and $7,358, respectively) $ 16,684,242 $ 7,696,448 ============= ============= (a) Commencement of operations. See Notes to Financial Statements. 10 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The AllianceBernstein U.S.Large Cap Blended Style Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term growth of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two 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 U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. SECURITY VALUATION Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 11 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. TAXES It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 7. REPURCHASE AGREEMENTS It is the policy of the Portfolio that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Until September 6, 2004, under the terms of an investment advisory agreement, the Portfolio paid the Adviser an advisory fee at an annual rate of .95% of the first $5 billion, .90% of the next $2.5 billion, .85% of the next $2.5 billion and .80% of the excess over $10 billion of the Portfolio's average daily net assets. Effective September 7, 2004, the terms of 12 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ the investment advisory agreement were amended so that the advisory fee was reduced to an annual rate of .65% of the first $2.5 billion, .55% of the next $2.5 billion and .50% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2004 the Adviser waived fees in the amount of $101,258. Effective January 1, 2004 through September 6, 2004, in connection with the Adviser's settlement with the New York Attorney General's Office ("NYAG") the Adviser began waiving a portion of its advisory fee so as to charge the Portfolio at the reduced annual rate discussed above. Through September 6, 2004 such waiver amounted to $23,973. 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 voluntarily 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 $69,000 for the year ended December 31, 2004. Brokerage commissions paid on investment transactions for the year ended December 31, 2004, amounted to $24,752, of which $12,851 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 $859 for the year ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2004 were as follows: PURCHASES SALES ============= ============= Investment securities (excluding U.S. government securities) $ 13,574,106 $ 5,329,398 U.S. government securities -0- -0- 13 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows: Cost $ 14,754,818 ============= Gross unrealized appreciation $ 2,146,838 Gross unrealized depreciation (158,025) ------------- Net unrealized appreciation $ 1,988,813 ============= 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. 14 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 --------------------------- ------------------------------ JUNE 6, JUNE 6, YEAR ENDED 2003(a) TO YEAR ENDED 2003(a) TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS A Shares sold -0- 100,000 $ -0- $ 1,000,000 Shares issued in reinvestment of dividends 109 -0- 1,200 -0- ----------- ----------- ------------- ------------- Net increase 109 100,000 $ 1,200 $ 1,000,000 =========== =========== ============= ============= SHARES AMOUNT --------------------------- ------------------------------ MAY 2, MAY 2, YEAR ENDED 2003(b) TO YEAR ENDED 2003(b) TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 ------------ ------------ -------------- -------------- CLASS B Shares sold 879,931 614,483 $ 9,659,236 $ 6,314,718 Shares issued in reinvestment of dividends 812 -0- 8,902 -0- Shares redeemed (183,519) (9,100) (2,042,920) (95,183) ----------- ----------- ------------- ------------- Net increase 697,224 605,383 $ 7,625,218 $ 6,219,535 =========== =========== ============= ============= NOTE F: RISK INVOLVED IN INVESTING IN THE PORTFOLIO In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: JOINT CREDIT FACILITY A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $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 Porfolio did not utilize the Facility during the year ended December 31, 2004. NOTE H: DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 were as follows: 2004 2003 ============= ============= Distributions paid from: Ordinary Income $ 10,102 $ -0- ------------- ------------- Total taxable distributions 10,102 -0- ------------- ------------- Total distributions paid $ 10,102 $ -0- ============= ============= (a) Commencement of distribution. (b) Commencement of operations. 15 U.S. LARGE CAP BLENDED STYLE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ As of December 31, 2004 the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 46,751 Accumulated capital and other losses (197,275)(a) Unrealized appreciation/(depreciation) 1,988,813(b) ------------- Total accumulated earnings/(deficit) $ 1,838,289 ============= (a) On December 31, 2004, the Portfolio had a net capital loss carryforward of $187,067 of which $8,021 will expire in the year 2011 and $179,046 will expire in the year 2012. 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, 2004, the Portfolio deferred to January 1, 2005, post - October capital losses of $10,208. (b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, and the tax treatment of dividends received. For the current fiscal year, there were no permanent differences. NOTE I: LEGAL PROCEEDINGS As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee. On September 7, 2004, the Fund's investment advisory agreement was amended to reflect the reduced advisory fee. For more information on this waiver and amendment to the Fund's investment advisory agreement, please see "Advisory Fee and Other Transactions with Affiliates" above. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; 16 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v. Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 17 U.S. LARGE CAP BLENDED STYLE PORTFOLIO FINANCIAL HIGHLIGHTS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD CLASS A ------------------------- JUNE 6, YEAR ENDED 2003(a) TO DECEMBER 31, DECEMBER 31, 2004 2003 ----------- ----------- Net asset value, beginning of period $10.96 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .06 .03 Net realized and unrealized gain on investment transactions .97 .93 Net increase in net asset value from operations 1.03 .96 LESS: DIVIDENDS Dividends from net investment income (.01) -0- Net asset value, end of period $11.98 $10.96 TOTAL RETURN Total investment return based on net asset value (d) 9.43% 9.60% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $1,200 $1,096 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.20% 1.20%(e) Expenses, before waivers and reimbursements 2.67% 6.65%(e) Net investment income (c) .55% .45%(e) Portfolio turnover rate 42% 13% See footnote summary on page 19. 18 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD CLASS B ------------------------- MAY 2, YEAR ENDED 2003(f) TO DECEMBER 31, DECEMBER 31, 2004 2003 ----------- ----------- Net asset value, beginning of period $10.90 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .04 .01 Net realized and unrealized gain on investment transactions .96 .89 Net increase in net asset value from operations 1.00 .90 LESS: DIVIDENDS Dividends from net investment income (.01) -0- Net asset value, end of period $11.89 $10.90 TOTAL RETURN Total investment return based on net asset value (d) 9.16% 9.00% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $15,485 $6,600 Ratio to average net assets of: Expenses, net of waivers and reimbursements 1.45% 1.43%(e) Expenses, before waivers and reimbursements 2.95% 8.25%(e) Net investment income (c) .37% .27%(e) Portfolio turnover rate 42% 13% (a) Commencement of distribution. (b) Based on average shares outstanding. (c) Net of expenses waived and reimbursed by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. (f) Commencement of operations. 19 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. ALLIANCEBERNSTEIN U.S. LARGE CAP BLENDED STYLE PORTFOLIO We have audited the accompanying statement of assets and liabilities of the AllianceBernstein U.S. Large Cap Blended Style Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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. Large Cap Blended Style Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2004, 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 periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 TAX INFORMATION (UNAUDITED) _______________________________________________________________________________ For corporate shareholders, 100% of the total ordinary income distribution paid during the current fiscal year ended December 31, 2004 qualifies for the corporate dividends received deduction. 20 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 21 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, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 9/7/32 associated since prior to 2000. He was formerly (1990) Deputy Comptroller and Chief Investment Chairman of the Board Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 22 U.S. LARGE CAP BLENDED STYLE PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND _______________________________________________________________________________ OFFICER INFORMATION Certain information concerning the Fund's Officers is listed below.
PRINCIPAL NAME, ADDRESS* POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------- Marc O. Mayer President Executive Vice President of Alliance Capital 10/2/57 Management Corporation ("ACMC")** since 2001; prior thereto, Chief Executive Officer of Sanford C. Bernstein & Co., LLC and its predecessor since prior to 2000. Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 President and Independent Officer--Mutual Funds of ACMC,** with which he has Compliance Officer been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Thomas J. Bardong Vice President Senior Vice President of ACMC**, with which he has 4/28/45 been associated since prior to 2000. Seth A. Masters Vice President Executive Vice President of ACMC** and Chief 6/4/59 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 2000. Mark R. Manley Secretary Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 Financial Officer Services, Inc. ("AGIS")** and Vice President of AllianceBernstein Investment Research and Manage- ment, Inc. ("ABIRM")**, with which he has been associated since prior to 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(1) The day-to-day management of and investment decisions for the investment portfolio are made by the Blend Investment Policy Group, comprised of senior Blend Group Members. * 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 BALANCED WEALTH STRATEGY PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 The Fund expects to hold a meeting of shareholders on or about November 15, 2005, at which the election of directors will be considered. For information with respect to submitting a candidate for director for consideration by the Governance and Nominating Committee of the Fund's Board of Directors, please see the Nominating Procedures in the Fund's Statement of Additional Information. INVESTMENT PRODUCTS OFFERED o ARE NOT FDIC INSURED o MAY LOSE VALUE o ARE NOT BANK GUARANTEED You may obtain a description of the Fund's proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit the Securities and Exchange Commission's (the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618. The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. BALANCED WEALTH STRATEGY PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND LETTER TO INVESTORS February 10, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Balanced Wealth Strategy Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2004. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks to achieve the highest total return consistent with the Adviser's determination of reasonable risk. The Portfolio is designed for investors who seek a moderate tilt toward equity returns without regard to taxes but also want risk diversification offered by debt securities and broad diversification of equity risk across styles, capitalization ranges and geographic regions. Normally, the Portfolio's targeted weighting is 60% equity and 40% debt securities. The Portfolio's targeted equity blend is an equal weighting of growth and value stocks (50% each), with approximately 70% of each in U.S. companies and 30% in non-U.S. companies. The Portfolio's fixed-income securities will primarily be investment grade, but may include high yield ("junk bonds") and preferred stock. The Adviser will allow the Portfolio's relative weightings to change in response to markets, but only within carefully constructed ranges. Beyond those ranges, the Adviser will rebalance toward the targeted blends. The Portfolio can also selectively invest in real estate investment trusts (REITs), which often provide attractive income yet historically have had a low correlation to the other asset classes that can make up the portfolio. INVESTMENT RESULTS The table on page 3 shows the Portfolio's performance compared to its balanced benchmark, a 60% / 40% blend of the Standard & Poor's (S&P) 500 Stock Index and the Lehman Brothers (LB) U.S. Aggregate Index, for the period from the Portfolio's inception on July 1, 2004 through December 31, 2004. The Portfolio posted a healthy absolute gain since its inception through December 31, 2004, and marginally outperformed the balanced benchmark. The equity portion of the Portfolio was positioned to take advantage of perceived pent-up growth potential in a number of stocks, particularly in the technology sector, trading at prices below what their growth rates might justify. The technology sector declined sharply in the third quarter of 2004, as did the health care sector in which the Portfolio held an overweighted position, resulting in underperformance relative to the broad market. Technology shares recovered strongly in the fourth quarter, however, and boosted the Portfolio's return. The Portfolio's return was also aided by its investment in non-U.S. securities, although the Portfolio's hedging position muted the returns relative to an unhedged position, as the U.S. dollar depreciated over the second half of the year compared to a market-capitalization weighted basket of foreign currencies. Finally, the bond market showed strength in a period of rising interest rates, and the Portfolio's yield-curve positioning added more value than the LB U.S. Aggregate Index. MARKET REVIEW AND INVESTMENT STRATEGY The S&P 500 Stock Index returned 7.19% in the second half of 2004, led by energy and utility stocks, as record high oil prices lifted industry profits. Technology stocks, which had been the worst performing sector in the third quarter of 2004, retreating nearly 9.9%, turned in the strongest performance of all sectors in the fourth quarter of 2004, rallying nearly 13.6% amidst robust holiday sales and renewed optimism for a pickup in corporate spending. International stocks, as measured by the unhedged Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, gained 15.10% for the six-month period ended December 31, 2004, comfortably outpacing the U.S. stock market. The bulk of the international gains, however, were the result of sharply appreciating foreign currency, as the U.S. dollar slid on continued concerns over mounting U.S. trade deficits. In local currency terms, the MSCI EAFE Index gained a more modest 5.73% for the six-month period. The real estate investment trust (REIT) market continued to show enormous strength, rising over 24.71% in the second half of the year, as measured by the NAREIT Equity Index. The U.S. bond market, measured by the LB U.S. Aggregate Index, held up surprisingly well in a period of rising interest rates, returning 4.18% during the same period. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Balanced Wealth Strategy Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 BALANCED WEALTH STRATEGY PORTFOLIO HISTORICAL PERFORMANCE ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND An Important Note About the Value of Historical Performance The performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For a free copy of the Portfolio's prospectus, which contains this and other information, call your financial advisor or (800) 984-7654. You should read the prospectus carefully before you invest. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. Benchmark Disclosure The unmanaged Standard & Poor's (S&P) 500 Stock Index and the unmanaged Lehman Brothers (LB) U.S. Aggregate Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Stock Index includes 500 U.S. stocks and is a common measure of the performance of the overall U.S. stock market. The LB U.S. Aggregate Index covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage passthrough securities, asset-backed securities and commercial mortgage-backed securities. An investor cannot invest directly in indices, and their results are not indicative of the performance for any specific investment, including AllianceBernstein Balanced Wealth Strategy Portfolio. A Word About Risk The Portfolio allocates its investments among multiple asset classes which will include U.S. and foreign securities, as well as equity and fixed-income securities. Within each of these, the Portfolio will also allocate its investments in different types of securities, such as growth and value stocks, real estate investment trusts, and corporate and U.S. government bonds. International investing involves risks not associated with U.S. investments, including currency fluctuations and political and economic changes. The Portfolio may at times use certain types of investment derivatives such as options, futures, forwards and swaps. The use of derivatives involves specific risks and is not suitable for all investors. The Portfolio systematically rebalances its allocations in these asset classes to maintain their target weightings. There can be no assurance that rebalancing will achieve its intended result, and the costs of rebalancing may be significant over time. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. (HISTORICAL PERFORMANCE CONTINUED ON NEXT PAGE) 2 BALANCED WEALTH STRATEGY PORTFOLIO HISTORICAL PERFORMANCE (CONTINUED FROM PREVIOUS PAGE) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND THE PORTFOLIO VS. ITS BENCHMARK Returns PERIOD ENDED DECEMBER 31, 2004 Since Inception* AllianceBernstein Balanced Wealth Strategy Portfolio Class A 6.90% 60% S&P 500 Stock Index / 40% LB U.S. Aggregate Index 5.99% S&P 500 Stock Index 7.19% LB U.S. Aggregate Index 4.18% * The since inception return for the Portfolio is from its actual inception date of 7/1/04. The since inception returns for the indices are from the closest month-end to the Portfolio's inception, which is 6/30/04. ALLIANCEBERNSTEIN BALANCED WEALTH STRATEGY PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 7/1/04*-12/31/04 [graphic omitted, data below] AllianceBernstein 60% S&P 500 Balanced Wealth Stock Index Strategy Portfolio 40% LB U.S/ S&P 500 LB U.S. Class A Aggregate Index Stock Index Aggregate Index ------------------------------------------------------------------------------- 7/1/04* 10000 10000 10000 10000 7/31/04 9850 9841 9669 10099 8/31/04 9930 9940 9708 10292 9/30/04 10040 10015 9813 10320 10/31/04 10210 10141 9963 10406 11/30/04 10439 10354 10365 10323 12/31/04 10689 10613 10718 10418 S&P 500 Stock Index: $10,718 AllianceBernstein Balanced Wealth Strategy Portfolio Class A: $10,689 60% S&P 500 Stock Index / 40% LB U.S. Aggregate Index: $10,613 LB U.S. Aggregate Index: $10,418 * SINCE INCEPTION OF THE PORTFOLIO'S CLASS A SHARES ON 7/1/04. THE GROWTH OF $10,000 FOR THE INDICES IS FROM THE CLOSEST MONTH-END TO THE PORTFOLIO'S INCEPTION, WHICH IS 6/30/04. THIS CHART ILLUSTRATES THE TOTAL VALUE OF AN ASSUMED $10,000 INVESTMENT IN ALLIANCEBERNSTEIN BALANCED WEALTH STRATEGY PORTFOLIO CLASS A SHARES (FROM 7/1/04* TO 12/31/04) AS COMPARED TO THE PERFORMANCE OF THE PORTFOLIO'S BALANCED BENCHMARK (60% S&P 500 STOCK INDEX / 40% LB U.S. AGGREGATE INDEX), AS WELL AS THE COMPONENTS OF THE BALANCED BENCHMARK BY THEMSELVES. THE CHART ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. See Historical Performance and Benchmark disclosures on previous page. 3 BALANCED WEALTH STRATEGY PORTFOLIO FUND EXPENSES ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Account Value Account Value Expenses Paid Annualized Balanced Wealth Strategy Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* -------------------------------------------------------------------------------------------------------------- Class A Actual $1,000 $1,069.00 $6.16 1.19% Hypothetical (5% return before expenses) $1,000 $1,019.05 $6.01 1.19% Class B Actual $1,000 $1,067.00 $7.65 1.48% Hypothetical (5% return before expenses) $1,000 $1,017.05 $7.47 1.48%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 BALANCED WEALTH STRATEGY PORTFOLIO TEN LARGEST HOLDINGS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS ---------------------------------------------------------------------------------------------- General Electric Co. (Common Stock and Bonds) $586,155 2.2% Ford Motor Co. 424,174 1.6 JPMorgan Chase & Co. (Common Stock & Bonds) 406,869 1.5 U.S. Treasury Note 397,531 1.5 Lehman Brothers Holdings, Inc. (Common Stock & Bonds) 372,054 1.4 Goldman Sachs Group, Inc. (Common Stock & Bonds) 347,987 1.3 Devon Financing Corp. 339,767 1.2 Citigroup, Inc. 339,668 1.2 Kraft Foods, Inc. 323,222 1.2 CIT Group, Inc. 314,046 1.2 $3,851,473 14.3%
SECTOR DIVERSIFICATION DECEMBER 31, 2004
SECTOR U.S. $ VALUE PERCENT OF NET ASSETS ---------------------------------------------------------------------------------------------- Finance $5,853,858 21.7% Industrials 4,130,063 15.3 Construction & Housing 2,586,470 9.6 Technology / Electronics 2,542,552 9.4 Consumer Cyclical 2,255,915 8.4 Medical 1,476,512 5.5 Utilities 1,357,891 5.0 Capital Equipment 1,020,570 3.8 Consumer Staples 642,250 2.4 Energy 571,451 2.1 U.S. Government and Sponsored Agency Obligations 397,531 1.5 Industrial Commodities 254,702 0.9 Transportation 236,498 0.9 Telecommunications 69,514 0.3 Total Investments* 23,395,777 86.8 Cash and receivables, net of liabilities 3,558,856 13.2 Net Assets $26,954,633 100.0%
* Excludes short-term investments. 5 BALANCED WEALTH STRATEGY PORTFOLIO COUNTRY DIVERSIFICATION DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
COUNTRY U.S. $ VALUE PERCENT OF NET ASSETS ---------------------------------------------------------------------------------------------- United States $18,992,270 70.5% United Kingdom 853,947 3.2 Japan 486,739 1.8 Switzerland 361,219 1.3 France 349,973 1.3 Canada 330,154 1.2 Cayman Islands 296,830 1.1 Australia 279,891 1.0 Other* 1,444,754 5.4 Total Investments** 23,395,777 86.8 Cash and receivables, net of liabilities 3,558,856 13.2 Net Assets $26,954,633 100.0%
* The Portfolio's country breakdown is expressed as a percentage of net assets and may vary over time. "Other" represents less than 1% weightings in the following countries: Bermuda, Finland, Germany, Hong Kong, Ireland, Israel, Italy, Mexico, Netherlands, Panama, Russia, Singapore, South Africa, South Korea, Spain, Sweden and Taiwan. ** Excludes short-term investments. 6 BALANCED WEALTH STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Company Shares U.S. $ Value ------------------------------------------------------------------------- COMMON STOCKS AND OTHER INVESTMENTS-53.9% UNITED STATES INVESTMENTS-38.8% FINANCE-7.6% BANKING-3.7% Bank of America Corp. 1,700 $79,883 Citigroup, Inc. 7,050 339,668 Fannie Mae 1,450 103,255 Freddie Mac 725 53,433 JPMorgan Chase & Co. 5,100 198,950 National City Corp. 2,600 97,630 SunTrust Banks, Inc. 1,000 73,880 Wachovia Corp. 1,000 52,600 ---------- 999,299 FINANCIAL SERVICES-1.8% Franklin Resources, Inc. 800 55,720 Lehman Brothers Holdings, Inc. 800 69,984 MBNA Corp. 5,400 152,225 Merrill Lynch & Co., Inc. 1,725 103,103 Morgan Stanley 900 49,968 The Goldman Sachs Group, Inc. 425 44,217 ---------- 475,217 INSURANCE-2.1% American International Group, Inc. 3,000 197,009 The Hartford Financial Services Group, Inc. 1,225 84,905 The Progressive Corp. 550 46,662 The St. Paul Travelers Cos., Inc. 1,500 55,605 Torchmark Corp. 700 39,998 UnitedHealth Group, Inc. 1,620 142,609 566,788 ---------- 2,041,304 TECHNOLOGY/ ELECTRONICS-7.4% DATA PROCESSING-4.5% Apple Computer, Inc. (a) 1,200 77,280 Arrow Electronics, Inc. (a) 950 23,085 Avnet, Inc. (a) 1,800 32,832 Dell, Inc. (a) 5,900 248,626 Electronic Arts, Inc. (a) 3,350 206,628 Google, Inc. Cl.A (a) 370 71,447 Hewlett-Packard Co. 7,200 150,984 Microsoft Corp. 8,700 232,377 Network Appliance, Inc. (a) 600 19,932 Sanmina-SCI Corp. (a) 4,600 38,962 Solectron Corp. (a) 10,000 53,300 Tech Data Corp. (a) 1,400 63,560 ---------- 1,219,013 ELECTRICAL & ELECTRONICS-2.4% Broadcom Corp. Cl.A (a) 3,100 $100,068 Cisco Systems, Inc. (a) 3,560 68,708 Corning, Inc. (a) 11,700 137,709 Juniper Networks, Inc. (a) 5,300 144,107 QUALCOMM, Inc. 4,150 175,960 Tellabs, Inc. (a) 3,200 27,488 ---------- 654,040 ELECTRONIC COMPONENTS & INSTRUMENTS-0.5% Applied Materials, Inc. (a) 1,850 31,635 Intel Corp. 1,245 29,121 Symantec Corp. (a) 2,900 74,704 ---------- 135,460 ---------- 2,008,513 CONSUMER CYCLICAL-6.9% BROADCASTING & PUBLISHING-2.2% Comcast Corp. Special Cl.A (a) 2,700 88,668 The E.W. Scripps Co. Cl.A 2,200 106,216 Time Warner, Inc. (a) 7,400 143,856 Yahoo!, Inc. (a) 6,550 246,804 ---------- 585,544 BUSINESS & PUBLIC SERVICES-0.2 % The Interpublic Group of Cos., Inc. (a) 3,200 42,880 LEISURE & TOURISM-0.9% Hilton Hotels Corp. 500 11,370 Host Marriott Corp. 3,900 67,470 McDonald's Corp. 2,100 67,326 Starbucks Corp. (a) 