-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock Global Allocation
V.I. Fund
(the “Fund”)
Supplement dated April 1, 2019 to the Prospectus of the Fund,
dated May 1, 2018
Effective April 1, 2019, the following changes are made to the
Fund’s Prospectus:
The section of the Prospectus entitled “Fund Overview — Key
Facts About BlackRock Global AllocationV.I. Fund — Portfolio
Managers” is deleted in its entirety and replaced with the
following:
Portfolio Managers
NamePortfolio Manager of
the Fund Since Title
Rick Rieder 2019 Managing Director of BlackRock, Inc.
Dan Chamby, CFA 2003 Managing Director of BlackRock, Inc.
Russ Koesterich, CFA, JD 2017 Managing Director of BlackRock,
Inc.
David Clayton, CFA, JD 2017 Managing Director of BlackRock,
Inc.
The section of the Prospectus entitled “Details About the Fund —
How the Fund Invests — About thePortfolio Management of the Fund”
is deleted in its entirety and replaced with the following:
ABOUT THE PORTFOLIO MANAGEMENT OF THE FUND
The Fund is managed by a team of financial professionals. Rick
Rieder, Dan Chamby, CFA, Russ Koesterich,CFA, JD, and David
Clayton, CFA, JD, are the Fund’s portfolio managers and are jointly
and primarilyresponsible for the day-to-day management of the Fund.
Please see “Management of the Funds — PortfolioManager Information”
for additional information about the portfolio management team.
The sections of the Prospectus entitled “Management of the Funds
— Portfolio Manager Information —BlackRock Global Allocation V.I.
Fund” are deleted in their entirety and replaced with the
following:
BlackRock Global Allocation V.I. Fund
The Fund is managed by Rick Rieder, Dan Chamby, CFA, Russ
Koesterich, CFA, JD, and David Clayton, CFA,JD, who are jointly and
primarily responsible for the management of the Fund.
-
Portfolio Manager Primary Role Since Title and Recent
Biography
Rick Rieder Jointly and primarily responsible forthe management
of the Fund’sportfolio, including setting the Fund’soverall
investment strategy andoverseeing the management of theFund.
2019 Managing Director of BlackRock, Inc.since 2009.
Dan Chamby, CFA Jointly and primarily responsible forthe
management of the Fund’sportfolio, including setting the
Fund’soverall investment strategy andoverseeing the management of
theFund.
2003 Managing Director of BlackRock, Inc.since 2007; Director of
BlackRock,Inc. in 2006.
Russ Koesterich,CFA, JD
Jointly and primarily responsible forthe management of the
Fund’sportfolio, including setting the Fund’soverall investment
strategy andoverseeing the management of theFund.
2017 Managing Director of BlackRock, Inc.since 2009.
David Clayton,CFA, JD
Jointly and primarily responsible forthe management of the
Fund’sportfolio, including setting the Fund’soverall investment
strategy andoverseeing the management of theFund.
2017 Managing Director of BlackRock, Inc.since 2012; Director of
BlackRock,Inc. from 2010 to 2011.
In addition, Dan Chamby intends to retire from BlackRock, Inc.
in March 2020.
Shareholders should retain this Supplement for future
reference.
2
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock iShares® Dynamic
Allocation V.I. Fund
(the “Fund”)
Supplement dated March 26, 2019 to the Fund’s Prospectusdated
May 1, 2018, as supplemented to date
Effective immediately, the Fund’s Prospectus is amended as
follows:
The subsection of the Prospectus entitled “Details about the
Fund — Information About the ETFs —ETFs” is amended to add the
following underlying exchange-traded fund to the table:
Fund Name Investment Objective and Principal Investment
Strategies
iShares Core S&P Total U.S.Stock Market ETF
The fund seeks to track the investment results of a broad-based
indexcomposed of U.S. equities.
The fund seeks to track the investment results of the S&P
Total MarketIndex™ (the “Underlying Index”), which is comprised of
the commonequities included in the S&P 500® and the S&P
Completion Index™. TheUnderlying Index consists of all U.S. common
equities listed on the NewYork Stock Exchange (including NYSE Arca,
Inc. and NYSE MKT), theNASDAQ Global Select Market, the NASDAQ
Global Market, theNASDAQ Capital Market and BATS Exchange, Inc. The
securities in theUnderlying Index are weighted based on the total
float-adjusted marketvalue of their outstanding shares. Securities
with higher total float-adjustedmarket value have a larger
representation in the Underlying Index. TheS&P 500 measures the
performance of the large-capitalization sector of theU.S. equity
market. The S&P Completion Index measures the performanceof the
U.S. mid-, small- and micro-capitalization sector of the U.S.
equitymarket. As of March 31, 2018, the S&P 500 and the S&P
CompletionIndex included approximately 80% and 20%, respectively,
of the marketcapitalization of the Underlying Index. The Underlying
Index includeslarge-, mid-, small- and micro-capitalization
companies. As of March 31,2018, a significant portion of the
Underlying Index is represented bysecurities of companies in the
financials and information technologyindustries or sectors. The
components of the Underlying Index are likely tochange over
time.
