UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05398

 

 

AB VARIABLE PRODUCTS SERIES FUND, INC.

(Exact name of registrant as specified in charter)

 

 

1345 Avenue of the Americas, New York, New York 10105

(Address of principal executive offices) (Zip code)

 

 

Joseph J. Mantineo

Alliance Bernstein 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, 2022

Date of reporting period: June 30, 2022

 

 

 


ITEM 1.

REPORTS TO STOCKHOLDERS.


JUN    06.30.22

 

LOGO

 

SEMI-ANNUAL REPORT

AB VARIABLE PRODUCTS

SERIES FUND, INC.

 

+  

BALANCED HEDGED ALLOCATION PORTFOLIO

   (formerly, Balanced Wealth Strategy Portfolio)

 

As of May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically requested paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.

You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.


 

 

 

Investment Products Offered

 

   

Are Not FDIC Insured

   

May Lose Value

   

Are Not Bank Guaranteed

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.

The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.


 
BALANCED HEDGED ALLOCATION PORTFOLIO
EXPENSE EXAMPLE (unaudited)   AB Variable Products Series Fund

 

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

    Beginning
Account Value
January 1, 2022
    Ending
Account Value
June 30, 2022
    Expenses Paid
During Period*
    Annualized
Expense Ratio*
    Total
Expenses Paid
During Period+
    Total
Annualized
Expense Ratio+
 

Class A

           

Actual

  $   1,000     $ 840.80     $   2.65       0.58   $   3.29       0.72

Hypothetical (5% annual return before expenses)

  $ 1,000     $   1,021.92     $ 2.91       0.58   $ 3.61       0.72
           

Class B

           

Actual

  $ 1,000     $ 839.40     $ 3.79       0.83   $ 4.42       0.97

Hypothetical (5% annual return before expenses)

  $ 1,000     $ 1,020.68     $ 4.16       0.83   $ 4.86       0.97

 

 

 

*   Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

 

+   In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

 

1


BALANCED HEDGED ALLOCATION PORTFOLIO
TEN LARGEST HOLDINGS1  
June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

 

SECURITY    U.S. $ VALUE        PERCENT OF NET ASSETS  

iShares Core S&P 500 ETF

   $ 54,626,795          27.9

iShares Core U.S. Aggregate Bond ETF

     30,361,648          15.5  

Vanguard Total Bond Market ETF

     30,314,728          15.5  

iShares Core MSCI EAFE ETF

     21,303,700          10.9  

iShares Core MSCI Emerging Markets ETF

     12,019,700          6.1  

S&P 500 Index

     11,972,690          6.1  

Vanguard Mid-Cap ETF

     5,554,554          2.8  

U.S. Treasury Inflation Index

     4,839,012          2.5  

Vanguard Real Estate ETF

     4,464,390          2.3  

Vanguard Small-Cap ETF

     3,962,475          2.0  
    

 

 

      

 

 

 
     $   179,419,692          91.6

SECURITY TYPE BREAKDOWN2

June 30, 2022 (unaudited)

 

 

SECURITY TYPE    U.S. $ VALUE        PERCENT OF TOTAL INVESTMENTS  

Investment Companies

   $ 162,607,990          84.3

Options Purchased—Puts

     9,606,050          5.1  

Inflation-Linked Securities

     4,839,012          2.5  

Options Purchased—Calls

     2,366,640          1.2  

Corporates—Investment Grade

     199,488          0.1  

Common Stocks

     288          0.0  

Short-Term Investments

     13,176,442          6.8  
    

 

 

      

 

 

 

Total Investments

   $   192,795,910          100.0

 

 

 

1   Long-term investments. Table shown includes investments of Underlying Portfolios.

 

2   The Portfolio’s security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). Table shown includes investments of Underlying Portfolios.

 

2


BALANCED HEDGED ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

Company       
    
    
Shares
    U.S. $ Value  
                                                         

INVESTMENT COMPANIES–83.2%

     

FUNDS AND INVESTMENT TRUSTS–83.2%(a)

     

iShares Core MSCI EAFE ETF

      362,000     $ 21,303,700  

iShares Core MSCI Emerging Markets ETF

      245,000       12,019,700  

iShares Core S&P 500 ETF

      144,077       54,626,795  

iShares Core U.S. Aggregate Bond ETF

      298,600       30,361,648  

Vanguard Mid-Cap ETF(b)

      28,200       5,554,554  

Vanguard Real Estate ETF(b)

      49,000       4,464,390  

Vanguard Small-Cap ETF(b)

      22,500       3,962,475  

Vanguard Total Bond Market ETF

      402,800       30,314,728  
     

 

 

 

Total Investment Companies
(cost $174,678,918)

        162,607,990  
     

 

 

 
    Notional
Amount
       

OPTIONS PURCHASED–PUTS–4.9%

     

OPTIONS ON EQUITY INDICES–4.9%

     

S&P 500 Index
Expiration: Dec 2023; Contracts: 10; Exercise Price: USD 4,100.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       4,100,000       518,500  

S&P 500 Index
Expiration: Dec 2023; Contracts: 30; Exercise Price: USD 4,400.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       13,200,000       2,049,600  

S&P 500 Index
Expiration: Dec 2023; Contracts: 30; Exercise Price: USD 4,600.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       13,800,000       2,446,050  
        
    
Notional
Amount
    U.S. $ Value  
                                                         

S&P 500 Index
Expiration: Dec 2023; Contracts: 60; Exercise Price: USD 4,500.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       27,000,000     4,485,900  

S&P 500 Index
Expiration: Dec 2024; Contracts: 2; Exercise Price: USD 4,000.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       800,000       106,000  
     

 

 

 

Total Options Purchased–Puts
(premiums paid $7,268,786)

        9,606,050  
     

 

 

 
    Principal
Amount
(000)
       

INFLATION-LINKED SECURITIES–2.5%

     

UNITED STATES–2.5%

     

U.S. Treasury Inflation Index
0.125%, 01/15/2032 (TIPS)
(cost $5,113,798)

    $       5,082       4,839,012  
     

 

 

 
    Notional
Amount
       

OPTIONS PURCHASED–CALLS–1.2%

     

OPTIONS ON EQUITY INDICES–1.2%

     

S&P 500 Index
Expiration: Dec 2023; Contracts: 10; Exercise Price: USD 4,100.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       4,100,000       316,400  

S&P 500 Index
Expiration: Dec 2023; Contracts: 30; Exercise Price: USD 4,400.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       13,200,000       586,050  

 

3


BALANCED HEDGED ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
(continued)   AB Variable Products Series Fund

 

        
    
Notional
Amount
    U.S. $ Value  
                                                         

S&P 500 Index
Expiration: Dec 2023; Contracts: 30; Exercise Price: USD 4,600.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       13,800,000     $ 407,100  

S&P 500 Index
Expiration: Dec 2023; Contracts: 60; Exercise Price: USD 4,500.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       27,000,000       959,100  

S&P 500 Index
Expiration: Dec 2024; Contracts: 2; Exercise Price: USD 4,000.00;
Counterparty: Morgan Stanley & Co., Inc.(c)

    USD       800,000       97,990  
     

 

 

 

Total Options Purchased–Calls
(premiums paid $4,981,150)

        2,366,640  
     

 

 

 
    Principal
Amount
(000)
       

CORPORATES–INVESTMENT GRADE–0.1%

     

INDUSTRIAL–0.1%

     

TRANSPORTATION–SERVICES–0.1%

     

Chicago Parking Meters
4.93%, 12/30/2025(d)
(cost $180,646)

    $       200       199,488  
     

 

 

 
    Shares        

COMMON STOCKS–0.0%

     

REAL ESTATE–0.0%

     

REAL ESTATE OPERATING COMPANIES–0.0%

     

CTP NV

      25       288  
     

 

 

 

ENERGY–0.0%

     

OIL, GAS & CONSUMABLE FUELS–0.0%

     

Gazprom PJSC (Sponsored ADR)(d)(e)

      15,730       –0 – 
Company       
    
    
Shares
    U.S. $ Value  
                                                         

LUKOIL PJSC (Sponsored ADR)(d)(e)

      790     –0 – 
     

 

 

 
        –0 – 
     

 

 

 

MATERIALS–0.0%

     

METALS & MINING–0.0%

     

MMC Norilsk Nickel PJSC (ADR)(d)(e)

      2,540       –0 – 
     

 

 

 

Total Common Stocks
(cost $272,190)

        288  
     

 

 

 

SHORT-TERM INVESTMENTS–6.7%

     

INVESTMENT COMPANIES–6.7%

     

AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 1.30%(a)(f)(g)
(cost $13,176,442)

      13,176,442       13,176,442  
     

 

 

 

Total Investments Before Security Lending Collateral for Securities Loaned–98.6%
(cost $205,671,930)

        192,795,910  
     

 

 

 

INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.6%

     

INVESTMENT COMPANIES–1.6%

     

AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 1.30%(a)(f)(g)
(cost $3,067,350)

      3,067,350       3,067,350  
     

 

 

 

TOTAL INVESTMENTS–100.2%
(cost $208,739,280)

        195,863,260  

Other assets less liabilities–(0.2)%

        (380,222
     

 

 

 

NET ASSETS–100.0%

      $ 195,483,038  
     

 

 

 

 

4


    AB Variable Products Series Fund

 

FUTURES (see Note D)

 

Description    Number of
Contracts
    

Expiration

Month

     Current
Notional
     Value and
Unrealized
Appreciation/
(Depreciation)
 

Purchased Contracts

 

E-Mini Russell 2000 Futures

     4        September 2022      $ 341,600      $ (36,342

MSCI EAFE Futures

     25        September 2022        2,320,750        (15,366

MSCI Emerging Market Futures

     22        September 2022        1,102,970        (5,187

S&P 500 E-Mini Futures

     112        September 2022          21,221,200        (1,377,283

S&P Mid 400 E Mini Futures

     4        September 2022        907,200        (99,404

U.S. Long Bond (CBT) Futures

     50        September 2022        6,931,250        (112,671

U.S. T-Note 10 Yr (CBT) Futures

     586        September 2022        69,459,313        (863,191
           

 

 

 
            $   (2,509,444
           

 

 

 

FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)

 

Counterparty      Contracts to
Deliver
(000)
       In Exchange
For
(000)
       Settlement
Date
       Unrealized
Appreciation/
(Depreciation)
 

Citibank, NA

       CHF        723          USD        762          07/13/2022        $ 4,815  

Citibank, NA

       USD        769          CHF        723          07/13/2022            (12,219

Citibank, NA

       KRW        1,090,551          USD        871          07/27/2022          24,766  

Citibank, NA

       TWD        7,542          USD        259          07/27/2022          5,239  

Citibank, NA

       USD        880          KRW        1,090,552          07/27/2022          (33,748

Citibank, NA

       USD        259          TWD        7,542          07/27/2022          (5,265

HSBC Bank USA

       TWD        14,640          USD        504          07/27/2022          10,515  

HSBC Bank USA

       USD        503          TWD        14,640          07/27/2022          (10,169

Morgan Stanley Capital Services, Inc.