1,150 71,714 Starwood Hotels & Resorts Worldwide, Inc. 675 39,420 ---------- 257,300 MERCHANDISING-3.2% Amazon.com, Inc. (a) 500 22,145 Bed Bath & Beyond, Inc. (a) 900 35,847 eBay, Inc. (a) 2,300 267,443 Federated Department Stores, Inc. 250 14,448 Limited Brands 1,200 27,624 Lowe's Cos., Inc. 3,300 190,047 Office Depot, Inc. (a) 4,000 69,440 Target Corp. 3,950 205,124 Wal-Mart Stores, Inc. 530 27,995 ---------- 860,113 7 BALANCED WEALTH STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Company Shares U.S. $ Value ------------------------------------------------------------------------- TEXTILES & APPAREL-0.4% Jones Apparel Group, Inc. 2,200 $80,454 V.F. Corp. 500 27,690 ---------- 108,144 ---------- 1,853,981 CONSTRUCTION & HOUSING-4.5% BUILDING MATERIALS-0.2% Martin Marietta Materials, Inc. 800 42,928 CONSTRUCTION & HOUSING-0.1% Pulte Homes, Inc. 550 35,090 REAL ESTATE-4.2% Alexandria Real Estate Equities, Inc. 775 57,676 AMB Property Corp. 700 28,273 Archstone-Smith Trust 1,000 38,300 Boston Properties, Inc. 575 37,185 Brookfield Properties Corp. 500 15,607 Camden Property Trust 825 42,075 Corporate Office Properties Trust 1,500 44,025 Developers Diversified Realty Corp. 1,600 70,992 Duke Realty Corp. 1,475 50,357 EastGroup Properties, Inc. 550 21,076 Equity Office Properties Trust 400 11,648 Equity One, Inc. 400 9,492 Equity Residential 1,600 57,888 Essex Property Trust, Inc. 200 16,760 General Growth Properties, Inc. 1,375 49,720 Glenborough Realty Trust, Inc. 425 9,044 iStar Financial, Inc. 750 33,945 Kimco Realty Corp. 100 5,799 LaSalle Hotel Properties 500 15,915 Mack-Cali Realty Corp. 525 24,166 Pan Pacific Retail Properties, Inc. 375 23,513 Prentiss Properties Trust 600 22,920 ProLogis 2,075 89,910 Reckson Associates Realty Corp. 100 3,281 Regency Centers Corp. 500 27,700 Shurgard Storage Centers, Inc. Cl.A 600 26,406 Simon Property Group, Inc. 1,300 84,071 SL Green Realty Corp. 425 25,734 Tanger Factory Outlet Centers, Inc. 600 15,876 The Macerich Co. 300 18,840 The Mills Corp. 550 35,068 United Dominion Realty Trust, Inc. 1,600 $39,680 Vornado Realty Trust 625 47,581 Washington Real Estate Invesment Trust 250 8,468 Windrose Medical Properties Trust 1,100 15,851 ---------- 1,124,842 ---------- 1,202,860 MEDICAL-3.5% HEALTH & PERSONAL CARE-3.5% Amgen, Inc. (a) 2,600 166,790 Avon Products, Inc. 2,850 110,295 Boston Scientific Corp. (a) 3,200 113,760 HCA, Inc. 1,600 63,936 Medco Health Solutions, Inc. (a) 2,300 95,680 Pfizer, Inc. 6,900 185,540 St. Jude Medical, Inc. (a) 3,050 127,887 Zimmer Holdings, Inc. (a) 1,000 80,120 ---------- 944,008 CAPITAL EQUIPMENT-3.0% AEROSPACE & DEFENSE-0.2% The Boeing Co. 1,400 72,478 AUTOMOBILES-0.3% BorgWarner, Inc. 1,350 73,130 INDUSTRIAL COMPONENTS-0.4% Eaton Corp. 1,400 101,304 MULTI-INDUSTRY-2.1% General Electric Co. 10,600 386,900 Hubbell, Inc. Cl.B 1,250 65,375 Parker Hannifin Corp. 1,000 75,740 Textron, Inc. 400 29,520 ---------- 557,535 ---------- 804,447 CONSUMER STAPLES-1.8% BEVERAGES & TOBACCO-0.8% Altria Group, Inc. 1,600 97,760 PepsiCo, Inc. 2,200 114,840 ---------- 212,600 FOOD & HOUSEHOLD PRODUCTS-1.0% Safeway, Inc. (a) 2,700 53,298 The Kroger Co. (a) 4,500 78,930 The Procter & Gamble Co. 2,700 148,716 ---------- 280,944 ---------- 493,544 8 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Company Shares U.S. $ Value ------------------------------------------------------------------------- ENERGY-1.4% ENERGY EQUIPMENT & SERVICES-0.3% Baker Hughes, Inc. 820 $34,989 Halliburton Co. 1,150 45,126 ---------- 80,115 ENERGY SOURCES-1.1% ChevronTexaco Corp. 2,150 112,896 ConocoPhillips 1,050 91,172 Occidental Petroleum Corp. 1,400 81,704 ---------- 285,772 ---------- 365,887 UTILITIES-1.0% ELECTRIC & GAS UTILITY-1.0% American Electric Power Co., Inc. 1,400 48,076 Entergy Corp. 1,400 94,626 FirstEnergy Corp. 700 27,657 Sempra Energy 1,400 51,352 Wisconsin Energy Corp. 1,550 52,251 ---------- 273,962 TRANSPORTATION-0.9% TRANSPORTATION - ROAD & RAIL-0.9% Burlington Northern Santa Fe Corp. 1,000 47,310 CSX Corp. 2,300 92,184 Norfolk Southern Corp. 1,700 61,523 United Parcel Service, Inc. 350 29,911 ---------- 230,928 INDUSTRIAL COMMODITIES-0.8% CHEMICAL-0.1% PPG Industries, Inc. 500 34,080 FOREST & PAPER-0.7% International Paper Co. 700 29,400 Kimberly-Clark Corp. 700 46,067 MeadWestvaco Corp. 1,400 47,446 Smurfit-Stone Container Corp. (a) 3,600 67,248 ---------- 190,161 ---------- 224,241 Total United States Investments (cost $9,600,414) 10,443,675 FOREIGN INVESTMENTS-15.1% AUSTRALIA-1.0% Bunnings Warehouse Property Trust 11,200 16,017 Centro Properties Group 1,800 8,156 Coles Myer Ltd. 1,386 10,713 DB RREEF Trust 2,979 3,082 General Property Trust 8,700 $25,507 ING Industrial Fund 17,103 29,003 Macquarie CountryWide Trust 15,000 24,504 Multplex Group 2,027 8,644 Publishing & Broadcasting Ltd. 400 5,499 Rinker Group Ltd. 3,600 30,080 Stockland 4,700 22,090 Westfield Group (a) 7,500 96,596 ---------- 279,891 BERMUDA-0.8% Cooper Industries Ltd. Cl.A 700 47,523 Marvell Technology Group Ltd. (a) 2,500 88,675 Nabors Industries Ltd. (a) 1,800 92,322 ---------- 228,520 CANADA-0.8% Boardwalk Real Estate Investment Trust 600 9,239 Borealis Retail Real Estate Investment Trust 2,150 24,010 Canadian Apartment Properties Real Estate Investment Trust 500 6,293 Canadian Real Estate Investment Trust 1,250 18,518 Cominar Real Estate Investment Trust 400 5,762 H&R Real Estate Investment Trust 1,200 19,019 InnVest Real Estate Investment Trust 500 4,966 O&Y Real Estate Investment Trust 900 10,591 Research In Motion Ltd. (a) 590 48,628 RioCan Real Estate Investment Trust 3,200 47,406 Summit Real Estate Investment Trust 1,800 27,072 ---------- 221,504 CAYMAN ISLANDS-0.3% XL Capital Ltd. Cl.A 1,000 77,650 FINLAND-0.1% Sponda Oyj 3,000 29,117 FRANCE-1.3% BNP Paribas, SA 413 29,934 Essilor International, SA 331 25,983 Gecina, SA 425 42,180 Klepierre 440 38,944 Sanofi-Aventis 305 24,385 Schneider Electric, SA 231 16,070 Total, SA 302 66,142 Unibail 675 106,335 ---------- 349,973 9 BALANCED WEALTH STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Company Shares U.S. $ Value ------------------------------------------------------------------------- GERMANY-0.4% Porsche AG pfd. 39 $24,703 SAP AG 339 60,026 SAP AG (ADR) 800 35,368 ---------- 120,097 HONG KONG-0.8% Esprit Holdings Ltd. 8,000 48,352 Henderson Land Development Co., Ltd. 10,000 51,991 Kerry Properties Ltd. 16,000 34,246 Sun Hung Kai Properties Ltd. 9,000 90,075 ---------- 224,664 IRELAND-0.4% Allied Irish Banks Plc 1,654 34,256 Anglo Irish Bank Corp. Plc 342 8,283 CRH Plc 2,013 53,848 ---------- 96,387 ISRAEL-0.5% Teva Pharmaceutical Industries Ltd. (ADR) 4,100 122,425 ITALY-0.3% Beni Stabili SpA 13,000 13,249 Eni S.p.A. 1,879 47,100 Fastweb 171 9,837 ---------- 70,186 JAPAN-1.8% Canon, Inc. 1,000 54,304 Daikin Industries Ltd. 1,000 28,985 Denso Corp. 2,100 56,499 East Japan Railway Co. 1 5,570 Eisai Co., Ltd 1,000 32,981 Honda Motor Co., Ltd. 600 31,369 Hoya Corp. 500 56,494 Japan Retail Fund Investment Corp. 4 33,766 Keyence Corp. 100 22,460 Mitsubishi Corp. 3,000 38,803 Mitsubishi Tokyo Financial Group, Inc. 2 20,484 Mitsui Fudosan Co., Ltd. 3,000 36,536 Nippon Building Fund, Inc. 2 17,059 Nitto Denko Corp. 200 10,981 Ricoh Co., Ltd. 1,000 19,376 Suzuki Motor Corp. 600 10,974 Takeda Pharmaceutical Co., Ltd. 200 10,098 ---------- 486,739 MEXICO-0.2% America Movil, SA de C.V. (ADR) 800 41,880 Grupo Televisa, SA (GDR) 200 12,100 ---------- 53,980 NETHERLANDS-0.5% ASML Holding NV 1,011 $16,160 Eurocommercial Properties NV 175 6,212 ING Groep NV 1,327 40,131 Rodamco Europe NV 700 55,418 Wereldhave NV 180 19,520 ---------- 137,441 PANAMA-0.3% Carnival Corp. 1,200 69,156 RUSSIA-0.1% Mobile Telesystems (ADR) 100 13,851 SINGAPORE-0.2% Ascendas Real Estate Investment Trust (a) 27,500 28,700 CapitaMall Trust 26,000 28,032 ---------- 56,732 SOUTH AFRICA-0.0% MTN Group Ltd. 511 3,946 SOUTH KOREA-0.1% Samsung Electronics Co., Ltd. 50 21,725 SPAIN-0.4% Banco Bilbao Vizcaya Argentaria, SA 2,553 45,279 Gestevision Telecinco, SA 772 15,929 Industria de Diseno Textil, SA 1,229 36,214 Inmobiliaria Colonial, SA 400 16,060 ---------- 113,482 SWEDEN-0.2% Telefonaktieboaget LM Ericsson 15,958 50,262 SWITZERLAND-1.3% Alcon, Inc. 1,650 132,989 Compagnie Financiere Richemont AG 468 15,580 Nobel Biocare Holding AG 127 22,949 Novartis AG 1,358 68,342 Roche Holding AG 549 63,016 UBS AG 696 58,343 ---------- 361,219 TAIWAN-0.1% Hon Hai Precision Industry Co., Ltd. 5,000 23,223 Taiwan Semiconductor Manufacturing Co., Ltd. 6,000 9,560 ---------- 32,783 UNITED KINGDOM-3.2% BHP Billiton Plc 1,667 19,480 British Land Co. Plc 2,050 35,201 10 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Shares or Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------- Brixton Plc 2,100 $14,142 Capita Group Plc 3,967 27,778 Capital & Regional Plc 2,400 31,971 Carnival Plc 1,005 61,316 Derwent Valley Holdings Plc 700 15,093 Enterprise Inns Plc 1,538 23,404 GUS Plc 2,627 47,248 Hammerson Plc 1,650 27,513 Hilton Group Plc 4,173 22,759 HSBC Holdings Plc 3,185 53,661 Land Securities Group Plc 2,750 73,760 Liberty International Plc 825 15,340 Man Group Plc 704 19,867 Reckitt Benckiser Plc 2,127 64,151 Royal Bank of Scotland Group Plc 2,513 84,399 Slough Estates Plc 3,700 38,959 Smith & Nephew Plc 2,867 29,336 Standard Chartered 1,635 30,350 Tesco Plc 13,704 84,555 WPP Group Plc 3,070 33,664 ---------- 853,947 Total Foreign Investments (cost $3,778,131) 4,075,677 Total Common Stocks and Other Investments (cost $13,378,545) 14,519,352 CORPORATE DEBT OBLIGATIONS-31.4% AUTOMOTIVE-2.7% Daimlerchrysler North America Holdings 4.75%, 1/15/08 $200 204,270 Ford Motor Co. 7.45%, 7/16/31 100 100,574 Ford Motor Credit Co. 7.375%, 10/28/09 300 323,600 General Motors Acceptance Corp. 6.75%, 12/01/14 100 100,137 728,581 BANKS-1.9% Mizuho Finance (Cayman Islands) 8.375% 04/27/49 200 219,180 Wachovia Corp. 5.25%, 8/01/14 100 102,490 Wells Fargo Co. 4.20%, 1/15/10 200 200,813 ---------- 522,483 FINANCE-10.2% Assurant, Inc. 5.625%, 2/15/14 100 103,275 Bear Stearns Co., Inc. 2.875%, 7/02/08 300 290,150 Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------- Boeing Capital Corp. 6.50%, 2/15/12 $100 $112,048 CIT Group, Inc. 5.50%, 11/30/07 300 314,046 Countrywide Home Loan FRN 2.54%, 11/16/07 100 99,926 Credit Suisse First Boston USA, Inc. 4.125%, 1/15/10 200 198,959 4.625%, 1/15/08 100 102,470 General Electric Capital Corp. Series A 3.50%, 12/05/07 200 199,255 Goldman Sachs Group, Inc. 4.125%, 1/15/08 300 303,770 JPMorgan Chase & Co. 5.25%, 5/30/07 200 207,919 Lehman Brothers Holdings, Inc. 4.00%, 1/22/08 300 302,070 MBNA America Bank NA 5.375%, 1/15/08 100 104,444 Morgan Stanley 2.20%, 1/12/07(b) 100 100,143 3.875%, 1/15/09 100 99,444 USA Education Series A 5.625%, 4/10/07 100 104,285 XL Capital Ltd. 5.25%, 9/15/14 100 100,215 ---------- 2,742,419 INDUSTRIALS-9.3% AOL Time Warner 7.70%, 5/01/32 100 122,312 AT&T Broadband 8.375%, 3/15/13 200 246,619 British Sky Broadcasting 8.20%, 7/15/09 100 115,702 CSX Corp. 5.50%, 8/01/13 200 209,162 CVS Corp. 4.00%, 9/15/09 100 99,530 Federated Department Stores, Inc. 6.625%, 4/01/11 100 111,811 Kraft Foods, Inc. 4.125%, 11/12/09 325 323,222 Kroger Co. 4.95%, 1/15/15 200 198,427 News America, Inc. 6.55%, 3/15/33 100 106,431 Raytheon Co. 4.85%, 1/15/11 100 102,460 Safeway, Inc. 7.25%, 2/01/31 200 229,244 Tyco International Group, SA 6.00%, 11/15/13 100 108,946 11 BALANCED WEALTH STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------- UnitedHealth Group, Inc. 3.75%, 2/10/09 $100 $98,394 Viacom, Inc. 6.625%, 5/15/11 100 112,433 Waste Management, Inc. 5.00%, 3/15/14 100 100,726 Weyerhaeuser Co. 7.375%, 3/15/32 200 237,169 ---------- 2,522,588 OIL-3.3% Devon Financing Corp. 6.875%, 9/30/11 300 339,767 Duke Capital LLC 6.75%, 2/15/32 100 108,821 FPL Group Capital, Inc. 4.086%, 2/16/07 100 101,059 Sunoco, Inc. 4.875%, 10/15/14 150 148,320 Valero Energy Corp. 7.50%, 4/15/32 150 180,927 ---------- 878,894 TELECOMMUNICATIONS-2.8% AT&T Wireless Services, Inc. 7.875%, 3/01/11 100 117,862 Bellsouth Corp. 4.20%, 9/15/09 300 300,784 SBC Communications 5.625%, 6/15/16 100 103,305 Sprint Capital Corp. 8.75%, 3/15/32 100 133,231 Telus Corp. (Canada) 7.50%, 6/01/07 100 108,650 ---------- 763,832 UTILITIES-1.2% Ohio Power Co. Series F 5.50%, 2/15/13 100 104,604 Pacific Gas & Electric 6.05%, 3/01/34 100 103,862 Progress Energy, Inc. 6.85%, 4/15/12 100 111,631 ---------- 320,097 Total Corporate Debt Obligations (cost $8,367,296) 8,478,894 U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY OBLIGATIONS-1.5% U.S. Treasury Note 3.00%, 11/15/07 (cost $398,233) 400 397,531 SHORT-TERM INVESTMENT-14.0% TIME DEPOSIT-14.0% The Bank of New York 1.50%, 1/03/05 (cost $3,785,000) 3,785 3,785,000 TOTAL INVESTMENTS-100.8% (cost $25,929,074) 27,180,777 Other assets less liabilities-(0.8%) (226,144) NET ASSETS-100% $26,954,633 FINANCIAL FUTURES CONTRACTS PURCHASED (see Note D)