Shareholders should retain this Supplement for future
reference.
PR-VARDAVI-0319SUP
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock iShares® Dynamic
Allocation V.I. Fund
(the “Fund”)
Supplement dated October 29, 2018to the Prospectus and Statement
of Additional Information,
each dated May 1, 2018, as supplemented to date
Effective as of October 29, 2018, BlackRock Advisors, LLC
(“BlackRock”) has agreed to adjust the caps on totalexpenses to
reduce the net expenses paid by shareholders of the Fund. To
achieve these expense caps, BlackRock hasagreed to waive and/or
reimburse fees and/or expenses if the Fund’s annual fund operating
expenses, excluding certainexpenses described in the Prospectus,
exceed a certain limit for the Fund’s Class I and Class III Shares.
Accordingly,effective October 29, 2018, the Fund’s Prospectus and
Statement of Additional Information are amended as follows:
The section of the Fund’s Prospectus entitled “Fund Overview —
Key Facts About BlackRock iShares®
Dynamic Allocation V.I. Fund — Fees and Expenses of the Fund” is
deleted in its entirety and replacedwith the following:
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund. Theexpenses below do not
include separate account fees and expenses, and would be higher if
these fees andexpenses were included. Please refer to your variable
annuity or insurance contract (the “Contract”) prospectusfor
information on the separate account fees and expenses associated
with your Contract.
Shareholder Fees (fees paid directly from your investment)
The Fund is not subject to any shareholder fees.
Annual Fund Operating Expenses(expenses that you pay each year
as a percentage of the value of yourinvestment) Class I Shares
Class III SharesManagement Fees1 0.15% 0.15%Distribution and/or
Service (12b-1) Fees None 0.25%Other Expenses2 0.79% 0.85%
Miscellaneous Other Expenses 0.79% 0.85%Other Expenses of the
Subsidiary2 — —
Acquired Fund Fees and Expenses3 0.21% 0.21%Total Annual Fund
Operating Expenses3 1.15% 1.46%Fee Waivers and/or Expense
Reimbursements1,4 (0.75)% (0.81)%Total Annual Fund Operating
Expenses After Fee Waivers and/or ExpenseReimbursements1,4 0.40%
0.65%
1 The Management Fee payable by the Fund is based on assets
estimated to be attributable to the Fund’s direct investments in
fixed-income and equity securities and instruments, including
exchange-traded funds advised by BlackRock Fund Advisors,
LLC(“BlackRock”) or other investment advisers, other investments
and cash and cash equivalents (including money market
funds).BlackRock has contractually agreed to waive the Management
Fee on assets estimated to be attributed to the Fund’s investments
in otherequity and fixed-income mutual funds managed by BlackRock
or its affiliates.
2 Other Expenses of iShares Dynamic Allocation V.I. Fund
(Cayman) (the “Subsidiary”) were less than 0.01% for the most
recent fiscal year.3 The Total Annual Fund Operating Expenses do
not correlate to the ratios of expenses to average net assets given
in the Fund’s most
recent annual report, which do not include Acquired Fund Fees
and Expenses.4 As described in the “Management of the Funds”
section of the Fund’s prospectus, BlackRock has contractually
agreed to waive and/or
reimburse fees or expenses in order to limit Total Annual Fund
Operating Expenses After Fee Waivers and/or Expense
Reimbursements(excluding Dividend Expense, Interest Expense,
Acquired Fund Fees and Expenses and certain other Fund expenses) to
0.19% (forClass I Shares) and 0.44% (for Class III Shares) of
average daily net assets through April 30, 2021. The Fund may have
to repay some ofthese waivers and/or reimbursements to BlackRock in
the two years following such waivers and/or reimbursements. The
contractualagreement may be terminated upon 90 days’ notice by a
majority of the non-interested directors of BlackRock Variable
Series Funds,Inc. (the “Company”) or by a vote of a majority of the
outstanding voting securities of the Fund.