       INR        59,224          USD        768          07/07/2022          17,748  

Morgan Stanley Capital Services, Inc.

       USD        774          INR        59,224          07/07/2022          (23,854

Morgan Stanley Capital Services, Inc.

       AUD        8,263          USD        5,923          07/21/2022          218,278  

Morgan Stanley Capital Services, Inc.

       USD        5,853          AUD        8,263          07/21/2022            (149,164

Standard Chartered Bank

       INR        58,707          USD        763          07/07/2022          19,971  

Standard Chartered Bank

       USD        760          INR        58,707          07/07/2022          (16,898

Standard Chartered Bank

       AUD        941          USD        698          07/21/2022          47,662  

Standard Chartered Bank

       CAD        1,004          USD        782          07/21/2022          1,784  

Standard Chartered Bank

       USD        667          AUD        941          07/21/2022          (17,044

Standard Chartered Bank

       USD        802          CAD        1,004          07/21/2022          (22,684

Standard Chartered Bank

       KRW        1,741,347          USD        1,403          07/27/2022          51,956  

Standard Chartered Bank

       USD        1,367          KRW        1,741,347          07/27/2022          (15,115

Standard Chartered Bank

       IDR        7,683,915          USD        527          07/28/2022          12,912  

Standard Chartered Bank

       USD        534          IDR        7,683,915          07/28/2022          (20,599

State Street Bank & Trust Co.

       SGD        54          USD        39          07/08/2022          239  

State Street Bank & Trust Co.

       USD        40          SGD        54          07/08/2022          (698

State Street Bank & Trust Co.

       CHF        57          USD        59          07/13/2022          (751

State Street Bank & Trust Co.

       USD        61          CHF        57          07/13/2022          (1,607

State Street Bank & Trust Co.

       JPY        10,846          USD        86          07/15/2022          5,546  

State Street Bank & Trust Co.

       USD        83          JPY        10,846          07/15/2022          (3,393

State Street Bank & Trust Co.

       CAD        107          USD        84          07/21/2022          1,279  

State Street Bank & Trust Co.

       USD        85          CAD        107          07/21/2022          (1,934

UBS AG

       CHF        721          USD        760          07/13/2022          4,805  

UBS AG

       USD        765          CHF        721          07/13/2022          (9,105
                         

 

 

 
                          $ 83,268  
                         

 

 

 

 

5


BALANCED HEDGED ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
(continued)   AB Variable Products Series Fund

 

(a)   To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618.

 

(b)   Represents entire or partial securities out on loan. See Note E for securities lending information.

 

(c)   Non-income producing security.

 

(d)   Fair valued by the Adviser.

 

(e)   Security in which significant unobservable inputs (Level 3) were used in determining fair value.

 

(f)   The rate shown represents the 7-day yield as of period end.

 

(g)   Affiliated investments.

Currency Abbreviations:

AUD—Australian Dollar

CAD—Canadian Dollar

CHF—Swiss Franc

IDR—Indonesian Rupiah

INR—Indian Rupee

JPY—Japanese Yen

KRW—South Korean Won

SGD—Singapore Dollar

TWD—New Taiwan Dollar

USD—United States Dollar

Glossary:

ADR—American Depositary Receipt

CBT—Chicago Board of Trade

EAFE—Europe, Australia, and Far East

ETF—Exchange Traded Fund

MSCI—Morgan Stanley Capital International

PJSC—Public Joint Stock Company

TIPS—Treasury Inflation Protected Security

See notes to financial statements.

 

6


BALANCED HEDGED ALLOCATION PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES  
June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

ASSETS

 

Investments in securities, at value

  

Unaffiliated issuers (cost $192,495,488)

   $ 179,619,468 (a) 

Affiliated issuers (cost $16,243,792—including investment of cash collateral for securities loaned of $3,067,350)

     16,243,792  

Cash collateral due from broker

     2,679,488  

Foreign currencies, at value (cost $1,852)

     1,864  

Unrealized appreciation on forward currency exchange contracts

     427,515  

Receivable for variation margin on futures

     412,092  

Unaffiliated dividends and interest receivable

     36,324  

Affiliated dividends receivable

     10,997  

Receivable for capital stock sold

     2,844  

Receivable for investment securities sold

     577  
  

 

 

 

Total assets

     199,434,961  
  

 

 

 

LIABILITIES

 

Payable for collateral received on securities loaned

     3,067,350  

Unrealized depreciation on forward currency exchange contracts

     344,247  

Payable for capital stock redeemed

     173,847  

Advisory fee payable

     72,570  

Distribution fee payable

     37,295  

Administrative fee payable

     21,446  

Foreign capital gains tax payable

     13,800  

Directors’ fees payable

     395  

Transfer Agent fee payable

     90  

Accrued expenses

     220,883  
  

 

 

 

Total liabilities

     3,951,923  
  

 

 

 

NET ASSETS

   $ 195,483,038  
  

 

 

 

COMPOSITION OF NET ASSETS

 

Capital stock, at par

   $ 20,086  

Additional paid-in capital

     166,592,535  

Distributable earnings

     28,870,417  
  

 

 

 

NET ASSETS

   $ 195,483,038  
  

 

 

 

Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value

 

Class      Net Assets        Shares
Outstanding
       Net Asset
Value
 
A      $ 17,614,656          1,783,706        $ 9.88  
B      $   177,868,382          18,302,001        $   9.72  

 

 

 

(a)   Includes securities on loan with a value of $13,823,994 (see Note E).

See notes to financial statements.

 

7


BALANCED HEDGED ALLOCATION PORTFOLIO
STATEMENT OF OPERATIONS  
Six Months Ended June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

INVESTMENT INCOME

  

Dividends

  

Unaffiliated issuers (net of foreign taxes withheld of $27,399)

   $ 1,550,582  

Affiliated issuers

     19,279  

Interest (net of foreign taxes withheld of $143)

     546,400  

Securities lending income

     4,680  
  

 

 

 
     2,120,941  
  

 

 

 

EXPENSES

  

Advisory fee (see Note B)

     569,213  

Distribution fee—Class B

     249,747  

Transfer agency—Class A

     227  

Transfer agency—Class B

     2,317  

Custody and accounting

     72,594  

Audit and tax

     42,890  

Administrative

     42,086  

Legal

     15,698  

Printing

     14,127  

Directors’ fees

     10,535  

Miscellaneous

     13,254  
  

 

 

 

Total expenses

     1,032,688  

Less: expenses waived and reimbursed by the Adviser (see Notes B & E)

     (147,703
  

 

 

 

Net expenses

     884,985  
  

 

 

 

Net investment income

     1,235,956  
  

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS

  

Net realized gain (loss) on:

  

Affiliated Underlying Portfolios

     (3,685,980

Investment transactions(a)

     23,492,628  

Forward currency exchange contracts

     2,177,028  

Futures

     (2,121,774

Swaps

     264,013  

Foreign currency transactions

     (2,604,892

Net change in unrealized appreciation/depreciation of:

  

Affiliated Underlying Portfolios

     (4,266,342

Investments(b)

     (50,022,205

Forward currency exchange contracts

     (408,162

Futures

     (2,535,308

Swaps

     49,082  

Foreign currency denominated assets and liabilities

     (5,498
  

 

 

 

Net loss on investment and foreign currency transactions

     (39,667,410
  

 

 

 

NET DECREASE IN NET ASSETS FROM OPERATIONS

   $ (38,431,454
  

 

 

 

 

 

 

(a)   Net of foreign realized capital gains taxes of $6,888.

 

(b)   Net of decrease in accrued foreign capital gains taxes on unrealized gains of $1,429.

See notes to financial statements.

 

8


    
BALANCED HEDGED ALLOCATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS   AB Variable Products Series Fund

 

     Six Months Ended
June 30, 2022
(unaudited)
    Year Ended
December 31,
2021
 

INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS

 

Net investment income

   $ 1,235,956     $ 3,030,763  

Net realized gain on investment and foreign currency transactions

     17,521,023       20,060,382  

Net realized gain distributions from Underlying Portfolios

     –0 –      2,321,524  

Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities

     (57,188,433     5,781,625  

Contributions from Affiliates (see Note B)

     –0 –      72  
  

 

 

   

 

 

 

Net increase (decrease) in net assets from operations

     (38,431,454     31,194,366  

Distributions to Shareholders

 

Class A

     –0 –      (615,351

Class B

     –0 –      (5,621,797

CAPITAL STOCK TRANSACTIONS

 

Net decrease

     (11,857,626     (22,864,424
  

 

 

   

 

 

 

Total increase (decrease)

     (50,289,080     2,092,794  

NET ASSETS

 

Beginning of period

     245,772,118       243,679,324  
  

 

 

   

 

 

 

End of period

   $ 195,483,038     $ 245,772,118  
  

 

 

   

 

 

 

 

 

See notes to financial statements.

 

9


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

NOTE A: Significant Accounting Policies

The AB Balanced Hedged Allocation Portfolio (the “Portfolio”) (formerly known as AB Balanced Wealth Strategy Portfolio) is a series of AB Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is to maximize total return consistent with the determination of AllianceBernstein L.P. (the “Adviser”) of reasonable risk. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland as an open-end series investment company. The Fund offers 10 separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.

The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.

The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Portfolio.

1. Security Valuation

Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).

In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, the Adviser will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.

Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S.

 

10


    AB Variable Products Series Fund

 

markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.