Value at Number of Expiration Original December 31, Unrealized Type Contracts Month Value 2004 Appreciation --------------------------------------------------------------------------------------------- British Pound FTSE March 100 Index 5 2005 $455,401 $460,536 $5,135 Euro Stoxx March 50 Index 34 2005 1,350,569 1,362,403 11,834 Japanese Yen March Topix Index 4 2005 429,837 447,936 18,099 $35,068
(a) Non-income producing security. Glossary of Terms: ADR-American Depositary Receipt FRN-Floating Rate Note GDR-Global Depositary Receipt pfd.-Preferred Stock See Notes to Financial Statements. 12 BALANCED WEALTH STRATEGY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
ASSETS Investments in securities, at value (cost $25,929,074) $27,180,777 Cash 4,878 Foreign cash, at value (cost $459,681) 460,586(a) Receivable for investment securities sold and foreign currency contracts 1,879,165 Receivable for capital stock sold 275,941 Dividends and interest receivable 137,495 Receivable due from Adviser 54,116 Total assets 29,992,958 LIABILITIES Payable for investment securities purchased and foreign currency contracts 2,964,477 Distribution fee payable 3,193 Payable for variation margin on futures contracts 2,421 Transfer agent fee payable 56 Accrued expenses 68,178 Total liabilities 3,038,325 NET ASSETS $26,954,633 COMPOSITION OF NET ASSETS Capital stock, at par $2,524 Additional paid-in capital 25,476,483 Undistributed net investment income 137,338 Accumulated net realized gain on investment and foreign currency transactions 53,858 Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 1,284,430 $26,954,633 Class A Shares Net assets $9,088,337 Shares of capital stock outstanding 850,000 Net asset value per share $10.69 Class B Shares Net assets $17,866,296 Shares of capital stock outstanding 1,673,766 Net asset value per share $10.67
(a) An amount of U.S. $129,016 has been segregated as collateral for the financial futures contracts outstanding at December 31, 2004. See Notes to Financial Statements. 12 BALANCED WEALTH STRATEGY PORTFOLIO STATEMENT OF OPERATIONS JULY 1, 2004(A) TO DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
INVESTMENT INCOME Interest $143,289 Dividends (net of foreign taxes withheld of $1,499) 87,238 Total investment income 230,527 EXPENSES Advisory fee 46,264 Distribution fee--Class B 10,258 Custodian 97,916 Audit 41,750 Administrative 34,500 Legal 17,185 Printing 7,803 Directors' fees 500 Transfer agency 409 Miscellaneous 2,562 Total expenses 259,147 Less: expenses waived and reimbursed by the Adviser (see Note B) (147,871) Net expenses 111,276 Net investment income 119,251 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions (62,785) Futures 118,316 Foreign currency transactions 16,414 Net change in unrealized appreciation/depreciation of: Investments 1,251,703 Futures 35,068 Foreign currency denominated assets and liabilities (2,341) Net gain on investment and foreign currency transactions 1,356,375 NET INCREASE IN NET ASSETS FROM OPERATIONS $1,475,626
(a) Commencement of operations. See Notes to Financial Statements. 14 BALANCED WEALTH STRATEGY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
July 1, 2004(a) to December 31, 2004 INCREASE IN NET ASSETS FROM OPERATIONS Net investment income $ 119,251 Net realized gain on investment and foreign currency transactions 71,945 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities 1,284,430 Net increase in net assets from operations 1,475,626 CAPITAL STOCK TRANSACTIONS Net increase 25,479,007 Total increase 26,954,633 NET ASSETS Beginning of period -0- End of period (including undistributed net investment income of $137,338) $26,954,633
(a) Commencement of operations. See Notes to Financial Statements. 15 BALANCED WEALTH STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND NOTE A: Significant Accounting Policies The AllianceBernstein Balanced Wealth Strategy Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term growth of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio commenced operations on July 1, 2004. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 16 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 7. Repurchase Agreements It is the policy of the Portfolio that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. 17 BALANCED WEALTH STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the daily average net assets for Class A and Class B shares, respectively. For the period ended December 31, 2004 the Adviser waived fees in the amount of $113,371. Pursuant to the terms of the investment advisory agreement, the Portfolio has voluntarily 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 $34,500 for the period ended December 31, 2004. Brokerage commissions paid on investment transactions for the period ended December 31, 2004, amounted to $27,708, of which $4,915 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 $409 for the period ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the period ended December 31, 2004 were as follows:
Purchases Sales Investment securities (excluding U.S. government securities) $28,770,807 $6,544,853 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 $26,046,617 Gross unrealized appreciation $1,215,288 Gross unrealized depreciation (81,128) Net unrealized appreciation $1,134,160 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 18 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND 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 affected. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. 2. Forward Exchange Currency Contracts The Portfolio may enter into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency on a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as net unrealized appreciation or depreciation by the Portfolio. The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having a value at least equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of the counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars reflects the total exposure the Portfolio has in that particular currency contract. 3. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Portfolio. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. 19 BALANCED WEALTH STRATEGY 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 July 1, 2004(a) to July 1, 2004(a) to December 31, December 31, 2004 2004 Class A Shares sold 850,000 $8,500,000 Net increase 850,000 $8,500,000 Class B Shares sold 1,731,943 $17,574,843 Shares redeemed (58,177) (595,836) Net increase 1,673,766 $16,979,007 NOTE F: Risks Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Interest Rate Risk and Credit Risk-- Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio's investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio's investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit risk rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as "junk bonds") have speculative elements or are predominantly speculative risks. Indemnification Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $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 period ended December 31, 2004. (a) Commencement of operations. 20 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND NOTE H: Component of Accumulated Earnings (Deficit) As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $305,590 Undistributed long-term capital gains 3,149 Unrealized appreciation/(depreciation) 1,166,887 Total accumulated earnings/(deficit) $1,475,626 (a) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on investments in passive foreign investment companies, and the tax treatment of dividends received. During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses and the tax character of gains/losses on disposition of passive foreign investment companies, resulted in a net increase in undistributed net investment income and a net decrease in accumulated net realized gain on investment and foreign currency transactions. This reclassification had no effect on net assets. NOTE I: Legal Proceedings As has been previously reported, 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 the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee with respect to certain AllianceBernstein funds. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; 21 BALANCED WEALTH STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V. ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 22 BALANCED WEALTH STRATEGY PORTFOLIO FINANCIAL HIGHLIGHTS ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A CLASS B July 1, 2004(a) July 1, 2004(a) to to December 31, December 31, 2004 2004 ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 $10.00 Income From Investment Operations Net investment income (b)(c) .07 .06 Net realized and unrealized gain on investment and foreign currency transactions .62 .61 Net increase in net asset value from operations .69 .67 Net asset value, end of period $10.69 $10.67 Total Return Total investment return based on net asset value (d) 6.90% 6.70% Ratios/Supplemental Data Net assets, end of period (000's omitted) $9,089 $17,866 Ratio to average net assets of: Expenses, net of waivers and reimbursements (e) 1.20% 1.45% Expenses, before waivers and reimbursements (e) 2.87% 3.34% Net investment income (c)(e) 1.36% 1.49% Portfolio turnover rate 44% 44%
(a) Commencement of operations. (b) Based on average shares outstanding. (c) Net of expenses waived and reimbursed by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. 23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND To the Shareholders and Board of Directors of AllianceBernstein Variable Products Inc. AllianceBernstein Balanced Wealth Strategy Portfolio: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Balanced Wealth Strategy Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statements of operations and changes in net assets, and the financial highlights for the period July 1, 2004 (commencement of operations) to December 31, 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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 Balanced Wealth Strategy Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2004, the results of its operations, the changes in its net assets, and the financial highlights for the period July 1, 2004 (commencement of operations) to December 31, 2004, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 24 BALANCED WEALTH STRATEGY 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 25 BALANCED WEALTH STRATEGY PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 CHAIRMAN OF THE BOARD associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design and during 1988-1992, Director and
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 26 BALANCED WEALTH STRATEGY PORTFOLIO ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND Officer Information(1) Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) HELD PRINCIPAL OCCUPATION AND DATE OF BIRTH WITH FUND DURING PAST 5 YEARS ----------------------------------------------------------------------------------------------------------- Marc O. Mayer President See biography above. 10/2/57 Philip L. Kirstein Senior Vice President Senior Vice President and Independent 5/29/45 and Independent Compliance Officer--Mutual Funds of Compliance Officer ACMC with which he has been associated since October 2004. Prior thereto, he was Counsel of Kirkpartrick & Lockhart, L.P. from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers since prior to 2000 until March 2003. Teresa Marziano Senior Vice President Senior Vice President of ACMC** since October 2000 9/1/54 and co-Chief Investment Officer of Real Estate Investments since July 2004. Prior thereto, she was a Senior Analyst of investment research at Sanford C. Bernstein & Co., Inc. ("Bernstein") since prior to 2000. Joseph G. Paul Senior Vice President Senior Vice President of ACMC**, co-Chief Investment 2/8/60 Officer of Real Estate Investments since July 2004; and Chief Investment Officer of Small and Mid Capitalization Value Equities since 2002. He is also Chief Investment Officer of Advanced Value at ACMC since October 2000, and held the same position at SCB since prior to 2000. Seth J. Masters Vice President Executive Vice President of ACMC** and Chief 6/4/59 Investment Officer of Style Blend and Core Equity Services and head of U.S. and Global Style Blend teams since October 2000. Prior thereto, he was Chief Investment Officer for Emerging Markets Value at Sanford C. Bernstein & Co., Inc. ("Bernstein") since prior to 2000. Mark R. Manley Clerk Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global 10/4/50 Financial Officer Investor Services, Inc. ("AGIS")** and Vice President of ABIRM**, with which he has been associated since prior to 2000. Thomas R. Manley Controller Vice President of ACMC**, with which 8/3/51 he has been associated since prior to 2000.