-
Example:This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in othermutual
funds. The Example assumes that you invest $10,000 in the Fund for
the time periods indicated and thenredeem all of your shares at the
end of those periods. The Example also assumes that your investment
has a 5%return each year and that the Fund’s operating expenses
remain the same. The Example does not reflect chargesimposed by the
Contract. See the Contract prospectus for information on such
charges. Although your actualcosts may be higher or lower, based on
these assumptions and the net expenses shown in the fee table, your
costswould be:
1 Year 3 Years 5 Years 10 Years
Class I Shares $41 $212 $483 $1,259
Class III Shares $66 $298 $638 $1,602
Portfolio Turnover:The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over”
itsportfolio). A higher portfolio turnover rate may indicate higher
transaction costs. These costs, which are notreflected in annual
fund operating expenses or in the Example, affect the Fund’s
performance. During the mostrecent fiscal year, the Fund’s
portfolio turnover rate was 48% of the average value of its
portfolio.
The first paragraph in the section of the Prospectus entitled
“Other Important Information – Class IShares – Management of the
Funds – BlackRock – BlackRock iShares® Alternative Strategies V.I.
Fundand BlackRock iShares® Dynamic Allocation V.I. Fund,” solely as
it relates to the Fund, is deleted in itsentirety and replaced with
the following:
BlackRock has contractually agreed to waive the management fee
with respect to any portion of the Fund’s assetsestimated to be
attributable to investments in other equity and fixed-income mutual
funds managed byBlackRock or its affiliates that have a contractual
management fee, through April 30, 2021. The contractualagreement
may be terminated upon 90 days’ notice by a majority of the
non-interested directors of the Companyor by a vote of a majority
of the outstanding voting securities of the Fund.
The contractual caps table in the section of the Prospectus
entitled “Other Important Information –Class I Shares – Management
of the Funds – BlackRock,” solely as it relates to the Fund, is
deleted in itsentirety and replaced with the following:
Contractual Caps1 onTotal Annual Fund
Operating Expenses2(excluding Dividend
Expense, InterestExpense, Acquired FundFees and Expenses and
certain other Fundexpenses)
Contractual Caps1on fees paid by Fundfor Operational and
Recordkeeping Services
iShares® Dynamic Allocation V.I. Fund 0.19% —
1 The contractual caps for the Fund are in effect through April
30, 2021. The contractual agreement may be terminated, with respect
to theFund, upon 90 days’ notice by a majority of the
non-interested directors of the Company or by a vote of a majority
of the outstandingvoting securities of the Fund.
2 As a percentage of average daily net assets and based on
current fees.
The first paragraph in the section of the Prospectus entitled
“Other Important Information – Class IIIShares – Management of the
Funds – BlackRock – BlackRock iShares® Alternative Strategies V.I.
Fund
-2-
-
and BlackRock iShares® Dynamic Allocation V.I. Fund,” solely as
it relates to the Fund, is deleted in itsentirety and replaced with
the following:
BlackRock has contractually agreed to waive the management fee
with respect to any portion of the Fund’s assetsestimated to be
attributable to investments in other equity and fixed-income mutual
funds managed byBlackRock or its affiliates that have a contractual
management fee, through April 30, 2021. The contractualagreement
may be terminated upon 90 days’ notice by a majority of the
non-interested directors of the Companyor by a vote of a majority
of the outstanding voting securities of the Fund.
The contractual caps table in the section of the Prospectus
entitled “Other Important Information –Class III Shares –
Management of the Funds – BlackRock,” solely as it relates to the
Fund, is deleted in itsentirety and replaced with the
following:
Contractual Caps1 on TotalAnnual Fund Operating
Expenses2 (excludingDividend Expense,Interest Expense,
Acquired Fund Fees andExpenses and certainother Fund
expenses)
Contractual Caps1 on feespaid by Fund forOperational and
Recordkeeping Services
iShares® Dynamic Allocation V.I. Fund 0.44% —
1 The contractual caps for the Fund are in effect through April
30, 2021. The contractual agreement may be terminated, with respect
to theFund, upon 90 days’ notice by a majority of the
non-interested directors of the Company or by a vote of a majority
of the outstandingvoting securities of the Fund.
2 As a percentage of average daily net assets and based on
current fees.
The section of the Statement of Additional Information entitled
“IV. Management and AdvisoryArrangements – (BlackRock iShares®
Alternative Strategies V.I. Fund and BlackRock iShares®
DynamicAllocation V.I. Fund),” solely as it relates to the Fund, is
deleted in its entirety and replaced with thefollowing:
BlackRock has contractually agreed to waive the management fee
with respect to any portion of the Fund’sassets estimated to be
attributable to investments in other equity and fixed-income mutual
funds managed byBlackRock or its affiliates that have a contractual
management fee, through April 30, 2021. The contractualagreement
may be terminated upon 90 days’ notice by a majority of the
Independent Directors or by a vote of amajority of the outstanding
voting securities of the Fund.