2. Fair Value Measurements

In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

   

Level 1—quoted prices in active markets for identical investments

   

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

   

Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments)

The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.

Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.

Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on an exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.

Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based

 

11


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.

Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.

The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of June 30, 2022:

 

       Level 1      Level 2      Level 3     Total  

Investments in Securities:

            

Assets:

 

Investment Companies

     $ 162,607,990      $ –0 –     $             –0 –    $ 162,607,990  

Options Purchased—Puts

       –0 –       9,606,050        –0 –      9,606,050  

Inflation—Linked Securities

       –0 –       4,839,012        –0 –      4,839,012  

Options Purchased—Calls

       –0 –       2,366,640        –0 –      2,366,640  

Corporates—Investment Grade

       –0 –       199,488        –0 –      199,488  

Common Stocks:

            

Real Estate

       –0 –       288        –0 –      288  

Energy

       –0 –       –0 –       0 (a)      –0 – 

Materials

       –0 –       –0 –       0 (a)      –0 – 

Short-Term Investments

       13,176,442        –0 –       –0 –      13,176,442  

Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund

       3,067,350        –0 –       –0 –      3,067,350  
    

 

 

    

 

 

    

 

 

   

 

 

 

Total Investments in Securities

       178,851,782        17,011,478        0 (a)      195,863,260  

Other Financial Instruments(b):

            

Assets:

 

Forward Currency Exchange Contracts

       –0 –       427,515        –0 –      427,515  

Liabilities:

 

Futures

       (2,509,444      –0 –       –0 –      (2,509,444 )(c) 

Forward Currency Exchange Contracts

       –0 –       (344,247      –0 –      (344,247
    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     $ 176,342,338      $ 17,094,746      $ 0 (a)    $ 193,437,084  
    

 

 

    

 

 

    

 

 

   

 

 

 

 

(a)   The Portfolio held securities with zero market value at period end.

 

(b)   Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value.

 

(c)   Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value.

3. Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade

 

12


    AB Variable Products Series Fund

 

and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

4. Taxes

It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.

In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.

5. Investment Income and Investment Transactions

Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.

6. Class Allocations

All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.

7. Dividends and Distributions

Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.

NOTE B: Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion, .425% 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. Prior to May 2, 2022, the Portfolio paid 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 Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis (the “Expense Caps”) to .75% and 1.00% of daily average net assets for Class A and Class B shares, respectively. For the six months ended June 30, 2022, there was no such reimbursement.

Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the six months ended June 30, 2022, the reimbursement for such services amounted to $42,086.

The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $873 for the six months ended June 30, 2022.

 

13


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2023. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the six months ended June 30, 2022, such waiver amounted to $3,140.

In connection with the Portfolio’s investments in other AB mutual funds, the Adviser has contractually agreed to waive fees and/or reimburse the expenses payable to the Adviser by the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fees of AB mutual funds, as paid by the Portfolio as an acquired fund fee and expense. These fee waivers and/or expense reimbursements will remain in effect until December 31, 2022. For the six months ended June 30, 2022, such waivers and/or reimbursements amounted to $144,425.

A summary of the Portfolio’s transactions in AB mutual funds for the six months ended June 30, 2022 is as follows:

 

                                           Distributions  

Fund

   Market Value
12/31/21
(000)
     Purchases
at Cost
(000)
    Sales
Proceeds
(000)
     Realized
Gain (Loss)
(000)
    Change in
Unrealized
Appr./(Depr.)
(000)
    Market Value
6/30/22
(000)
    Dividend
Income
(000)
    Realized
Gains
(000)
 

Government Money Market Portfolio

   $ 1,525      $ 99,966     $ 88,314      $ –0 –    $ –0 –    $ 13,177     $ 19     $ –0 – 

AB Discovery Growth Fund, Inc.

     3,174        –0 –      2,346        (400     (428     –0 –      –0 –      –0 – 

AB Trust—AB Discovery Value Fund

     3,246        –0 –      2,923        7       (330     –0 –      –0 –      –0 – 

Bernstein Fund, Inc.: International Small Cap Portfolio

     8,146        –0 –      7,073        (658     (415     –0 –      –0 –      –0 – 

International Strategic Equities Portfolio

     42,838        –0 –      37,952        (2,434     (2,452     –0 –      –0 –      –0 – 

Small Cap Core Portfolio

     3,267        –0 –      2,808        122       (581     –0 –      –0 –      –0 – 

Sanford C. Bernstein Fund, Inc.—Emerging Markets Portfolio

     3,784        –0 –      3,401        (323     (60     –0 –      –0 –      –0 – 

Government Money Market Portfolio*

     214        21,189       18,336        –0 –      –0 –      3,067       0 **      –0 – 
          

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

           $ (3,686   $ (4,266   $ 16,244     $ 19     $ –0 – 
          

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*   Investments of cash collateral for securities lending transactions (see Note E).

 

**   Amount is less than $500.

During the year ended December 31, 2021, the Adviser reimbursed the Portfolio $72 for trading losses incurred due to a trade entry error.

NOTE C: Distribution Plan

The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.    

 

14


    AB Variable Products Series Fund

 

The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.

In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.

The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.

NOTE D: Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the six months ended June 30, 2022 were as follows:

 

       Purchases        Sales  

Investment securities (excluding U.S. government securities)

     $ 221,346,108        $ 235,325,825  

U.S. government securities

       28,459,925          37,665,252  

The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows:

 

Gross unrealized appreciation

   $ 2,783,622  

Gross unrealized depreciation

     (18,085,818
  

 

 

 

Net unrealized depreciation

   $ (15,302,196
  

 

 

 

1. Derivative Financial Instruments

The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.

The principal types of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:

 

   

Futures

The Portfolio may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Portfolio bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Portfolio may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.

At the time the Portfolio enters into futures, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.

Use of long futures subjects the Portfolio to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Portfolio to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.

 

15


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

During the six months ended June 30, 2022, the Portfolio held futures for hedging and non-hedging purposes.

 

   

Forward Currency Exchange Contracts

The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.

A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Portfolio. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

During the six months ended June 30, 2022, the Portfolio held forward currency exchange contracts for hedging and non-hedging purposes.

 

   

Option Transactions

For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Portfolio may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.

The risk associated with purchasing an option is that the Portfolio pays a premium whether or not the option is exercised. Additionally, the Portfolio bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Portfolio were permitted to expire without being sold or exercised, its premium would represent a loss to the Portfolio. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.

When the Portfolio writes an option, the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Portfolio’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Portfolio. In writing an option, the Portfolio bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio selling or buying a security or currency at a price different from the current market value.

During the six months ended June 30, 2022, the Portfolio held purchased options for hedging and non-hedging purposes.

 

   

Swaps

The Portfolio may enter into swaps to hedge its exposure to interest rates, credit risk or currencies. The Portfolio may also enter into swaps for non-hedging purposes as a means of gaining market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions.” A swap is an agreement that

 

16


    AB Variable Products Series Fund

 

obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Portfolio in accordance with the terms of the respective swaps to provide value and recourse to the Portfolio or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.

Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by the posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.

Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.

At the time the Portfolio enters into a centrally cleared swap, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.

Interest Rate Swaps:

The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Portfolio holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Portfolio may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Portfolio may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.

In addition, the Portfolio may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Portfolio with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed

 

17


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments).

During the six months ended June 30, 2022, the Portfolio held interest rate swaps for hedging and non-hedging purposes.

Inflation (CPI) Swaps:

Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Portfolio against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.

During the six months ended June 30, 2022, the Portfolio held inflation (CPI) swaps for hedging and non-hedging purposes.

Credit Default Swaps:

The Portfolio may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Portfolio, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Portfolio may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Portfolio receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Portfolio is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Portfolio will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Portfolio for the same referenced obligations with the same counterparty.

Credit default swaps may involve greater risks than if a Portfolio had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Portfolio is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Portfolio is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Portfolio.

Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.

During the six months ended June 30, 2022, the Portfolio held credit default swaps for hedging and non-hedging purposes.

The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single

 

18


    AB Variable Products Series Fund

 

net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.

The Portfolio’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s OTC counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.

During the six months ended June 30, 2022, the Portfolio had entered into the following derivatives:

 

   

Asset Derivatives

   

Liability Derivatives

 

Derivative Type

 

Statement of
Assets and Liabilities
Location

  Fair Value    

Statement of
Assets and Liabilities
Location

  Fair Value  

Interest rate contracts

      Receivable/Payable for variation margin on futures   $ 975,862

Equity contracts

      Receivable/Payable for variation margin on futures     1,533,582

Foreign currency contracts

  Unrealized appreciation on forward currency exchange contracts   $ 427,515     Unrealized depreciation on forward currency exchange contracts     344,247  

Equity contracts

  Investments in securities, at value     11,972,690      
   

 

 

     

 

 

 

Total

    $ 12,400,205       $ 2,853,691  
   

 

 

     

 

 

 

 

*   Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments.

 

Derivative Type

  

Location of Gain or (Loss) on Derivatives
Within Statement of Operations

   Realized Gain or
(Loss) on
Derivatives
    Change in Unrealized
Appreciation or
(Depreciation)
 

Interest rate contracts

   Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures    $ 589,241     $ (1,001,726

Equity contracts

   Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures      (2,711,015     (1,533,582

Foreign currency contracts

   Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts      2,177,028       (408,162

Equity contracts

   Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments      –0 –      (277,246

Interest rate contracts

   Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps      259,822       (42,437

Credit contracts

   Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps      4,191       91,519  
     

 

 

   

 

 

 

Total

      $ 319,267     $ (3,171,634
     

 

 

   

 

 

 

 

19


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

The following table represents the average monthly volume of the Portfolio’s derivative transactions during the six months ended June 30, 2022:

 

Futures:

  

Average notional amount of buy contracts

   $ 59,754,325  

Average notional amount of sale contracts

   $ 5,154,986 (a) 

Forward Currency Exchange Contracts:

  

Average principal amount of buy contracts

   $ 30,919,282  

Average principal amount of sale contracts

   $ 56,239,741  

Purchased Options:

  

Average notional amount

   $ 114,000,000 (a) 

Inflation Swaps:

  

Average notional amount

   $ 6,210,000 (b) 

Centrally Cleared Interest Rate Swaps:

  

Average notional amount

   $ 2,620,338 (a) 

Credit Default Swaps:

  

Average notional amount of sale contracts

   $ 481,851 (a) 

Centrally Cleared Credit Default Swaps:

  

Average notional amount of buy contracts

   $ 2,111,818 (a) 

 

(a)   Positions were open for three months during the period.