(1) The day-today management of and investment decisions for the portfolio are made by the Blend Investment Policy team, comprised of senior Blend portfolio managers. * The address for each of the Fund's Officers is 1345 Avenue of the Americas, New York, NY 10105. ** ACMC, ABIRM, AGIS and Bernstein are affiliates of the Trust. The Fund's Statement of Additional Information (SAI) has additional information about the Fund's Trustees 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. 27 ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND ALLIANCEBERNSTEIN WEALTH APPRECIATION STRATEGY PORTFOLIO ANNUAL REPORT DECEMBER 31, 2004 THE FUND EXPECTS TO HOLD A MEETING OF SHAREHOLDERS ON OR ABOUT NOVEMBER 15, 2005, AT WHICH THE ELECTION OF DIRECTORS WILL BE CONSIDERED. FOR INFORMATION WITH RESPECT TO SUBMITTING A CANDIDATE FOR DIRECTOR FOR CONSIDERATION BY THE GOVERNANCE AND NOMINATING COMMITTEE OF THE FUND'S BOARD OF DIRECTORS, PLEASE SEE THE NOMINATING PROCEDURES IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. INVESTMENT PRODUCTS OFFERED > ARE NOT FDIC INSURED > MAY LOSE VALUE > ARE NOT BANK GUARANTEED YOU MAY OBTAIN A DESCRIPTION OF THE FUND'S PROXY VOTING POLICIES AND PROCEDURES, AND INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, WITHOUT CHARGE. SIMPLY VISIT THE SECURITIES AND EXCHANGE COMMISSION'S (THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800) 227-4618. THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330. WEALTH APPRECIATION STRATEGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ LETTER TO INVESTORS February 10, 2005 The following is an update of AllianceBernstein Variable Products Series Fund AllianceBernstein Wealth Appreciation Strategy Portfolio (the "Portfolio") for the annual reporting period ended December 31, 2004. INVESTMENT OBJECTIVE AND POLICIES The Portfolio seeks to achieve long-term growth of capital by investing in a portfolio of equity securities. The Portfolio is designed for investors who seek equity returns without regard to taxes but also want broad diversification of related risks across styles, capitalization ranges and geographic regions. Normally, the Portfolio's targeted blend is an equal weighting of growth and value stocks (50% each), with approximately 70% of each in U.S. companies and 30% in non-U.S. companies. The Adviser will allow the Portfolio's relative weightings to change in response to markets, but only within carefully constructed ranges. Beyond those ranges, the Adviser will rebalance toward the targeted blends. The Portfolio can also selectively invest in real estate investment trusts (REITs), which often provide attractive income, yet historically have had a low correlation to other asset classes that can make up the portfolio. INVESTMENT RESULTS The table on page 3 shows the Portfolio's performance compared to its balanced benchmark, a 70% / 30% blend of the Standard & Poor's (S&P) 500 Stock Index and the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, for the period from the Portfolio's inception on July 1, 2004 through December 31, 2004. The Portfolio posted a healthy absolute gain since its inception through December 31, 2004 but underperformed its balanced benchmark. The Portfolio was positioned to take advantage of perceived pent-up growth potential in a number of stocks, particularly in the technology sector, trading at prices below what their growth rates might justify. The technology sector declined sharply in the third quarter of 2004, as did the health care sector in which the Portfolio held an overweighted position, resulting in underperformance relative to the broad market. Technology shares recovered strongly in the fourth quarter, however, and boosted the Portfolio's return. The Portfolio's return was also aided by its investment in non-U.S. securities, although the Portfolio's hedging position muted the returns relative to an unhedged position, as the U.S. dollar depreciated over the second half of the year compared to a market-capitalization weighted basket of foreign currencies. MARKET REVIEW AND INVESTMENT STRATEGY The S&P 500 Stock Index returned 7.19% in the second half of 2004, led by energy and utility stocks, as record high oil prices lifted industry profits. Technology stocks, which had been the worst performing sector in the third quarter of 2004, retreating nearly 9.9%, turned in the strongest performance of all sectors in the fourth quarter of 2004, rallying nearly 13.6% amidst robust holiday sales and renewed optimism for a pickup in corporate spending. International stocks, as measured by the unhedged MSCI EAFE Index, gained 15.10% for the six-month period ended December 31, 2004, comfortably outpacing the U.S. stock market. The bulk of the international gains, however, were the result of sharply appreciating foreign currency, as the U.S. dollar slid on continued concerns over mounting U.S. trade deficits. In local currency terms, the MSCI EAFE Index gained a more modest 5.73% for the six-month period. The real estate investment trust (REIT) market continued to show enormous strength, rising over 24.71% in the second half of the year, as measured by the NAREIT Equity Index. IN MEMORY It is with sadness that we announce the passing of Clifford L. Michel, a member of the Board of Directors of AllianceBernstein Variable Products Series Fund Wealth Appreciation Strategy Portfolio. His hard work, dedication and contributions to the Portfolio will be greatly missed. 1 WEALTH APPRECIATION STRATEGY PORTFOLIO HISTORICAL PERFORMANCE AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ AN IMPORTANT NOTE ABOUT THE VALUE OF HISTORICAL PERFORMANCE THE PERFORMANCE SHOWN ON THE FOLLOWING PAGE REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE INFORMATION SHOWN. PLEASE CONTACT YOUR FINANCIAL ADVISOR OR INSURANCE AGENT REPRESENTATIVE AT YOUR FINANCIAL INSTITUTION TO OBTAIN PORTFOLIO PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO WILL FLUCTUATE, SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE PORTFOLIO CAREFULLY BEFORE INVESTING. FOR A FREE COPY OF THE PORTFOLIO'S PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION, CALL YOUR FINANCIAL ADVISOR OR (800) 984-7654. YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Returns are annualized for periods longer than one year. 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. NAV returns do not reflect sales charges; if sales charges were reflected, the Portfolio's quoted performance would be lower. Returns for Class B shares will vary due to different expenses associated with this class. Performance assumes reinvestment of distributions and does not account for taxes. BENCHMARK DISCLOSURE The unmanaged Standard & Poor's (S&P) 500 Stock Index and the unmanaged Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Stock Index includes 500 U.S. stocks and is a common measure of the performance of the overall U.S. stock market. The MSCI EAFE 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 indices, and their results are not indicative of the performance for any specific investment, including AllianceBernstein Wealth Appreciation Strategy Portfolio. A WORD ABOUT RISK The Portfolio allocates its investments among multiple asset classes which will include U.S. and foreign securities. Within each of these, the Portfolio will also allocate its investments in different types of securities, such as growth and value stocks and real estate investment trusts. International investing involves risks not associated with U.S. investments, including currency fluctuations and political and economic changes. The Portfolio may at times use certain types of investment derivatives such as options, futures, forwards and swaps. The use of derivatives involves specific risks and is not suitable for all investors. The Portfolio systematically rebalances its allocations in these asset classes to maintain their target weightings. There can be no assurance that rebalancing will achieve its intended result, and the costs of rebalancing may be significant over time. There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Product prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money. (HISTORICAL PERFORMANCE CONTINUED ON NEXT PAGE) 2 WEALTH APPRECIATION STRATEGY PORTFOLIO HISTORICAL PERFORMANCE (CONTINUED FROM PREVIOUS PAGE) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ THE PORTFOLIO VS. ITS BENCHMARK Returns PERIOD ENDED DECEMBER 31, 2004 Since Inception* ------------------------------------------------------------------------------- AllianceBernstein Wealth Appreciation Strategy Portfolio Class A 6.90% 70% S&P 500 Stock Index / 30% MSCI EAFE Index 9.56% S&P 500 Stock Index 7.19% MSCI EAFE Index 15.10% * The since inception return for the Portfolio is from its actual inception date of 7/1/04. The since inception returns for the indices are from the closest month-end to the Portfolio's inception, which is 6/30/04. ALLIANCEBERNSTEIN WEALTH APPRECIATION STRATEGY PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT 7/1/04*-12/31/04 ALLIANCEBERNSTEIN WEALTH APPRECIATION STRATEGY PORTFOLIO CLASS A: $10,691 70% S&P 500 STOCK INDEX/ 30% MSCI EAFE INDEX: $10,951 S&P 500 STOCK INDEX: $10,718 MSCI EAFE INDEX: $11,510 [THE FOLLOWING DATA WAS REPRESENTED BY A CHART IN THE PRINTED MATERIAL]
AllianceBernstein 70% S&P 500 Wealth Appreciation Stock Index / S&P 500 Strategy Portfolio 30% MSCI Stock MSCI EAFE Class A EAFE Index Index Index ---------------------------------------------------------------------------------------------- 7/1/04* 10,000 10,000 10,000 10,000 7/31/04 9,710 9,671 9,669 9,677 8/31/04 9,660 9,712 9,708 9,722 9/30/04 9,800 9,862 9,813 9,977 10/31/04 9,980 10,069 9,963 10,318 11/30/04 10,370 10,561 10,365 11,026 12/31/04 10,691 10,951 10,718 11,510
* SINCE INCEPTION OF THE PORTFOLIO'S CLASS A SHARES ON 7/1/04. THE GROWTH OF $10,000 FOR THE INDICES IS FROM THE CLOSEST MONTH-END TO THE PORTFOLIO'S INCEPTION, WHICH IS 6/30/04. THIS CHART ILLUSTRATES THE TOTAL VALUE OF AN ASSUMED $10,000 INVESTMENT IN ALLIANCEBERNSTEIN WEALTH APPRECIATION STRATEGY PORTFOLIO CLASS A SHARES (FROM 7/1/04* TO 12/31/04) AS COMPARED TO THE PERFORMANCE OF THE PORTFOLIO'S BALANCED BENCHMARK (70% S&P 500 STOCK INDEX / 30% MSCI EAFE INDEX), AS WELL AS THE COMPONENTS OF THE BALANCED BENCHMARK BY THEMSELVES. THE CHART ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. See Historical Performance and Benchmark disclosures on previous page. 3 WEALTH APPRECIATION STRATEGY PORTFOLIO FUND EXPENSES AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. Actual Expenses The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Ending Wealth Appreciation Account Value Account Value Expenses Paid Annualized Strategy Portfolio July 1, 2004 December 31, 2004 During Period* Expense Ratio* ------------------------------------------------------------------------------------------------------- Class A Actual $ 1,000 $ 1,069.00 $ 6.10 1.18% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.10 $ 5.96 1.18% Class B Actual $ 1,000 $ 1,067.00 $ 7.70 1.49% Hypothetical (5% return before expenses) $ 1,000 $ 1,017.55 $ 7.52 1.49%
* Expenses are equal to each classes' annualized expense ratios, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/366 (to reflect the one-half year period). 4 WEALTH APPRECIATION STRATEGY PORTFOLIO TEN LARGEST HOLDINGS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COMPANY U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- General Electric Co. $ 383,250 2.4% Citigroup, Inc. 330,032 2.0 eBay, Inc. 267,443 1.6 Dell, Inc. 248,625 1.5 Yahoo!, Inc. 244,919 1.5 Microsoft Corp. 239,055 1.5 Electronic Arts, Inc. 203,544 1.3 Target Corp. 202,527 1.2 JPMorgan Chase & Co. 198,950 1.2 American International Group, Inc. 197,009 1.2 $ 2,515,354 15.4% SECTOR DIVERSIFICATION December 31, 2004 ------------------------------------------------------------------------------- PERCENT OF SECTOR U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- Technology/Electronics $ 2,566,395 15.7% Finance 2,523,813 15.5 Consumer Cyclical 2,158,517 13.2 Construction & Housing 1,670,767 10.3 Medical 1,465,078 9.0 Capital Equipment 1,005,425 6.2 Consumer Staples 636,562 3.9 Energy 598,708 3.7 Utilities 276,318 1.7 Industrial Commodities 258,173 1.6 Transportation 195,526 1.2 Telecommunications 69,782 0.4 Total Investments* 13,425,064 82.4 Cash and receivables, net of liabilities 2,867,455 17.6 Net Assets $16,292,519 100.0% * Excludes short-term investments. 5 WEALTH APPRECIATION STRATEGY PORTFOLIO COUNTRY DIVERSIFICATION December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ PERCENT OF COUNTRY U.S. $ VALUE NET ASSETS ------------------------------------------------------------------------------- United States $ 9,854,090 60.5% United Kingdom 759,358 4.7 Japan 470,486 2.9 Switzerland 366,404 2.2 France 281,894 1.7 Bermuda 201,364 1.2 Australia 190,148 1.2 Hong Kong 161,139 1.0 Canada 159,857 1.0 Other* 980,324 6.0 Total Investments** 13,425,064 82.4 Cash and receivables, net of liabilities 2,867,455 17.6 Net Assets $16,292,519 100.0% * The Fund's country breakdown is expressed as a percentage of net assets and may vary over time. "Other" represents less than 1% weightings in the following countries: Cayman Islands, Finland, Germany, Ireland, Israel, Italy, Mexico, Netherlands, Panama, Russia, Singapore, South Africa, South Korea, Spain, Sweden and Taiwan. ** Excludes short-term obligations. 6 WEALTH APPRECIATION STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value ------------------------------------------------------------------------------- COMMON STOCKS AND OTHER INVESTMENTS-82.4% UNITED STATES INVESTMENTS-60.5% TECHNOLOGY / ELECTRONICS-12.5% DATA PROCESSING-7.7% Apple Computer, Inc. (a) 1,200 $ 77,280 Arrow Electronics, Inc. (a) 1,350 32,805 Avnet, Inc. (a) 1,800 32,832 Dell, Inc. (a) 5,900 248,625 Electronic Arts, Inc. (a) 3,300 203,544 Electronic Data Systems Corp. 2,400 55,440 Google, Inc. Cl. A (a) 360 69,516 Hewlett-Packard Co. 6,500 136,305 Microsoft Corp. 8,950 239,055 Network Appliance, Inc. (a) 600 19,932 Sanmina-SCI Corp. (a) 3,000 25,410 Solectron Corp. (a) 8,700 46,371 Tech Data Corp.