 

(b)   Positions were open for four months during the period.

For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.

All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of June 30, 2022. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.

 

Counterparty

  Derivative Assets
Subject to a MA
    Derivatives
Available
for Offset
    Cash Collateral
Received*
    Security Collateral
Received*
    Net Amount of
Derivative
Assets
 

Citibank, NA

  $ 34,820     $ (34,820   $             –0   $             –0   $ –0

HSBC Bank USA

    10,515       (10,169     –0 –      –0 –      346  

Morgan Stanley Capital Services, Inc.

    236,026       (173,018     –0 –      –0 –      63,008  

Standard Chartered Bank

    134,285       (92,340     –0 –      –0 –      41,945  

State Street Bank & Trust Co.

    7,064       (7,064     –0 –      –0 –      –0 – 

UBS AG

    4,805       (4,805     –0 –      –0 –      –0 – 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 427,515     $ (322,216   $ –0 –    $ –0 –    $ 105,299
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Counterparty

  Derivative Liabilities
Subject to a MA
    Derivatives
Available
for Offset
    Cash Collateral
Pledged*
    Security Collateral
Pledged*
    Net Amount of
Derivative
Liabilities
 

Citibank, NA

  $ 51,232     $ (34,820   $             –0   $             –0   $ 16,412  

HSBC Bank USA

    10,169       (10,169     –0 –      –0 –      –0 – 

Morgan Stanley Capital Services, Inc.

    173,018       (173,018     –0 –      –0 –      –0 – 

Standard Chartered Bank

    92,340       (92,340     –0 –      –0 –      –0 – 

State Street Bank & Trust Co.

    8,383       (7,064     –0 –      –0 –      1,319  

UBS AG

    9,105       (4,805     –0 –      –0 –      4,300  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 344,247     $ (322,216   $ –0 –    $ –0 –    $ 22,031
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*   The actual collateral received/pledged may be more than the amount reported due to over-collateralization.

 

^   Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty.

 

20


    AB Variable Products Series Fund

 

2. Currency Transactions

The Portfolio may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).

3. TBA and Dollar Rolls

The Portfolio may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.

The Portfolio may enter into certain TBA transactions known as dollar rolls. Dollar rolls involve sales by the Portfolio of securities for delivery in the current month and the Portfolio’s simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Portfolio is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques. For the six months ended June 30, 2022, the Portfolio earned drop income of $12,275 which is included in interest income in the accompanying statement of operations.

NOTE E: Securities Lending

The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized by cash, the Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any dividend income or other distributions from the securities; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect

 

21


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.

A summary of the Portfolio’s transactions surrounding securities lending for the six months ended June 30, 2022 is as follows:

 

                       

  Government Money Market  
Portfolio

 

Market Value of
Securities

on Loan*

   

Cash Collateral*

   

Market Value of
Non-Cash
Collateral*

   

Income from
Borrowers

   

Income

Earned

   

Advisory Fee
Waived

 
$ 13,823,994     $ 3,067,350     $ 11,178,454     $ 4,312     $ 368     $ 138  

 

*   As of June 30, 2022.

NOTE F: Capital Stock

Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:

 

    SHARES           AMOUNT  
    Six Months Ended
June 30, 2022
(unaudited)
    Year Ended
December 31,
2021
          Six Months Ended
June 30, 2022
(unaudited)
    Year Ended
December 31,
2021
 

Class A

         

Shares sold

    57,196       195,158       $ 621,586     $ 2,203,872  

Shares issued in reinvestment of dividends and distributions

    –0 –      53,369         –0 –      615,351  

Shares redeemed

    (135,330     (388,807       (1,475,201     (4,445,529
 

 

 

   

 

 

     

 

 

   

 

 

 

Net decrease

    (78,134     (140,280     $ (853,615   $ (1,626,306
 

 

 

   

 

 

     

 

 

   

 

 

 

Class B

         

Shares sold

    636,965       1,167,051       $ 6,813,827     $ 13,063,851  

Shares issued in reinvestment of dividends and distributions

    –0 –      494,442         –0 –      5,621,797  

Shares redeemed

    (1,670,836     (3,578,639       (17,817,838     (39,923,766
 

 

 

   

 

 

     

 

 

   

 

 

 

Net decrease

    (1,033,871     (1,917,146     $ (11,004,011   $ (21,238,118
 

 

 

   

 

 

     

 

 

   

 

 

 

At June 30, 2022, certain shareholders of the Portfolio owned 68% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.

NOTE G: Risks Involved in Investing in the Portfolio

Market Risk—The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness) and regional and global conflicts, that affect large portions of the market.

Allocation Risk—The allocation of investments among the different investment styles, such as growth or value, equity or debt securities, or U.S. or non-U.S. securities may have a more significant effect on the Portfolio’s net asset value, or NAV, when one of these investment strategies is performing more poorly than others.

ETF Risk—ETFs are investment companies and are subject to market and selection risk. When the Portfolio invests in an ETF, the Portfolio bears its share of the ETF’s expenses and runs the risk that the ETF may not achieve its investment objective.

Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.

 

22


    AB Variable Products Series Fund

 

Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory or other uncertainties.

Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the Portfolio’s returns.

Interest-Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations. The Fund may be subject to a greater risk of rising interest rates than would normally be the case due to the end of a recent period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives.

Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.

Below Investment-Grade Securities Risk—Investments in fixed-income securities with lower ratings (“junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, interest rate sensitivity and negative perceptions of the junk bond market generally, and may be more difficult to trade than other types of securities.

Capitalization Risk—Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.

Derivatives Risk—Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. A short position in a derivative instrument involves the risk of a theoretically unlimited increase in the value of the underlying instrument, which could cause the Portfolio to suffer a (potentially unlimited) loss. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk, which is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable or unwilling to honor its contractual obligations to the Portfolio.

Real Assets Risk—The Portfolio’s investments in securities linked to real assets involve significant risks, including financial, operating, and competitive risks. Investments in securities linked to real assets expose the Portfolio to adverse macroeconomic conditions, such as a rise in interest rates or a downturn in the economy in which the asset is located. Changes in inflation rates or in the market’s inflation expectations may adversely affect the market value of inflation-sensitive equities. The Portfolio’s investments in real estate securities have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in real estate investment trusts, or REITs, may have additional risks. REITs are dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in tax laws. Some REITs may utilize leverage, which increases investment risk and may potentially increase the Portfolio’s losses.

LIBOR Transition and Associated Risk—A Portfolio may be exposed to debt securities, derivatives or other financial instruments that are tied to the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In 2017, the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. The FCA and LIBOR’s administrator, ICE Benchmark Administration, have since announced that most LIBOR settings (which reflect LIBOR rates quoted in different currencies over various time periods) will no longer be published after the end of 2021 but that the most widely used U.S. dollar LIBOR settings will continue to be published until June 30, 2023. However, banks were strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. It is possible that a subset of LIBOR settings will be published after these dates on a “synthetic” basis, but any such publications would be considered non-representative of the underlying market. The U.S. Federal Reserve, based on the recommendations of the New York Federal Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their

 

23


BALANCED HEDGED ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS  
(continued)   AB Variable Products Series Fund

 

regulators), has begun publishing a Secured Overnight Funding Rate (referred to as SOFR), which is intended to replace U.S. dollar LIBOR. Proposals for alternative reference rates for other currencies have also been announced or have already begun publication. Markets are slowly developing in response to these new rates.

The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. The potential effects of a phase out of LIBOR on LIBOR-based investments are currently unknown.

Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.

Management Risk—The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.

NOTE H: Joint Credit Facility

A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing related to redemptions and other short term liquidity requirements, subject to certain restrictions. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the six months ended June 30, 2022.

NOTE I: Distributions to Shareholders

The tax character of distributions to be paid for the year ending December 31, 2022 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended December 31, 2021 and December 31, 2020 were as follows:

 

       2021        2020  

Distributions paid from:

         

Ordinary income

     $ 2,456,552        $ 5,219,650  

Net long-term capital gains

       3,780,596          6,835,156  
    

 

 

      

 

 

 

Total taxable distributions paid

     $ 6,237,148        $ 12,054,806  
    

 

 

      

 

 

 

As of December 31, 2021, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed ordinary income

   $ 8,306,029  

Undistributed capital gains

     18,272,667  

Other losses

     (839 )(a) 

Unrealized appreciation/(depreciation)

     40,744,702 (b) 
  

 

 

 

Total accumulated earnings/(deficit)

   $ 67,322,559 (c) 
  

 

 

 

 

(a)   As of December 31, 2021, the cumulative deferred loss on straddles was $839.

 

(b)   The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of Treasury inflation-protected securities, the amortization on callable bonds, the tax treatment of swaps, and the tax deferral of losses on wash sales.

 

24


    AB Variable Products Series Fund

 

(c)   The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to the accrual of foreign capital gains tax.

For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2021, the Portfolio did not have any capital loss carryforwards.

NOTE J: Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, “Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.

NOTE K: Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.

 

25


BALANCED HEDGED ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS   AB Variable Products Series Fund

 

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

    CLASS A  
    Six Months
Ended
June 30, 2022

(unaudited)
    Year Ended December 31,  
    2021     2020     2019     2018     2017  

Net asset value, beginning of period

    $11.75       $10.61       $10.24       $10.10       $11.86       $10.54  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Income From Investment Operations

           

Net investment income (a)(b)

    .07       .16       .13       .19       .23       .17  

Net realized and unrealized gain (loss) on investment and foreign currency transactions

    (1.94     1.29       .78       1.58       (.87     1.48  

Contributions from Affiliates

    –0 –      .00 (c)      –0 –      –0 –      .00 (c)      .00 (c) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net asset value from operations

    (1.87     1.45       .91       1.77       (.64     1.65  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Less: Dividends and Distributions

           

Dividends from net investment income

    –0 –      (.06     (.24     (.29     (.23     (.24

Distributions from net realized gain on investment transactions

    –0 –      (.25     (.30     (1.34     (.89     (.09
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

    –0 –      (.31     (.54     (1.63     (1.12     (.33
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

    $9.88       $11.75       $10.61       $10.24       $10.10       $11.86  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Total Return

           

Total investment return based on net asset value (d)*

    (15.92 )%      13.73     9.41     18.53     (6.17 )%      15.84
           

Ratios/Supplemental Data

           

Net assets, end of period (000’s omitted)

    $17,615       $21,879       $21,252       $24,347       $23,967       $29,328  

Ratio to average net assets of:

           

Expenses, net of waivers/
reimbursements (e)(f)‡

    .58 %^      .56     .55     .55     .66     .73

Expenses, before waivers/
reimbursements (e)(f)‡

    .71 %^      .75     .77     .75     .75     .73

Net investment income (b)

    1.36 %^      1.43     1.38     1.81     2.05     1.51

Portfolio turnover rate**

    122     63     66     63     150     108
           

‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

  

portfolios

    .14 %^      .20     .22     .22     .11     .00

 

 

See footnote summary on page 28.

 

26


    AB Variable Products Series Fund

 

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

    CLASS B  
    Six Months
Ended
June 30, 2022

(unaudited)
    Year Ended December 31,  
    2021     2020     2019     2018     2017  

Net asset value, beginning of period

    $11.58       $10.47       $10.10       $9.98       $11.73       $10.42  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Income From Investment Operations

           

Net investment income (a)(b)

    .06       .13       .11       .16       .20       .14  

Net realized and unrealized gain (loss) on investment and foreign currency transactions

    (1.92     1.26       .78       1.56       (.86     1.47  

Contributions from Affiliates

    –0 –      .00 (c)      –0 –      –0 –      .00 (c)      .00 (c) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net asset value from operations

    (1.86     1.39       .89       1.72       (.66     1.61  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Less: Dividends and Distributions

           

Dividends from net investment income

    –0 –      (.03     (.22     (.26     (.20     (.21

Distributions from net realized gain on investment transactions

    –0 –      (.25     (.30     (1.34     (.89     (.09
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions

    –0 –      (.28     (.52     (1.60     (1.09     (.30
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

    $9.72       $11.58       $10.47       $10.10       $9.98       $11.73  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Total Return

           

Total investment return based on net asset value (d)*

    (16.06 )%      13.36     9.25     18.20     (6.41 )%      15.62
           

Ratios/Supplemental Data

           

Net assets, end of period
(000’s omitted)

    $177,868       $223,893       $222,427       $231,071       $220,274       $274,070  

Ratio to average net assets of:

           

Expenses, net of waivers/reimbursements (e)(f)‡

    .83 %^      .81     .80     .80     .91     .98

Expenses, before waivers/reimbursements (e)(f)‡

    .96 %^      1.00     1.02     1.00     1.00     .98

Net investment income (b)

    1.10 %^      1.20     1.14     1.57     1.79     1.26

Portfolio turnover rate**

    122     63     66     63     150     108
           

‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

  

portfolios

    .14 %^      .20     .22     .22     .11     .00

 

 

See footnote summary on page 28.

 

27


BALANCED HEDGED ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS  
(continued)   AB Variable Products Series Fund

 

(a)   Based on average shares outstanding.

 

(b)   Net of expenses waived/reimbursed by the Adviser.

 

(c)   Amount is less than $.005.

 

(d)   Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized.

 

(e)   In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the six months ended June 30, 2022 and the years ended December 31, 2021, December 31, 2020, December 31, 2019 and December 31, 2018, such waiver amounted to .13% (annualized), .19%, .20%, .20% and .09%, respectively.

 

(f)   The expense ratios presented below exclude interest/bank overdraft expense:

 

     Six Months
Ended
June 30, 2022

(unaudited)
    Year Ended December 31,  
    2021     2020     2019     2018     2017  

Class A

            

Net of waivers/reimbursements

     .58 %^      .56     .55     .54     .66     .73

Before waivers/reimbursements

     .71 %^      .75     .77     .75     .75     .73

Class B

            

Net of waivers/reimbursements

     .83 %^      .81     .80     .79     .91     .98

Before waivers/reimbursements

     .96 %^      1.00     1.02     1.00     1.00     .98

 

*   Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the year ended December 31, 2017 by .02%.

 

**   The Portfolio accounts for dollar roll transactions as purchases and sales.

 

^   Annualized.

See notes to financial statements.

 

28


 
BALANCED HEDGED ALLOCATION PORTFOLIO   AB Variable Products Series Fund

 

OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:

In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.

One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”).

Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2022, which covered the period January 1, 2021 through December 31, 2021 (the “Program Reporting Period”).

The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner.

Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.

During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, incorporating any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP.

The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.

The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP. During the Program Reporting Period, liquidity in all markets was significantly recovered and improved compared to the prior reporting period which included extreme levels of price volatility and relative illiquidity beginning in March 2020 with COVID-19 impacts. As such, the program operated in a relatively robust and benign liquidity environment experienced in markets during the Program Reporting Period. There were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.

 

29


BALANCED HEDGED ALLOCATION PORTFOLIO
CONTINUANCE DISCLOSURE   AB Variable Products Series Fund

 

INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT

At a meeting of the Board of Directors (“Board” or “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) held by video conference on November 2-4, 2021 (the “November 2021 Meeting”), the Board approved, upon recommendation of the Adviser, certain changes to AB Balanced Wealth Strategy Portfolio (the “Fund”)1 as set forth in the Supplement dated November 5, 2021 to the Prospectuses and Summary Prospectuses dated May 1, 2021 of the Fund, including changes to the Fund’s name (to “AB Balanced Hedged Allocation Portfolio”) and principal investment strategies. In connection with these changes the Adviser also presented its recommendation that the Board consider and approve an amendment to the Company’s then-current Advisory Agreement with the Adviser in respect of the Fund to implement a reduction to the Fund’s then-current advisory fee schedule (the “Amended Advisory Agreement”).

At the recommendation of the Adviser, the disinterested directors (“the directors”) unanimously approved the Amended Advisory Agreement.    

The Adviser’s changes, including the proposed advisory fee reduction, will be effective on or about May 1, 2022 and do not require shareholder approval.

The directors approved the continuance of the Fund’s then-current Advisory Agreement at a meeting held by video conference on August 4-5, 2021 (the “August 2021 Meeting”).

Prior to approval of the Amended Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed Amended Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed approval in private sessions with counsel.

The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.

The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the proposed advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Amended Advisory Agreement, including the proposed advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The directors noted that the proposed lowering of the advisory fee would benefit the Fund and its shareholders. The directors noted that the Adviser was reducing the fees for business reasons, and had assured them that there would be no diminution in the nature or quality of services to the Fund. The material factors and conclusions that formed the basis for the directors’ determinations included the following:

Nature, Extent and Quality of Services Provided

The directors considered the scope and quality of services to be provided by the Adviser under the Amended Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Amended Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting,

 

1   Effective May 2, 2022, the Fund changed its name to AB Balanced Hedged Allocation Portfolio.

 

30


    AB Variable Products Series Fund

 

administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Amended Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant at the request of the directors. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services to be provided to the Fund under the Amended Advisory Agreement.

Costs of Services Provided and Profitability

In connection with their approval of the continuance of the Fund’s then-current Advisory Agreement at the August 2021 Meeting, the directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2019 and 2020 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant at the request of the directors. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the then-current Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in the periods reviewed.

The Adviser agreed to provide the directors with profitability information in connection with future proposed continuances of the Amended Advisory Agreement. The directors noted that the proposed reduction in the advisory fee rate would likely impact the Adviser’s profitability analysis in future years.

Fall-Out Benefits

At the August 2021 Meeting, the directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of the Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Fund’s unprofitability to the Adviser would be exacerbated without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.

Investment Results

In addition to the information reviewed by the directors in connection with the November 2021 Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.

At the August 2021 Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended May 31, 2021 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.

Advisory Fees and Other Expenses

The directors considered the proposed advisory fee rate payable by the Fund to the Adviser under the Amended Advisory Agreement and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund following the implementation of the Adviser’s proposed changes. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund’s pro forma contractual effective advisory fee rate (reflecting a

 

31


BALANCED HEDGED ALLOCATION PORTFOLIO
CONTINUANCE DISCLOSURE  
(continued)   AB Variable Products Series Fund

 

reduction in the advisory fee rate to take effect on or about May 1, 2022) with a peer group median. Taking into account the administrative expense reimbursement paid to the Adviser in the latest fiscal year, the directors noted that the Adviser’s pro forma total rate of compensation was above the peer group median.

The Adviser informed the directors that there were no institutional products managed by it that utilize investment strategies similar to those of the Fund.

The directors noted that the Fund may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued, and rules adopted, by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.

In connection with their review of the Fund’s proposed advisory fee, the directors also considered the projected total expense ratio of the Class B shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The information provided included the pro forma expense ratio to reflect a reduction in the Fund’s expense ratio effective on or about May 1, 2022. The Adviser had agreed to cap the Fund’s expenses at then-current cap level, but the directors noted that the Fund’s pro forma expense ratio was currently below the level of the Adviser’s then-current cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s pro forma expense ratio was above the expense group median. After reviewing and discussing the Adviser’s explanation for this, the directors concluded that the Fund’s pro forma expense ratio was acceptable.

Economies of Scale

The directors noted that the proposed advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the November 2021 Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.

 

32


VPS-BHA-0152-0622


JUN    06.30.22

 

LOGO

 

SEMI-ANNUAL REPORT

AB VARIABLE PRODUCTS SERIES FUND, INC.

 

+  

DYNAMIC ASSET ALLOCATION PORTFOLIO

 

As of May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically requested paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.

You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.


 

 

 

Investment Products Offered

 

   

Are Not FDIC Insured

   

May Lose Value

   

Are Not Bank Guaranteed

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.

The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.