(a) 1,300 59,020 ------------ 1,246,135 ELECTRICAL & ELECTRONICS-4.0% Broadcom Corp. Cl. A (a) 3,050 98,454 Cisco Systems, Inc. (a) 3,550 68,515 Corning, Inc. (a) 11,700 137,709 Juniper Networks, Inc. (a) 5,250 142,748 Qualcomm, Inc. 4,150 175,960 Tellabs, Inc. (a) 3,300 28,347 ------------ 651,733 ELECTRICAL COMPONENTS & INSTRUMENTS-0.8% Applied Materials, Inc. (a) 1,800 30,780 Intel Corp. 1,230 28,770 Symantec Corp. (a) 2,900 74,704 ------------ 134,254 ------------ 2,032,122 FINANCE-12.2% BANKING-6.1% Bank of America Corp. 1,700 79,883 Citigroup, Inc. 6,850 330,032 Fannie Mae 1,200 85,452 Freddie Mac 950 70,015 JPMorgan Chase & Co. 5,100 198,950 National City Corp. 2,450 91,998 SunTrust Banks, Inc. 1,100 81,268 Wachovia Corp. 1,000 52,600 ------------ 990,198 FINANCIAL SERVICES-2.5% Franklin Resources, Inc. 800 55,720 Lehman Brothers Holdings, Inc. 800 69,984 MBNA Corp. 5,350 150,817 Merrill Lynch & Co., Inc. 620 37,057 Morgan Stanley 800 44,416 The Goldman Sachs Group, Inc. 550 57,222 ------------ 415,216 INSURANCE-3.6% American International Group, Inc. 3,000 197,009 The Hartford Financial Services Group, Inc. 1,225 84,905 The Progressive Corp. 550 46,662 The St. Paul Travelers Cos., Inc. 2,100 77,847 Torchmark Corp. 700 39,998 UnitedHealth Group, Inc. 1,600 140,848 ------------ 587,269 ------------ 1,992,683 CONSUMER CYCLICAL-10.7% BROADCASTING & PUBLISHING-3.6% Comcast Corp. Special Cl. A (a) 3,250 106,730 The E.W. Scripps Co. Cl. A 2,200 106,216 Time Warner, Inc. (a) 6,900 134,136 Yahoo!, Inc. (a) 6,500 244,919 ------------ 592,001 BUSINESS & PUBLIC SERVICES-0.3% The Interpublic Group of Cos., Inc. (a) 3,600 48,240 LEISURE & TOURISM-0.9% Hilton Hotels Corp. 300 6,822 Host Marriott Corp. 2,400 41,520 Starbucks Corp. (a) 1,150 71,714 Starwood Hotels & Resorts Worldwide, Inc. 425 24,820 ------------ 144,876 MERCHANDISING-5.3% Amazon.com, Inc. (a) 500 22,145 Bed Bath & Beyond, Inc. (a) 900 35,847 eBay, Inc. (a) 2,300 267,443 Federated Department Stores, Inc. 500 28,895 Limited Brands 1,000 23,020 Lowe's Cos., Inc. 3,250 187,168 Office Depot, Inc. (a) 3,900 67,704 Target Corp. 3,900 202,527 Wal-Mart Stores, Inc. 550 29,051 ------------ 863,800 7 WEALTH APPRECIATION STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value TEXTILES & APPAREL-0.6% Jones Apparel Group, Inc. 2,200 $ 80,454 V.F. Corp. 400 22,152 ------------ 102,606 ------------ 1,751,523 MEDICAL-5.7% HEALTH & PERSONAL CARE-5.7% Amgen, Inc. (a) 2,550 163,583 Avon Products, Inc. 2,850 110,295 Boston Scientific Corp. (a) 3,200 113,760 HCA, Inc. 1,700 67,932 Medco Health Solutions, Inc. (a) 1,750 72,800 Pfizer, Inc. 7,100 190,918 St. Jude Medical, Inc. (a) 3,050 127,887 Zimmer Holdings, Inc. (a) 1,000 80,120 ------------ 927,295 CAPITAL EQUIPMENT-5.0% AEROSPACE & DEFENSE-0.4% The Boeing Co. 1,200 62,124 AUTOMOBILES-0.4% BorgWarner, Inc. 1,350 73,130 INDUSTRIAL COMPONENTS-0.5% Eaton Corp. 1,100 79,596 MULTI-INDUSTRY-3.7% General Electric Co. 10,500 383,250 Hubbell, Inc. Cl. B 1,650 86,295 Parker Hannifin Corp. 1,300 98,462 Textron, Inc. 400 29,520 ------------ 597,527 ------------ 812,377 CONSTRUCTION & HOUSING-4.7% BUILDING MATERIALS-0.3% Martin Marietta Materials, Inc. 800 42,928 CONSTRUCTION & HOUSING-0.2% Pulte Homes, Inc. 550 35,090 REAL ESTATE-4.2% Alexandria Real Estate Equities, Inc. 470 34,977 AMB Property Corp. 450 18,176 Archstone-Smith Trust 700 26,810 Boston Properties, Inc. 375 24,251 Brookfield Properties 300 9,364 Camden Property Trust 450 22,950 Corporate Office Properties Trust 775 22,746 Developers Diversified Realty Corp. 905 40,155 Duke Realty Corp. 950 32,433 EastGroup Properties, Inc. 375 14,370 Equity Office Properties Trust 250 7,280 Equity One, Inc. 250 5,933 Equity Residential 1,000 36,180 Essex Property Trust, Inc. 150 12,570 General Growth Properties, Inc. 875 31,640 Glenborough Realty Trust, Inc. 225 4,788 iStar Financial, Inc. 430 19,462 Kimco Realty Corp. 50 2,900 LaSalle Hotel Properties 400 12,732 Mack-Cali Realty Corp. 300 13,809 Pan Pacific Retail Properties, Inc. 200 12,540 Prentiss Properties Trust 325 12,415 ProLogis 1,275 55,246 Reckson Associates Realty Corp. 100 3,281 Regency Centers Corp. 325 18,005 Shurgard Storage Centers, Inc. Cl. A 375 16,504 Simon Property Group, Inc. 825 53,353 SL Green Realty Corp. 275 16,651 Tanger Factory Outlet Centers, Inc. 400 10,584 The Macerich Co. 200 12,560 The Mills Corp. 325 20,722 United Dominion Realty Trust, Inc. 1,000 24,800 Vornado Realty Trust 350 26,646 Washington Real Estate, Inc. 150 5,081 Windrose Medical Properties Trust 650 9,367 ------------ 691,281 ------------ 769,299 CONSUMER STAPLES-3.0% BEVERAGES & TOBACCO-1.2% Altria Group, Inc. 1,600 97,760 PepsiCo, Inc. 1,900 99,180 ------------ 196,940 FOOD & HOUSEHOLD PRODUCTS-1.8% Safeway, Inc. (a) 4,100 80,934 The Kroger Co. (a) 3,300 57,882 The Procter & Gamble Co. 2,700 148,716 ------------ 287,532 ------------ 484,472 8 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value ENERGY-2.4% ENERGY EQUIPMENT & SERVICES-0.5% Baker Hughes, Inc. 820 $ 34,989 Halliburton Co. 1,150 45,126 ------------ 80,115 ENERGY SOURCES-1.9% ChevronTexaco Corp. 2,500 131,275 ConocoPhillips 1,125 97,684 Occidental Petroleum Corp. 1,400 81,704 ------------ 310,663 ------------ 390,778 UTILITIES-1.7% ELECTRIC & GAS UTILITY-1.7% American Electric Power Co., Inc. 1,100 37,774 Entergy Corp. 1,300 87,867 FirstEnergy Corp. 800 31,608 Sempra Energy 1,500 55,020 Wisconsin Energy Corp. 1,900 64,049 ------------ 276,318 TRANSPORTATION-1.2% TRANSPORTATION - ROAD & RAIL-1.2% Burlington Northern Santa Fe Corp. 500 23,655 CSX Corp. 2,500 100,200 Norfolk Southern Corp. 1,000 36,190 United Parcel Service, Inc. 350 29,911 ------------ 189,956 INDUSTRIAL COMMODITIES-1.4% CHEMICAL-0.2% PPG Industries, Inc. 500 34,080 FOREST & PAPER-1.2% International Paper Co. 800 33,600 Kimberly-Clark Corp. 700 46,067 MeadWestvaco Corp. 1,200 40,668 Smurfit-Stone Container Corp. (a) 3,900 72,852 ------------ 193,187 ------------ 227,267 Total United States Investments (cost $9,061,075) 9,854,090 FOREIGN INVESTMENTS-21.9% AUSTRALIA-1.2% Bunnings Warehouse Property Trust 6,950 9,939 Centro Properties Group 1,100 4,984 Coles Myer Ltd. 1,395 10,782 DB Rreef Trust 1,790 1,852 General Property Trust 5,100 14,952 ING Industrial Fund 10,783 18,286 Macquarie CountryWide Trust 9,300 15,192 Multplex Group 1,370 5,842 Publishing & Broadcasting 400 5,499 Rinker Group Ltd. 3,600 30,080 Stockland 3,200 15,040 Westfield Group (a) 4,480 57,700 ------------ 190,148 BERMUDA-1.2% Cooper Industries Ltd. Cl. A 300 20,367 Marvell Technology Group Ltd. (a) 2,500 88,675 Nabors Industries Ltd. (a) 1,800 92,322 ------------ 201,364 CANADA-1.0% Boardwalk Real Estate Investment Trust 400 6,160 Borealis Retail Real Estate Investment Trust 1,300 14,517 Canadian Apartment Properties Real Estate 400 5,034 Canadian Real Estate Investment Trust 1,000 14,815 Cominar Real Estate Investment Trust 300 4,322 H&R Real Estate Investment Trust 800 12,680 InnVest Real Estate Investment Trust 300 2,980 O&Y Real Estate Investment Trust 900 10,591 Research In Motion Ltd. (a) 580 47,804 RioCan Real Estate Investment Trust 1,800 26,666 Summit Real Estate Investment Trust 950 14,288 ------------ 159,857 CAYMAN ISLANDS-0.3% XL Capital Ltd. Cl. A 700 54,355 FINLAND-0.1% Sponda Oyj 1,850 17,955 FRANCE-1.7% BNP Paribas, SA 422 30,586 Essilor International, SA 338 26,533 Gecina, SA 289 28,682 Klepierre 275 24,340 Sanofi Aventis 311 24,865 Schneider Electric,SA 236 16,418 Total, SA 308 67,456 Unibail 400 63,014 ------------ 281,894 9 WEALTH APPRECIATION STRATEGY PORTFOLIO PORTFOLIO OF INVESTMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value GERMANY-0.7% Porsche AG pfd. 38 $ 24,069 SAP AG 337 59,672 SAP AG (ADR) 800 35,368 ------------ 119,109 HONG KONG-1.0% Esprit Holdings Ltd. 8,000 48,352 Henderson Land Development Co., Ltd. 6,000 31,195 Kerry Properties Ltd. 11,000 23,544 Sun Hung Kai Properties Ltd. 5,800 58,048 ------------ 161,139 IRELAND-0.6% Allied Irish Banks Plc 1,691 35,023 Anglo Irish Bank Corp., Plc 352 8,525 CRH Plc 2,059 55,078 ------------ 98,626 ISRAEL-0.8% Teva Pharmaceutical Industries Ltd. (ADR) 4,100 122,425 ITALY-0.4% Beni Stabili SpA 7,200 7,338 Eni S.p.A. 1,921 48,152 Fastweb (a) 175 10,067 ------------ 65,557 JAPAN-2.9% Canon, Inc. 1,000 54,304 Daikin Industries Ltd. 1,000 28,985 Denso Corp. 2,000 53,809 East Japan Railway Co. 1 5,570 Eisai Co., Ltd. 1,000 32,981 Honda Motor Co., Ltd. 700 36,597 Hoya Corp. 500 56,494 Japan Retail Fund Investment Corp. 3 25,324 Keyence Corp. 100 22,460 Mitsubishi Corp. 3,000 38,803 Mitsubishi Tokyo Financial Group, Inc. 2 20,484 Mitsui Fudosan Co., Ltd. 2,000 24,358 Nippon Building Fund, Inc. 2 17,059 Nitto Denko Corp. 200 10,981 Ricoh Co., Ltd. 1,000 19,376 Suzuki Motor Corp. 700 12,803 Takeda Chemical Industries Ltd. 200 10,098 ------------ 470,486 MEXICO-0.3% America Movil, S.A. de C.V. Series L (ADR) 800 41,880 Grupo Televisa, SA (GDR) 200 12,100 ------------ 53,980 NETHERLANDS-0.7% ASML Holding NV (a) 1,034 16,527 Eurocommercial Properties NV 110 3,904 ING Groep NV 1,356 41,008 Rodamco Europe NV 455 36,022 Wereldhave NV 110 11,929 ------------ 109,390 PANAMA-0.4% Carnival Corp. 1,225 70,597 RUSSIA-0.1% Mobile Telesystems 100 13,851 SINGAPORE-0.2% Ascendas Real Estate Investment Trust Cl. A 1,600 1,607 Ascendas Real Estate Investment Trust (a) 16,000 16,761 CapitaMall Trust (a) 16,000 17,251 ------------ 35,619 SOUTH AFRICA-0.0% MTN Group Ltd. 516 3,984 SOUTH KOREA-0.1% Samsung Electronics Co. 50 21,725 SPAIN-0.7% Banco Bilbao Vizcaya 2,611 46,308 Gestevision Telecinco, SA (a) 790 16,300 Industria de Diseno Textil, SA (Inditex) 1,257 37,039 Inmobiliaria Colonial 250 10,037 ------------ 109,684 SWEDEN-0.3% Ericsson AB CI. B (a) 16,092 50,684 SWITZERLAND-2.3% Alcon, Inc. 1,650 132,989 Compagnie Financiere Richemont AG 478 15,913 Nobel Biocare Holding AG 130 23,491 Novartis AG 1,389 69,902 Roche Holding AG 562 64,508 UBS AG 711 59,601 ------------ 366,404 TAIWAN-0.2% Hon Hai Precision Industry 5,000 23,223 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 6,000 9,560 ------------ 32,783 10 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Company Shares U.S. $ Value ------------------------------------------------------------------------------- UNITED KINGDOM-4.7% Billiton Plc 1,705 $ 19,925 British Land Co. Plc 1,200 20,606 Brixton Plc 1,350 9,091 Capita Group Plc 4,056 28,401 Capital & Regional Plc 1,500 19,982 Carnival Plc 1,027 62,658 Derwent Valley Holdings Plc 400 8,625 Enterprise Inns Plc 1,572 23,921 Great Universal Stores Plc 2,687 48,328 Hammerson Plc 900 15,007 Hilton Group Plc 4,268 23,277 HSBC Holdings Plc 3,257 54,874 Land Securities Group Plc 1,500 40,233 Liberty International Plc 500 9,297 Man Group Plc 719 20,290 Reckitt Benckiser Plc 2,176 65,629 Royal Bank of Scotland Group Plc 2,570 86,313 Slough Estates Plc 2,200 23,165 Smith & Nephew Plc 2,931 29,991 Shares or Principal Amount Company (000) U.S. $ Value ------------------------------------------------------------------------------- Standared Chartered Bank 1,673 $ 31,056 Tesco Plc 14,013 86,461 WPP Group Plc 2,939 32,228 ------------ 759,358 Total Foreign Investments (cost $3,364,883) 3,570,974 Total Common Stocks and Other Investments (cost $12,425,958) 13,425,064 SHORT-TERM INVESTMENT-16.1% TIME DEPOSIT-16.1% The Bank of New York 1.50%, 1/03/05 (cost $2,629,000) $2,629 2,629,000 TOTAL INVESTMENTS-98.5% (cost $15,054,958) 16,054,064 Other assets less liabilities-1.5% 238,455 NET ASSETS-100% $16,292,519 FINANCIAL FUTURES CONTRACTS SOLD (see Note D)
Value at Number of Expiration Original December 31, Unrealized Type Contracts Month Value 2004 Appreciation ----------------------------------------------------------------------------------------------- EURO STOXX 50 33 Mar 2005 $1,310,745 $1,322,332 $11,587 FTSE 100 IDX FUT 5 Mar 2005 455,933 460,536 4,603 TOPIX INDX FUT 4 Mar 2005 429,837 447,936 18,099 $34,289
(a) Non-income producing security. Glossary: ADR - American Depositary Receipt GDR - Global Depositary Receipt See Notes to Financial Statements. 11 WEALTH APPRECIATION STRATEGY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $15,054,958) $16,054,064 Cash 170 Foreign cash, at value (cost $453,146) 453,879(a) Receivable for investment securities sold and foreign currency contracts 106,652 Receivable due from Adviser 54,772 Receivable for capital stock sold 41,444 Dividends and interest receivable 16,352 Total assets 16,727,333 LIABILITIES Payable for investment securities purchased and foreign currency contracts 365,665 Payable for variation margin on futures contracts 2,244 Distribution fee payable 1,954 Transfer agent fee payable 56 Accrued expenses 64,895 Total liabilities 434,814 NET ASSETS $16,292,519 COMPOSITION OF NET ASSETS Capital stock, at par $ 1,526 Additional paid-in capital 15,156,750 Undistributed net investment income 55,406 Accumulated net realized gain on investment and foreign currency transactions 46,617 Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 1,032,220 $16,292,519 Class A Shares Net assets $ 5,877,179 Shares of capital stock outstanding 550,000 Net asset value per share $ 10.69 Class B Shares Net assets $10,415,340 Shares of capital stock outstanding 976,076 Net asset value per share $ 10.67 (a) An amount of U.S. $126,029 has been segregated as collateral for the financial futures contracts outstanding at December 31, 2004. See Notes to Financial Statements. 12 WEALTH APPRECIATION STRATEGY PORTFOLIO STATEMENT OF OPERATIONS July 1, 2004(a) to December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $936) $ 76,818 Interest 16,136 Total investment income 92,954 EXPENSES Advisory fee 33,919 Distribution fee--Class B 6,185 Custodian 93,072 Audit 41,750 Administrative 34,500 Legal 17,185 Printing 5,772 Directors' fees 500 Transfer agency 409 Miscellaneous 2,562 Total expenses 235,854 Less: expenses waived and reimbursed by the Adviser (see Note B) (167,050) Net expenses 68,804 Net investment income 24,150 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS Net realized gain (loss) on: Investment transactions (81,467) Futures 128,942 Foreign currency transactions 30,398 Net change in unrealized appreciation/depreciation of: Investments 999,106 Futures 34,289 Foreign currency denominated assets and liabilities (1,175) Net gain on investment and foreign currency transactions 1,110,093 NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,134,243 (a) Commencement of operations. See Notes to Financial Statements. 13 WEALTH APPRECIATION STRATEGY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ July 1, 2004(a) to December 31, 2004 ------------------ INCREASE IN NET ASSETS FROM OPERATIONS Net investment income $ 24,150 Net realized gain on investment and foreign currency transactions 77,873 Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities 1,032,220 Net increase in net assets from operations 1,134,243 CAPITAL STOCK TRANSACTIONS Net increase 15,158,276 Total increase 16,292,519 NET ASSETS Beginning of period -0- End of period (including undistributed net investment income of $55,406) $16,292,519 (a) Commencement of operations. See Notes to Financial Statements. 14 WEALTH APPRECIATION STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS December 31, 2004 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE A: Significant Accounting Policies The AllianceBernstein Wealth Appreciation Strategy Portfolio (the "Portfolio") is a series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment objective is to seek long-term growth of capital. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers twenty-two separately managed pools of assets which have differing investment objectives and policies. The Portfolio commenced operations on July 1, 2004. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan. The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio's net asset value per share. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Additional information about some of the items discussed in these Notes to Financial Statements is contained in the Fund's Statement of Additional Information, which is available upon request. The following is a summary of significant accounting policies followed by the Portfolio. 1. Security Valuation Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at "fair value" as determined in accordance with procedures established by and under the general supervision of the Fund's Board of Directors. In general, the market value of securities which are readily available and deemed reliable are determined as follows. Securities listed on a national securities exchange or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities not listed on an exchange but traded on The NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ Official Closing Price; listed put or call options are valued at the last sale price. If there has been no sale on that day, such securities will be valued at the closing bid prices on that day; open futures contracts and options thereon are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; securities traded in the over-the-counter market, ("OTC") (but excluding securities traded on NASDAQ) are valued at the mean of the current bid and asked prices as reported by the National Quotation Bureau or other comparable sources; U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are valued at amortized cost if their original maturity was 60 days or less; or by amortizing their fair value as of the 61st day prior to maturity if their original term to maturity exceeded 60 days; fixed-income securities, including mortgage backed and asset backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker/dealers. In cases where broker/dealer quotes are obtained, Alliance Capital Management, L.P. (the "Adviser") may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security; and OTC and other derivatives are valued on the basis of a quoted bid price or spread from a major broker/dealer in such security. Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer's financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because, most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. 15 WEALTH APPRECIATION STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 2. Currency Translation Assets and liabilities denominated in foreign currencies and commitments under forward exchange currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued. Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of investments and foreign currency denominated assets and liabilities. 3. Taxes It is the policy of the Portfolio to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned. 4. Investment Income and Investment Transactions Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the trade date securities are purchased or sold. Investment gains and losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. 5. 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 U.S. generally accepted accounting principles. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification. 7. Repurchase Agreements It is the policy of the Portfolio that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited. NOTE B: Advisory Fee and Other Transactions with Affiliates Under the terms of an investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .65% of the first $2.5 billion, .55% of the next $2.5 billion and .50% in excess of $5 billion, of the Portfolio's average daily net assets. The fee is accrued daily and paid monthly. 16 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of the daily average net assets for Class A and Class B shares, respectively. For the period ended December 31, 2004 the Adviser waived fees in the amount of $132,550. Pursuant to the terms of the investment advisory agreement, the Portfolio has voluntarily 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 $34,500 for the period ended December 31, 2004. Brokerage commissions paid on investment transactions for the period ended December 31, 2004, amounted to $25,508, of which $3,257 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 $409 for the period ended December 31, 2004. 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 the Portfolio's average daily net assets attributable to the Class B shares. The fees are accrued daily and paid monthly. The Board of Directors currently limits payments under the Plan to .25% of the Portfolio's average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio's Class B shares. Since the Distributor's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the "compensation" variety. In the event that the Plan is terminated or not continued, no distribution and servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor. The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio's shares. NOTE D: Investment Transactions Purchases and sales of investment securities (excluding short-term investments) for the period ended December 31, 2004 were as follows: Purchases Sales ------------- ------------- Investment securities (excluding U.S. government securities) $13,634,903 $ 1,131,938 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 $15,138,710 Gross unrealized appreciation $ 990,026 Gross unrealized depreciation (74,672) Net unrealized appreciation $ 915,354 17 WEALTH APPRECIATION STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 1. Financial Futures Contracts The Portfolio may buy or sell financial futures contracts for the purpose of hedging its portfolio against adverse affects of anticipated movements in the market. The Portfolio bears the market risk that arises from changes in the value of these financial instruments and the imperfect correlation between movements in the price of the futures contracts and movements in the price of the securities hedged or used for cover. At the time the Portfolio enters into a futures contract, the Portfolio deposits and maintains as collateral an initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of a contract. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed. 2. Forward Exchange Currency Contracts The Portfolio may enter into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sales commitments denominated in foreign currencies and for investment purposes. A forward exchange currency contract is a commitment to purchase or sell a foreign currency on a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward exchange currency contracts are recorded for financial reporting purposes as net unrealized appreciation or depreciation by the Portfolio. The Portfolio's custodian will place and maintain cash not available for investment or other liquid assets in a separate account of the Portfolio having a value at least equal to the aggregate amount of the Portfolio's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of the counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars reflects the total exposure the Portfolio has in that particular currency contract. 3. Option Transactions For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign government securities and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Portfolio. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value. 18 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE E: 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 as follows: SHARES AMOUNT ------------------ ------------------ July 1, 2004(a) to July 1, 2004(a) to December 31, December 31, 2004 2004 ------------------ ------------------ Class A Shares sold 550,000 $5,499,146 Net increase 550,000 $5,499,146 Class B Shares sold 985,580 $9,756,067 Shares redeemed (9,504) (96,937) Net increase 976,076 $9,659,130 (a) Commencement of operations. NOTE F: Risk Involved in Investing in the Portfolio Foreign Securities Risk--Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable United States companies or of the United States government. Indemnification of Risk--In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. NOTE G: Joint Credit Facility A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $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 six months ended December 31, 2004. NOTE H: Component of Accumulated Earnings (Deficit) As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Undistributed ordinary income $ 183,845 Undistributed long-term capital gain 1,715 Unrealized appreciation/(depreciation) 948,683 Total accumulated earnings/(deficit) $1,134,243 The difference between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of gains/losses on certain derivative instruments, the tax character of dividends received, and the realization for tax purposes of unrealized gains/losses on investments in passive foreign investment companies. During the current fiscal year, permanent differences, primarily due to the tax treatment of foreign currency gains and losses and the tax character of gains/losses on disposition of passive foreign investment companies, resulted in a net increase in undistributed net investment income and a net decrease in accumulated net realized gain on investment and foreign currency transactions. This reclassification had no effect on net assets. 19 WEALTH APPRECIATION STRATEGY PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued) AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ NOTE I: Legal Proceedings As has been previously reported, the staff of the U.S. Securities and Exchange Commission ("SEC") and the NYAG have been investigating practices in the mutual fund industry identified as "market timing" and "late trading" of mutual fund shares. Certain other regulatory authorities have also been conducting investigations into these practices within the industry and have requested that the Adviser provide information to them. The Adviser has been cooperating and will continue to cooperate with all of these authorities. On December 18, 2003, the Adviser confirmed that it had reached terms with the SEC and the NYAG for the resolution of regulatory claims relating to the practice of "market timing" mutual fund shares in some of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an Order of the Commission ("SEC Order"). The agreement with the NYAG is memorialized in an Assurrance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the following: (i) The Adviser agreed to establish a $250 million fund (the "Reimbursement Fund") to compensate mutual fund shareholders for the adverse effects of market timing attributable to market timing relationships described in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be paid, in order of priority, to fund investors based on (i) their aliquot share of losses suffered by the fund due to market timing, and (ii) a proportionate share of advisory fees paid by such fund during the period of such market timing; (ii) The Adviser agreed to reduce the advisory fees it receives from some of the AllianceBernstein long-term, open-end retail funds until December 31, 2008; and (iii) The Adviser agreed to implement changes to its governance and compliance procedures. Additionally, the SEC Order and the NYAG Order contemplate that the Adviser's registered investment company clients, including the Fund, will introduce governance and compliance changes. In anticipation of final, definitive documentation of the NYAG Order and effective January 1, 2004, the Adviser began waiving a portion of its advisory fee with respect to certain AllianceBernstein funds. A special committee of the Adviser's Board of Directors, comprised of the members of the Adviser's Audit Committee and the other independent member of the Adviser's Board, 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 the Adviser; Alliance Capital Management Holding L.P.; Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles Schaffran (collectively, the "Alliance Capital defendants"); and certain other defendants not affiliated with the Adviser. 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 the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts. Since October 2, 2003, numerous additional lawsuits making factual allegations similar to those in the Hindo Complaint were filed against the Adviser and certain other defendants, some of which name the Fund as a defendant. All of these lawsuits seek an unspecified amount of damages. The lawsuits are now pending in the United States District Court for the District of Maryland pursuant to a ruling by the Judicial Panel on Multidistrict Litigation transferring and centralizing all of the mutual fund cases involving market and late trading in the District of Maryland. 20 AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ 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. The Adviser and approximately twelve other investment management firms were publicly mentioned in connection with the settlement by the SEC of charges that an unaffiliated broker/dealer violated federal securities laws relating to its receipt of compensation for selling specific mutual funds and the disclosure of such compensation. The SEC has indicated publicly that, among other things, it is considering enforcement action in connection with mutual funds' disclosure of such arrangements and in connection with the practice of considering mutual fund sales in the direction of brokerage commissions from fund portfolio transactions. The SEC has issued subpoenas to the Adviser in connection with this matter and the Adviser has provided documents and other information to the SEC and is cooperating fully with its investigation. On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V. ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against the Adviser, Alliance Capital Management Holding L.P., Alliance Capital Management Corporation, AXA Financial, Inc., AllianceBernstein Investment Research & Management, Inc., certain current and former directors of the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint names certain of the AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was filed in the United States District Court for the Southern District of New York by an alleged shareholder of an AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things, (i) that certain of the defendants improperly authorized the payment of excessive commissions and other fees from fund assets to broker-dealers in exchange for preferential marketing services, (ii) that certain of the defendants misrepresented and omitted from registration statements and other reports material facts concerning such payments, and (iii) that certain defendants caused such conduct as control persons of other defendants. The Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding and abetting breaches of common law fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages and punitive damages, rescission of their contracts with the Adviser, including recovery of all fees paid to the Adviser pursuant to such contracts, an accounting of all fund-related fees, commissions and soft dollar payments, and restitution of all unlawfully or discriminatorily obtained fees and expenses. Since June 22, 2004, numerous additional lawsuits making factual allegations substantially similar to those in the Aucoin Complaint were filed against the Adviser and certain other defendants, and others may be filed. It is possible that these matters and/or other developments resulting from these matters could result in increased redemptions of the Fund's shares or other adverse consequences to the Fund. However, the Adviser believes that these matters are not likely to have a material adverse effect on its ability to perform advisory services relating to the Fund. 21 WEALTH APPRECIATION STRATEGY PORTFOLIO FINANCIAL HIGHLIGHTS AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period CLASS A CLASS B --------------- --------------- July 1, 2004(a) July 1, 2004(a) to to December 31, December 31, 2004 2004 --------------- --------------- Net asset value, beginning of period $10.00 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income (b)(c) .01 .03 Net realized and unrealized gain on investment and foreign currency transactions .68 .64 Net increase in net asset value from operations .69 .67 Net asset value, end of period $10.69 $10.67 TOTAL RETURN Total investment return based on net asset value (d) 6.90% 6.70% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $5,877 $10,416 Ratio to average net assets of: Expenses, net of waivers and reimbursements (e) 1.20% 1.45% Expenses, before waivers and reimbursements (e) 4.33% 4.78% Net investment income (c)(e) .25% .71% Portfolio turnover rate 14% 14% (a) Commencement of operations. (b) Based on average shares outstanding. (c) Net of expenses waived and reimbursed by the Adviser. (d) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) Annualized. 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ALLIANCEBERNSTEIN VARIABLE PRODUCTS INC. ALLIANCEBERNSTEIN WEALTH APPRECIATION STRATEGY PORTFOLIO: We have audited the accompanying statement of assets and liabilities of the AllianceBernstein Wealth Appreciation Strategy Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. (the "Portfolio"), including the schedule of investments, as of December 31, 2004, and the related statements of operations and changes in net assets, and the financial highlights for the period July 1, 2004 (commencement of operations) to December 31, 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and others. 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 Wealth Appreciation Strategy Portfolio of the AllianceBernstein Variable Products Series Fund, Inc. at December 31, 2004, the results of its operations, the changes in its net assets, and the financial highlights for the period July 1, 2004 (commencement of operations) to December 31, 2004, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 4, 2005 23 WEALTH APPRECIATION STRAGEGY 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) 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 REGISTERED PUBLIC ACCOUNTING FIRM 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 and Governance and Nominating Committee. 24 WEALTH APPRECIATION STRATEGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Board of Directors Information The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund's Directors is set forth below.
PORTFOLIOS IN FUND OTHER NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIP DATE OF BIRTH OCCUPATION(S) OVERSEEN BY HELD BY (YEAR ELECTED*) DURING PAST 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------- DISINTERESTED DIRECTORS William H. Foulk, Jr.,# Investment adviser and an independent 113 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 CHAIRMAN OF THE BOARD associated since prior to 2000. He was formerly 9/7/32 Deputy Comptroller and Chief Investment (1990) Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. Ruth Block, #, ** Formerly Executive Vice President and Chief 94 None 500 SE Mizner Blvd. Insurance Officer of The Equitable Life Boca Raton, FL 33432 Assurance Society of the United States; 11/7/30 Chairman and Chief Executive Officer of Evlico; (1992) 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,# Independent consultant. Until December 1994, 95 None P.O. Box 167 he was Senior Vice President of Alliance Capital Spring Lake, NJ 07762 Management Corporation ("ACMC") responsible 10/23/29 for mutual fund administration. Prior to joining (1990) 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,# 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 2/19/42 and President of Historic Hudson Valley (historic (1992) 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.
* There is no stated term of office for the Fund's Directors. # Member of the Audit Committee and Governance and Nominating Committee. ** Ms. Block was an "interested person", as defined in the 1940 Act, until October 21, 2004 by reason of her ownership of 116 American Depository Shares of AXA having a value of approximately $2,396. AXA is a controlling person of ACMC. Ms. Block received shares of The Equitable Companies Incorporated as part of the demutualization of The Equitable Life Assurance Society of the United States, which were subsequently converted through a corporate action into 116 American Despositary Shares of AXA. 25 WEALTH APPRECIATION STRATEGY PORTFOLIO AllianceBernstein Variable Products Series Fund _______________________________________________________________________________ Officer Information(1) Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------- Marc O. Mayer President See biography above. 10/2/57 Philip L. Kirstein Senior Vice President Senior Vice President and Independent Compliance 5/29/45 and Independent Officer-Mutual Funds of ACMC**, with which he has Compliance Officer been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel and First Vice President of Merrill Lynch Investment Managers L.P. since prior to 2000 until March 2003. Teresa Marziano Senior Vice President Senior Vice President of ACMC** since October 9/1/54 2000 and co-Chief Investment Officer of Real Estate Investments since July 2004. Prior thereto, she was a Senior Analyst of investment research at Sanford C. Bernstein & Co., Inc. ("Bernstein") since prior to 2000. Joseph G. Paul Senior Vice President Senior Vice President of ACMC**, co-Chief Investment 2/8/60 Officer of Real Estate Investments since July 2004; and Chief Investment Officer of Small and Mid Capitalization Value Equities since 2002. He is also Chief Investment Officer of Advanced Value at ACMC since October 2000, and held the same position at SCB since prior to 2000. Seth J. Masters Vice President Executive Vice President of ACMC** and Chief 6/4/59 Investment Officer of Style Blend and Core Equity Services and head of U.S. and Global Style Blend teams since October 2000. Prior thereto, he was Chief Investment Officer for Emerging Markets Value at Sanford C. Bernstein & Co., Inc. ("Bernstein") since prior to 2000. Mark R. Manley Clerk Senior Vice President, Deputy General Counsel and 10/23/62 Chief Compliance Officer of ACMC**, with which he has been associated since prior to 2000. Mark D. Gersten Treasurer and Chief Senior Vice President of Alliance Global Investor 10/4/50 Financial Officer Services, Inc. ("AGIS")** and Vice President of ABIRM**, with which he has been associated since prior to 2000. Thomas R. Manley Controller Vice President of ACMC**, with which he has been 8/3/51 associated since prior to 2000.
(1) The day-to-day management of and investment decisions for the portfolio are made by the Blend Investment Policy Team, comprised of senior Blend portfolio managers. * 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 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 material amendments were made to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Directors has determined that independent directors David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial experts ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Fund's last two fiscal years for professional services rendered for: (i) the audit of the Fund's annual financial statements included in the Fund's annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund's financial statements and are not reported under (i), which include multi-class distribution testing, advice and education on accounting and auditing issues, and consent letters; and (iii) tax compliance, tax advice and tax return preparation.
Audit-Related Audit Fees Fees Tax Fees ---------- ------------- -------- AllianceBernstein Americas Government Income Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Balanced Wealth Strategy Portfolio 2003 0 0 0 2004* $26,000 $1,843 $7,283 AllianceBernstein Global Bond Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Global Dollar Government Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Growth Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Growth and Income Portfolio 2003 $23,500 $2,185 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein High Yield Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein International Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,609 AllianceBernstein International Value Portfolio 2003 $23,500 $2,172 $8,747 2004 $26,000 $2,310 $7,809 AllianceBernstein Money Market Portfolio 2003 $23,500 $2,173 $7,729 2004 $26,000 $2,310 $7,282 AllianceBernstein Premier Growth Portfolio 2003 $23,500 $2,185 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Real Estate Investment Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Small Cap Growth Portfolio 2003 $23,500 $2,173 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Small Cap Value Portfolio 2003 $23,500 $2,172 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Technology Portfolio 2003 $23,500 $2,1732 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Total Return Portfolio 2003 $23,500 $2,172 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein U.S. Government / High Grade Securities Portfolio 2003 $23,500 $2,172 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein U.S. Large Cap Blended Style Portfolio 2003 $23,500 $822 $6,543 2004 $26,000 $2,310 $7,282 AllianceBernstein Utility Income Portfolio 2003 $23,500 $2,172 $8,748 2004 $26,000 $2,310 $7,282 AllianceBernstein Value Portfolio 2003 $23,500 $2,172 $8,747 2004 $26,000 $2,310 $7,282 AllianceBernstein Wealth Appreciation Strategy Portfolio 2003 0 0 0 2004* $26,000 $1,843 $7,283 AllianceBernstein Worldwide Privatization Portfolio 2003 $23,500 $2,172 $8,747 2004 $26,000 $2,310 $11,789
* The Portfolio commenced operations on July 1, 2004. (d) Not applicable. (e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund's Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Fund's independent registered public accounting firm. The Fund's Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund. (e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) - (c) are for services pre-approved by the Fund's Audit Committee. (f) Not applicable. (g) The following table sets forth the aggregate non-audit services provided to the Fund, the Fund's Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund, which include conducting an annual internal control report pursuant to Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of Foregoing Column Pre-approved by the All Fees for Audit Committee Non-Audit Services (Portion Comprised of Provided to the Audit Related Fees) Portfolio, the Adviser (Portion Comprised of and Service Affiliates Tax Fees) ---------------------- --------------------- AllianceBernstein Americas Government Income Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Balance Wealth Strategy Portfolio 2003 0 [0] (0) (0) 2004* $966,844 $84,126 ($76,843) ($7,283) AllianceBernstein Global Bond Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Global Dollar Government Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Growth Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Growth and Income Portfolio 2003 $910,185 $372,932 ($364,185) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein High Yield Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein International Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,637 $84,919 ($77,310) ($7,609) AllianceBernstein International Value Portfolio 2003 $910,184 $372,919 ($364,172) ($8,747) 2004 $967,837 $85,119 ($77,310) ($7,809) AllianceBernstein Money Market Portfolio 2003 $909,167 $371,902 ($364,173) ($7,729) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Premier Growth Portfolio 2003 $910,197 $372,932 ($364,185) ($8,747) 2004 $967,310 84,592 ($77,310) ($7,282) AllianceBernstein Real Estate Investment Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Small Cap Growth Portfolio 2003 $910,197 $372,932 ($364,185) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Small Cap Value Portfolio 2003 $910,184 $372,919 ($364,172) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Technology Portfolio 2003 $910,185 $372,920 ($364,173) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Total Return Portfolio 2003 $910,184 $372,919 ($364,172) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein U.S. Government / High Grade Securities Portfolio 2003 $910,184 $372,919 ($364,172) ($8,747) 2004 $967,310 84,592 ($77,310) ($7,282) AllianceBernstein U.S. Large Cap Blended Style Portfolio 2003 $906,630 $369,365 ($362,822) ($6,543) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Utility Income Portfolio 2003 $910,185 $372,920 ($364,172) ($8,748) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Value Portfolio 2003 $910,184 $372,919 ($364,172) ($8,747) 2004 $967,310 $84,592 ($77,310) ($7,282) AllianceBernstein Wealth Appreciation Strategy Portfolio 2003 0 0 (0) (0) 2004* $966,844 $84,126 ($76,843) ($7,283) AllianceBernstein Worldwide Privatization Portfolio 2003 $910,184 $372,919 ($364,172) ($8,747) 2004 $971,817 $89,099 ($77,310) ($11,789)
* The Portfolio commenced operations on July 1, 2004. (h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund's independent registered public accounting firm to the Adviser and Service Affiliates is compatible with maintaining the auditor's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the registrant. ITEM 6. SCHEDULE OF INVESTMENTS. Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 8. 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. There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund's Board of Directors since the Fund last provided disclosure in response to this item. ITEM 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 over financial reporting that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 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 28, 2005 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 28, 2005 By: /s/ Mark D. Gersten ------------------- Mark D. Gersten Treasurer and Chief Financial Officer Date: February 28, 2005