 
DYNAMIC ASSET ALLOCATION PORTFOLIO
EXPENSE EXAMPLE (unaudited)   AB Variable Products Series Fund

 

As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

    Beginning
Account Value
January 1, 2022
    Ending
Account Value
June 30, 2022
    Expenses Paid
During Period*
    Annualized
Expense Ratio*
    Total
Expenses Paid
During Period+
    Total
Annualized
Expense Ratio+
 

Class A

           

Actual

  $ 1,000     $ 830.70     $ 3.81       0.84   $   3.86       0.85

Hypothetical (5% annual return before expenses)

  $   1,000     $   1,020.63     $   4.21       0.84   $ 4.26       0.85
           

Class B

           

Actual

  $ 1,000     $ 829.60     $ 4.94       1.09   $ 4.99       1.10

Hypothetical (5% annual return before expenses)

  $ 1,000     $ 1,019.39     $ 5.46       1.09   $ 5.51       1.10

 

 

 

*   Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

 

+   In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/ unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

 

1


DYNAMIC ASSET ALLOCATION PORTFOLIO
TEN LARGEST HOLDINGS1  
June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

 

SECURITY    U.S. $ VALUE        PERCENT OF NET ASSETS  

U.S. Treasury Notes & Bonds

   $ 88,345,837          36.1

Apple, Inc.

     6,370,468          2.6  

Microsoft Corp.

     5,222,638          2.1  

AB All Market Real Return Portfolio—Class Z

     4,734,038          1.9  

Amazon.com, Inc.

     2,777,498          1.1  

Alphabet, Inc.—Class A

     1,871,984          0.8  

Alphabet, Inc.—Class C

     1,776,210          0.7  

Tesla, Inc.

     1,689,611          0.7  

UnitedHealth Group, Inc.

     1,380,124          0.6  

Johnson & Johnson

     1,332,568          0.5  
    

 

 

      

 

 

 
     $   115,500,976          47.1

PORTFOLIO BREAKDOWN2

June 30, 2022 (unaudited)

 

 

ASSET CLASSES      ALLOCATION  

Equities

      

US Large Cap

       32.8

International Large Cap

       14.6  

Emerging Market Equities

       1.5  

Real Equities

       1.3  
      

 

 

 

Sub-total

       50.2  
      

 

 

 

Fixed Income

      

U.S. Bonds

       41.7  

International Bonds

       1.4  
      

 

 

 

Sub-total

       43.1  
      

 

 

 

Opportunistic Assets

      

Emerging Market Debt

       1.0  

Commodities

       0.6  
      

 

 

 

Sub-total

       1.6  
      

 

 

 

Net Cash

       5.1  
      

 

 

 

Total

       100.0

SECURITY TYPE BREAKDOWN3

June 30, 2022 (unaudited)

 

 

SECURITY TYPE    U.S. $ VALUE        PERCENT OF TOTAL INVESTMENTS  

Common Stocks

   $   140,358,279          58.0

Governments—Treasuries

     88,345,837          36.4  

Investment Companies

     4,734,038          2.0  

Options Purchased—Puts

     1,143,694          0.5  

Short-Term Investments

     7,484,833          3.1  
    

 

 

      

 

 

 

Total Investments

   $   242,066,681          100.0

 

 

 

1   Long-term investments.

 

2   All data are as of June 30, 2022. The Portfolio breakdown is expressed as an approximate percentage of the Portfolio’s total investments inclusive of derivative exposure, based on the Adviser’s internal classification guidelines.

 

3   The Portfolio’s security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details).

 

2


DYNAMIC ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
June 30, 2022 (unaudited)   AB Variable Products Series Fund

 

    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

COMMON STOCKS–57.4%

 

     

INFORMATION TECHNOLOGY–12.1%

     

COMMUNICATIONS EQUIPMENT–0.4%

     

Arista Networks, Inc.(a)

      703     $ 65,899  

Cisco Systems, Inc.

      11,860       505,710  

F5, Inc.(a)

      174       26,629  

Juniper Networks, Inc.

      921       26,249  

Motorola Solutions, Inc.

      481       100,818  

Nokia Oyj

      15,450       71,611  

Telefonaktiebolaget LM Ericsson–Class B

      8,333       62,239  
     

 

 

 
        859,155  
     

 

 

 

ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.5%

     

Amphenol Corp.–Class A

      1,710       110,090  

Arrow Electronics, Inc.(a)

      193       21,633  

Azbil Corp.

      299       7,883  

CDW Corp./DE

      386       60,818  

Cognex Corp.

      496       21,090  

Corning, Inc.

      2,294       72,284  

Halma PLC

      1,083       26,590  

Hamamatsu Photonics KK

      349       13,596  

Hexagon AB–Class B(b)

      5,557       58,065  

Hirose Electric Co., Ltd.

      89       11,818  

Ibiden Co., Ltd.

      241       6,828  

Keyence Corp.

      624       213,993  

Keysight Technologies, Inc.(a)

      522       71,958  

Kyocera Corp.

      859       45,919  

Murata Manufacturing Co., Ltd.

      1,617       88,009  

Omron Corp.

      553       28,146  

Shimadzu Corp.

      678       21,490  

TDK Corp.

      1,062       32,835  

TE Connectivity Ltd.

      930       105,230  

Teledyne Technologies, Inc.(a)

      135       50,640  

Trimble, Inc.(a)

      717       41,751  

Venture Corp. Ltd.

      462       5,534  

Yaskawa Electric Corp.

      638       20,606  

Yokogawa Electric Corp.

      634       10,488  

Zebra Technologies Corp.–Class A(a)

      152       44,680  
     

 

 

 
        1,191,974  
     

 

 

 

IT SERVICES–2.1%

     

Accenture PLC–Class A

      1,805       501,158  

Adyen NV(a)(b)

      62       89,474  

Affirm Holdings, Inc.(a)(b)

      543       9,807  

Akamai Technologies, Inc.(a)

      458       41,829  

Amadeus IT Group SA(a)

      1,286       72,008  

Automatic Data Processing, Inc.

      1,200       252,048  
Company       
    
    
Shares
    U.S. $ Value  
                                                         

Bechtle AG

      234     $ 9,611  

Black Knight, Inc.(a)

      443       28,968  

Block, Inc.(a)

      1,480       90,961  

Broadridge Financial Solutions, Inc.

      334       47,612  

Capgemini SE

      468       80,711  

CGI, Inc.(a)

      624       49,709  

Cognizant Technology Solutions Corp.–Class A

      1,498       101,100  

Computershare Ltd.

      1,551       26,449  

Edenred

      712       33,728  

EPAM Systems, Inc.(a)

      163       48,049  

Fidelity National Information Services, Inc.

      1,741       159,598  

Fiserv, Inc.(a)

      1,769       157,388  

FleetCor Technologies, Inc.(a)

      221       46,434  

Fujitsu Ltd.

      551       68,945  

Gartner, Inc.(a)

      235       56,830  

Global Payments, Inc.

      805       89,065  

GMO Payment Gateway, Inc.

      164       11,682  

GoDaddy, Inc.–Class A(a)

      477       33,180  

International Business Machines Corp.

      2,568       362,576  

Itochu Techno-Solutions Corp.

      255       6,270  

Jack Henry & Associates, Inc.

      208       37,444  

Mastercard, Inc.–Class A

      2,492       786,176  

MongoDB, Inc.(a)

      191       49,565  

NEC Corp.

      709       27,663  

Nexi SpA(a)(b)

      1,496       12,423  

Nomura Research Institute Ltd.

      954       25,602  

NTT Data Corp.

      1,822       25,276  

Nuvei Corp.(a)(b)(c)

      191       6,903  

Obic Co., Ltd.

      221       31,428  

Okta, Inc.(a)

      424       38,330  

Otsuka Corp.

      230       6,845  

Paychex, Inc.

      927       105,558  

PayPal Holdings, Inc.(a)

      3,160       220,694  

SCSK Corp.

      392       6,657  

Shopify, Inc.–Class A(a)(b)

      3,260       101,862  

Snowflake, Inc.–Class A(a)

      612       85,105  

TIS, Inc.

      594       15,629  

Twilio, Inc.–Class A(a)

      490       41,067  

VeriSign, Inc.(a)

      283       47,354  

Visa, Inc.–Class A(b)

      4,735       932,274  

Western Union Co. (The)

      1,123       18,496  

Wix.com Ltd.(a)

      163       10,685  

Worldline SA/France(a)

      680       25,364  
     

 

 

 
        5,133,590  
     

 

 

 

SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–2.4%

     

Advanced Micro Devices, Inc.(a)

      4,668       356,962  

 

3


DYNAMIC ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
(continued)   AB Variable Products Series Fund

 

    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

Advantest Corp.

      577     $ 31,029  

Analog Devices, Inc.

      1,494       218,258  

Applied Materials, Inc.

      2,522       229,452  

ASM International NV(b)

      134       33,340  

ASML Holding NV

      1,161       548,500  

Broadcom, Inc.

      1,170       568,398  

Disco Corp.

      156       37,122  

Enphase Energy, Inc.(a)

      383       74,777  

Entegris, Inc.

      387       35,654  

Infineon Technologies AG

      3,728       90,686  

Intel Corp.

      11,626       434,929  

KLA Corp.

      431       137,523  

Lam Research Corp.

      399       170,034  

Lasertec Corp.(b)

      271       32,277  

Marvell Technology, Inc.

      2,409       104,864  

Microchip Technology, Inc.

      1,587       92,173  

Micron Technology, Inc.

      3,197       176,730  

Monolithic Power Systems, Inc.

      127       48,773  

NVIDIA Corp.

      7,138       1,082,049  

NXP Semiconductors NV

      750       111,023  

ON Semiconductor Corp.(a)

      1,235       62,133  

Qorvo, Inc.(a)

      310       29,239  

QUALCOMM, Inc.

      3,218       411,067  

Renesas Electronics Corp.(a)

      3,317       30,017  

Rohm Co., Ltd.

      279       19,558  

Skyworks Solutions, Inc.

      468       43,356  

SolarEdge Technologies, Inc.(a)

      151       41,326  

STMicroelectronics NV

      1,951       61,700  

SUMCO Corp.

      934       12,147  

Teradyne, Inc.

      464       41,551  

Texas Instruments, Inc.

      2,637       405,175  

Tokyo Electron Ltd.

      430       140,349  

Tower Semiconductor Ltd.(a)

      311       14,506  
     

 

 

 
        5,926,677  
     

 

 

 

SOFTWARE–3.9%

     

Adobe, Inc.(a)

      1,347       493,083  

ANSYS, Inc.(a)

      249       59,583  

AppLovin Corp.–Class A(a)(b)

      339       11,675  

Autodesk, Inc.(a)

      628       107,991  

Avalara, Inc.(a)

      259       18,285  

AVEVA Group PLC(b)

      344       9,444  

Bentley Systems, Inc.–Class B(b)

      544       18,115  

Bill.com Holdings, Inc.(a)

      266       29,244  

BlackBerry Ltd.(a)(b)

      1,556       8,389  

Cadence Design Systems, Inc.(a)

      792       118,824  

Ceridian HCM Holding, Inc.(a)

      390       18,361  

Check Point Software Technologies Ltd.(a)

      295       35,925  

Citrix Systems, Inc.

      359       34,884  

Cloudflare, Inc.–Class A(a)

      713       31,194  
    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

Coinbase Global, Inc.–Class A(a)(b)

      342     $ 16,081  

Constellation Software, Inc./Canada

      58       86,102  

Coupa Software, Inc.(a)

      213       12,162  

Crowdstrike Holdings, Inc.–Class A(a)

      565       95,236  

CyberArk Software Ltd.(a)

      114       14,587  

Dassault Systemes SE

      1,904       70,526  

Datadog, Inc.–Class A(a)

      642       61,144  

DocuSign, Inc.(a)

      565       32,420  

Dropbox, Inc.–Class A(a)

      822       17,254  

Fair Isaac Corp.(a)

      75       30,067  

Fortinet, Inc.(a)

      1,955       110,614  

Guidewire Software, Inc.(a)

      226       16,044  

HubSpot, Inc.(a)

      129       38,784  

Intuit, Inc.

      768       296,018  

Lightspeed Commerce, Inc.(a)(b)

      381       8,495  

Microsoft Corp.

      20,335       5,222,638  

Nemetschek SE

      165       10,038  

Nice Ltd.(a)

      181       34,927  

NortonLifeLock, Inc.

      1,661       36,476  

Open Text Corp.

      774       29,278  

Oracle Corp.

      4,575       319,655  

Oracle Corp.Japan

      142       8,269  

Palantir Technologies, Inc.–Class A(a)

      4,681       42,457  

Palo Alto Networks,
Inc.(a)(b)

      282       139,291  

Paycom Software, Inc.(a)

      147       41,178  

PTC, Inc.(a)

      317       33,710  

RingCentral, Inc.– Class A(a)

      229       11,968  

Sage Group PLC (The)

      2,906       22,503  

Salesforce, Inc.(a)

      2,813       464,258  

SAP SE

      2,982       271,810  

ServiceNow, Inc.(a)

      571       271,522  

Sinch AB(a)(b)

      1,592       5,200  

Splunk, Inc.(a)

      454       40,161  

SS&C Technologies Holdings, Inc.

      659       38,268  

Synopsys, Inc.(a)

      438       133,021  

Temenos AG (REG)

      182       15,576  

Trade Desk, Inc. (The)–Class A(a)

      1,258       52,698  

Trend Micro, Inc./Japan

      389       19,030  

Tyler Technologies, Inc.(a)

      118       39,233  

Unity Software, Inc.(a)(b)

      546       20,104  

VMware, Inc.–Class A

      598       68,160  

WiseTech Global Ltd.(b)

      419       10,987  

Workday, Inc.–Class A(a)

      560       78,165  

Xero Ltd.(a)

      384       20,483  

Zendesk, Inc.(a)

      348       25,776  

Zoom Video Communications, Inc.–Class A(a)

      623       67,265  

Zscaler, Inc.(a)

      240       35,882  
     

 

 

 
        9,530,518  
     

 

 

 

 

4


    AB Variable Products Series Fund

 

    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–2.8%

     

Apple, Inc.

      46,595     $ 6,370,468  

Brother Industries Ltd.

      585       10,293  

Canon, Inc.

      2,811       63,701  

Dell Technologies, Inc.–Class C

      828       38,262  

FUJIFILM Holdings Corp.

      1,009       54,215  

Hewlett Packard Enterprise Co.

      3,714       49,248  

HP, Inc.

      3,007       98,570  

Logitech International SA (REG)(b)

      494       25,760  

NetApp, Inc.

      635       41,427  

Ricoh Co., Ltd.

      1,572       12,273  

Seagate Technology Holdings PLC

      594       42,435  

Seiko Epson Corp.

      792       11,204  

Western Digital Corp.(a)

      893       40,033  
     

 

 

 
        6,857,889  
     

 

 

 
        29,499,803  
     

 

 

 

HEALTH CARE–8.1%

     

BIOTECHNOLOGY–1.1%

     

AbbVie, Inc.

      5,050       773,458  

Alnylam Pharmaceuticals, Inc.(a)

      343       50,026  

Amgen, Inc.

      1,591       387,090  

Argenx SE(a)

      139       52,075  

Biogen, Inc.(a)

      420       85,655  

BioMarin Pharmaceutical, Inc.(a)

      526       43,590  

CSL Ltd.

      1,376       255,489  

Exact Sciences Corp.(a)(b)

      497       19,577  

Genmab A/S(a)

      188       60,996  

Gilead Sciences, Inc.

      3,580       221,280  

Grifols SA(a)(b)

      851       16,139  

Horizon Therapeutics PLC(a)

      615       49,052  

Incyte Corp.(a)

      537       40,796  

Moderna, Inc.(a)

      978       139,707  

Neurocrine Biosciences, Inc.(a)

      272       26,515  

Regeneron Pharmaceuticals, Inc.(a)

      305       180,295  

Seagen, Inc.(a)

      393       69,537  

Swedish Orphan Biovitrum AB(a)

      482       10,469  

Vertex Pharmaceuticals, Inc.(a)

      727       204,861  
     

 

 

 
        2,686,607  
     

 

 

 

HEALTH CARE EQUIPMENT & SUPPLIES–1.4%

     

Abbott Laboratories

      5,035       547,053  

ABIOMED, Inc.(a)

      130       32,176  
    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

Alcon, Inc.

      1,427     $ 100,063  

Align Technology, Inc.(a)

      214       50,647  

Asahi Intecc Co., Ltd.

      541       8,191  

Avantor, Inc.(a)

      1,741       54,145  

Baxter International, Inc.

      1,434       92,106  

Becton Dickinson and Co.

      813       200,429  

BioMerieux

      118       11,570  

Boston Scientific Corp.(a)

      4,073       151,801  

Carl Zeiss Meditec AG

      115       13,826  

Cochlear Ltd.(b)

      188       25,811  

Coloplast A/S–Class B

      339       38,734  

Cooper Cos., Inc. (The)

      141       44,150  

Demant A/S(a)

      274       10,300  

DENTSPLY SIRONA, Inc.

      624       22,296  

Dexcom, Inc.(a)

      1,152       85,859  

DiaSorin SpA

      72       9,469  

Edwards Lifesciences Corp.(a)

      1,779       169,165  

Fisher & Paykel Healthcare Corp., Ltd.

      1,647       20,518  

Getinge AB–Class B

      653       15,134  

GN Store Nord AS

      374       13,194  

Hologic, Inc.(a)

      714       49,480  

Hoya Corp.

      1,048       89,691  

IDEXX Laboratories, Inc.(a)

      241       84,526  

Insulet Corp.(a)

      198       43,152  

Intuitive Surgical, Inc.(a)

      1,022       205,126  

Koninklijke Philips NV

      2,523       54,115  

Masimo Corp.(a)

      150       19,600  

Medtronic PLC

      3,833       344,012  

Novocure Ltd.(a)(b)

      268       18,626  

Olympus Corp.

      3,480       70,523  

ResMed, Inc.

      418       87,625  

Sartorius AG (Preference Shares)

      70       24,568  

Siemens Healthineers AG

      805       41,044  

Smith & Nephew PLC

      2,511       35,116  

Sonova Holding AG (REG)

      154       49,215  

STERIS PLC

      286       58,959  

Straumann Holding AG (REG)

      318       38,308  

Stryker Corp.

      971       193,161  

Sysmex Corp.

      491       29,627  

Teleflex, Inc.

      134       32,944  

Terumo Corp.

      1,751       52,970  

Zimmer Biomet Holdings, Inc.

      597       62,721  
     

 

 

 
        3,401,746  
     

 

 

 

HEALTH CARE PROVIDERS & SERVICES–1.3%

     

AmerisourceBergen Corp.–Class A

      448       63,383  

Amplifon SpA(b)

      355       10,914  

Cardinal Health, Inc.

      791       41,346  

Centene Corp.(a)

      1,664       140,791  

Cigna Corp.

      917       241,648  

 

5


DYNAMIC ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
(continued)   AB Variable Products Series Fund

 

    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

CVS Health Corp.

      3,748     $ 347,290  

DaVita, Inc.(a)

      165       13,193  

Elevance Health, Inc.

      689       332,498  

Fresenius Medical Care AG & Co. KGaA

      586       29,359  

Fresenius SE & Co. KGaA

      1,195       36,342  

HCA Healthcare, Inc.

      694       116,634  

Henry Schein, Inc.(a)

      392       30,082  

Humana, Inc.

      362       169,441  

Laboratory Corp. of America Holdings

      267       62,574  

McKesson Corp.

      428       139,618  

Molina Healthcare, Inc.(a)

      167       46,695  

Quest Diagnostics, Inc.

      341       45,346  

Ramsay Health Care Ltd.(b)

      523       26,490  

Sonic Healthcare Ltd.

      1,301       29,654  

UnitedHealth Group, Inc.

      2,687       1,380,124  

Universal Health Services, Inc.–Class B

      193       19,437  
     

 

 

 
        3,322,859  
     

 

 

 

HEALTH CARE TECHNOLOGY–0.1%

     

M3, Inc.

      1,230       35,405  

Teladoc Health, Inc.(a)(b)

      457       15,177  

Veeva Systems, Inc.–Class A(a)

      397       78,622  
     

 

 

 
        129,204  
     

 

 

 

LIFE SCIENCES TOOLS & SERVICES–0.8%

     

Agilent Technologies, Inc.

      858       101,905  

Bachem Holding AG (REG)

      89       6,203  

Bio-Rad Laboratories, Inc.–Class A(a)

      64       31,680  

Bio-Techne Corp.

      113       39,170  

Charles River Laboratories International, Inc.(a)

      145       31,026  

Danaher Corp.

      1,941       492,082  

Eurofins Scientific SE

      384       30,328  

Illumina, Inc.(a)

      449       82,778  

IQVIA Holdings, Inc.(a)

      545       118,260  

Lonza Group AG (REG)

      213       113,771  

Mettler-Toledo International, Inc.(a)

      66       75,819  

PerkinElmer, Inc.

      361       51,341  

QIAGEN NV(a)

      659       30,985  

Sartorius Stedim Biotech

      79       24,926  

Thermo Fisher Scientific, Inc.

      1,117       606,844  

Waters Corp.(a)

      173       57,259  

West Pharmaceutical Services, Inc.

      212       64,102  
     

 

 

 
        1,958,479  
     

 

 

 

PHARMACEUTICALS–3.4%

 

   

Astellas Pharma, Inc.

      5,285       82,455  

AstraZeneca PLC

      4,424       583,622  
    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

Bausch Health Cos., Inc.(a)

      770     $ 6,437  

Bayer AG (REG)

      2,805       167,504  

Bristol-Myers Squibb Co.

      6,223       479,171  

Catalent, Inc.(a)

      486       52,143  

Chugai Pharmaceutical Co., Ltd.

      1,883       48,168  

Daiichi Sankyo Co., Ltd.

      4,958       126,094  

Eisai Co., Ltd.

      645       27,271  

Elanco Animal Health, Inc.(a)

      1,215       23,850  

Eli Lilly & Co.

      2,312       749,620  

GSK PLC

      14,514       312,800  

Hikma Pharmaceuticals PLC

      495       9,767  

Ipsen SA

      108       10,226  

Jazz Pharmaceuticals PLC(a)

      176       27,458  

Johnson & Johnson

      7,507       1,332,568  

Kyowa Kirin Co., Ltd.

      705       15,917  

Merck & Co., Inc.

      7,217       657,974  

Merck KGaA

      369       62,590  

Nippon Shinyaku Co., Ltd.

      106       6,470  

Novartis AG (REG)

      6,256       530,387  

Novo Nordisk A/S–Class B

      4,808       533,218  

Ono Pharmaceutical Co., Ltd.

      994       25,535  

Orion Oyj–Class B

      303       13,561  

Otsuka Holdings Co., Ltd.

      1,078       38,481  

Pfizer, Inc.

      16,055       841,764  

Recordati Industria Chimica e Farmaceutica SpA

      298       12,995  

Roche Holding AG

      2,083       700,404  

Royalty Pharma PLC–Class A

      989       41,577  

Sanofi

      3,247       327,447  

Shionogi & Co., Ltd.

      759       38,738  

Takeda Pharmaceutical Co., Ltd.(b)

      4,243       119,179  

Teva Pharmaceutical Industries Ltd. (Sponsored ADR)(a)

      3,150       23,688  

UCB SA

      361       30,591  

Viatris, Inc.

      3,452       36,142  

Vifor Pharma AG(a)

      130       22,537  

Zoetis, Inc.

      1,348       231,708  
     

 

 

 
        8,350,057  
     

 

 

 
        19,848,952  
     

 

 

 

FINANCIALS–7.7%

     

BANKS–3.3%

     

ABN AMRO
Bank NV(b)(c)

      1,207       13,563  

Australia & New Zealand Banking Group Ltd.

      8,004       121,907  

Banco Bilbao Vizcaya Argentaria SA

      19,037       86,477  

Banco Santander SA

      49,510       140,084  

Bank Hapoalim BM

      3,625       30,440  

 

6


    AB Variable Products Series Fund

 

    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

Bank Leumi Le-Israel BM

      4,148     $ 37,108  

Bank of America Corp.

      20,736       645,512  

Bank of Montreal

      1,851       177,996  

Bank of Nova Scotia (The)

      3,470       205,364  

Barclays PLC

      47,842       89,463  

BNP Paribas SA

      3,172       151,723  

BOC Hong Kong Holdings Ltd.

      10,031       39,833  

CaixaBank SA

      12,657       44,325  

Canadian Imperial Bank of Commerce

      2,575       125,049  

Chiba Bank Ltd. (The)(b)

      1,414       7,740  

Citigroup, Inc.

      5,666       260,579  

Citizens Financial Group, Inc.

      1,415       50,501  

Commerzbank AG(a)

      3,039       21,562  

Commonwealth Bank of Australia

      4,872       304,386  

Concordia Financial Group Ltd.

      3,021       10,489  

Credit Agricole SA

      3,555       32,773  

Danske Bank A/S

      1,969       28,024  

DBS Group Holdings Ltd.

      4,175       89,334  

DNB Bank ASA

      2,655       48,065  

Erste Group Bank AG

      981       24,928  

Fifth Third Bancorp

      1,952       65,587  

FinecoBank Banca Fineco SpA

      1,741       20,886  

First Citizens BancShares, Inc./NC–Class A

      35       22,882  

First Republic Bank/CA

      505       72,821  

Hang Seng Bank Ltd.

      1,305       23,126  

HSBC Holdings PLC

      57,823       377,730  

Huntington Bancshares, Inc./OH

      4,105       49,383  

ING Groep NV

      11,146       109,806  

Intesa Sanpaolo SpA

      47,155       88,249  

Israel Discount Bank Ltd.–Class A

      3,531       18,490  

Japan Post Bank Co., Ltd.

      1,118       8,704  

JPMorgan Chase & Co.

      8,431       949,415  

KBC Group NV

      714       40,170  

KeyCorp

      2,648       45,625  

Lloyds Banking Group PLC

      202,692       104,286  

M&T Bank Corp.

      513       81,767  

Mediobanca Banca di Credito Finanziario SpA

      1,728       14,986  

Mitsubishi UFJ Financial Group, Inc.

      34,087       182,367  

Mizrahi Tefahot Bank Ltd.

      439       14,615  

Mizuho Financial Group, Inc.

      6,854       78,032  

National Australia Bank Ltd.

      9,232       175,065  

National Bank of Canada

      966       63,392  

NatWest Group PLC

      16,043       42,703  

Nordea Bank Abp

      9,447       83,450  

Oversea-Chinese Banking Corp., Ltd.

      9,327       76,510  
    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

PNC Financial Services Group, Inc. (The)

      1,195     $ 188,535  

Regions Financial Corp.

      2,675       50,156  

Resona Holdings, Inc.

      6,122       22,899  

Royal Bank of Canada

      4,043       391,485  

Shizuoka Bank Ltd. (The)

      1,294       7,791  

Signature Bank/New York NY

      179       32,079  

Skandinaviska Enskilda Banken AB–Class A

      4,646       45,772  

Societe Generale SA

      2,270       50,189  

Standard Chartered PLC

      7,444       56,198  

Sumitomo Mitsui Financial Group, Inc.

      3,633       107,991  

Sumitomo Mitsui Trust Holdings, Inc.

      917       28,341  

SVB Financial Group(a)

      168       66,358  

Svenska Handelsbanken AB–Class A

      4,164       35,743  

Swedbank AB–Class A

      2,585       32,785  

Toronto-Dominion Bank (The)

      5,202       341,129  

Truist Financial Corp.

      3,792       179,855  

UniCredit SpA

      6,038       57,701  

United Overseas Bank Ltd.

      2,692       50,858  

US Bancorp

      4,025       185,231  

Webster Financial Corp.

      513       21,623  

Wells Fargo & Co.

      10,891       426,601  

Westpac Banking Corp.

      9,996       134,835  
     

 

 

 
        8,111,427  
     

 

 

 

CAPITAL MARKETS–1.7%

     

3i Group PLC

      2,778       37,653  

Abrdn PLC(b)

      6,226       12,153  

Ameriprise Financial, Inc.

      317       75,345  

Amundi SA

      174       9,580  

ASX Ltd.(b)

      553       31,258  

Bank of New York Mellon Corp. (The)

      2,182       91,011  

BlackRock, Inc.–Class A

      435       264,932  

Blackstone, Inc.

      2,000       182,460  

Brookfield Asset Management, Inc.–Class A (Canada)

      4,030       179,271  

Carlyle Group, Inc. (The)

      559       17,698  

Cboe Global Markets, Inc.

      305       34,523  

Charles Schwab Corp. (The)

      4,137       261,376  

CME Group, Inc.–Class A

      1,026       210,022  

Credit Suisse Group AG (REG)

      7,568       43,197  

Daiwa Securities Group, Inc.

      3,863       17,297  

Deutsche Bank AG (REG)

      5,900       51,847  

Deutsche Boerse AG

      543       91,184  

EQT AB

      844       17,347  

Euronext NV(c)

      245       20,093  

FactSet Research Systems, Inc.

      108       41,534  

 

7


DYNAMIC ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS  
(continued)   AB Variable Products Series Fund

 

    
    
    
Company
 

Shares

    U.S. $ Value  
                                                         

Franklin Resources, Inc.(b)

      860     $ 20,047  

Futu Holdings Ltd. (ADR)(a)(b)

      150       7,831  

Goldman Sachs Group, Inc. (The)

      965       286,624  

Hargreaves Lansdown PLC

      1,015       9,793  

Hong Kong Exchanges & Clearing Ltd.

      3,590       177,548  

IGM Financial, Inc.(b)

      239       6,406  

Intercontinental Exchange, Inc.

      1,604       150,840  

Invesco Ltd.

      986       15,904  

Japan Exchange Group, Inc.

      1,388       20,119  

Julius Baer Group Ltd.

      631       29,272  

KKR & Co., Inc.

      1,587       73,462  

London Stock Exchange Group PLC

      940       87,713  

LPL Financial Holdings, Inc.

      229       42,246  

Macquarie Group Ltd.

      1,041       118,524  

MarketAxess Holdings, Inc.

      108       27,649  

Moody’s Corp.

      476       129,458  

Morgan Stanley

      3,814       290,093  

MSCI, Inc.–Class A

      232       95,619  

Nasdaq, Inc.

      329       50,186  

Nomura Holdings, Inc.

      8,221       29,868  

Northern Trust Corp.

      564       54,415  

Onex Corp.(b)

      211       10,507