The first two paragraphs in the section of the Statement of
Additional Information entitled “IV.Management and Advisory
Arrangements – BlackRock Managed Volatility V.I. Fund,
BlackRockiShares® Alternative Strategies V.I. Fund and BlackRock
iShares® Dynamic Allocation V.I. Fund,” solelyas they relate to the
Fund, are deleted in their entirety and replaced with the
following:
With respect to Class I shares of the Fund, the Manager has
agreed to contractually waive and/or reimbursefees or expenses in
order to limit Total Annual Fund Operating Expenses (excluding
Dividend Expense, InterestExpense, Acquired Fund Fees and Expenses
and certain other Fund expenses) to 0.19% of average daily
netassets for iShares® Dynamic Allocation V.I. Fund.
-3-
-
With respect to Class III shares of the Fund, the Manager has
agreed to contractually waive and/orreimburse fees or expenses in
order to limit Total Annual Fund Operating Expenses (excluding
DividendExpense, Interest Expense, Acquired Fund Fees and Expenses
and certain other Fund expenses, and excludingDistribution Fees) to
0.44% of average daily net assets for Class III shares of iShares®
Dynamic Allocation V.I.Fund.
Shareholders should retain this Supplement for future
reference.
PRSAI-VARDAVI-1018SUP
-4-
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock Advantage Large
Cap Core V.I. FundBlackRock Advantage Large Cap Value V.I.
FundBlackRock Advantage U.S. Total Market V.I. Fund
BlackRock Basic Value V.I. FundBlackRock Capital Appreciation
V.I. Fund
BlackRock Equity Dividend V.I. FundBlackRock Global Allocation
V.I. Fund
BlackRock Government Money Market V.I. FundBlackRock High Yield
V.I. Fund
BlackRock International V.I. FundBlackRock iShares® Dynamic
Allocation V.I. Fund
BlackRock Large Cap Focus Growth V.I. FundBlackRock Managed
Volatility V.I. Fund
BlackRock S&P 500 Index V.I. FundBlackRock Total Return V.I.
Fund
BlackRock U.S. Government Bond V.I. Fund
(each, a “Fund” and collectively, the “Funds”)
Supplement dated September 17, 2018to the Prospectus and the
Statement of Additional Information of each Fund,
each dated May 1, 2018, as supplemented to date
On September 17, 2018 (the “Closing Date”), each series of
BlackRock Variable Series Funds II, Inc. listedbelow (each, an
“Acquiring Fund”) acquired the assets, subject to the liabilities,
of the corresponding series ofBlackRock Variable Series Funds, Inc.
(each, a “Target Fund”) set forth in the table below through a
tax-freereorganization (each, a “Reorganization”):
Acquiring Fund, each a series of BlackRockVariable Series Funds
II, Inc.
Corresponding Target Fund, each a series ofBlackRock Variable
Series Funds, Inc.
BlackRock High Yield V.I. Fund BlackRock High Yield V.I.
Fund
BlackRock Total Return V.I. Fund BlackRock Total Return V.I.
Fund
BlackRock U.S. Government Bond V.I. Fund BlackRock U.S.
Government Bond V.I. Fund
As a result of each Reorganization, shareholders of the
applicable Target Fund became shareholders of thecorresponding
Acquiring Fund as of the Closing Date. Each Acquiring Fund is
currently offered pursuant to theProspectus and the Statement of
Additional Information dated July 17, 2018. All references to the
Target Funds arehereby deleted from the Prospectus and the
Statement of Additional Information of the Funds dated May 1,
2018.
Shareholders should retain this Supplement for future
reference.
PRSAI-VAR-0918SUP2
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock Large Cap Focus
Growth V.I. Fund
(the “Fund”)
Supplement dated August 29, 2018 to the Class I Shares
Prospectus and Class III Shares Prospectus of the Fund (together,
the “Prospectuses”), each dated May 1, 2018, as supplemented to
date
The following change is made to the Fund’s Prospectuses:
Footnote 1 in the section of each Prospectus entitled “For More
Information — Funds and Service Providers — Custodians” is amended
to include a reference to BlackRock Large Cap Focus Growth V.I.
Fund.
Shareholders should retain this Supplement for future
reference.
PRO-VAR-LCFG-0818SUP
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock Total Return V.I.
Fund
(the “Fund”)
Supplement dated July 31, 2018 to theProspectus of the Fund,
dated May 1, 2018, as supplemented to date
Effective immediately, the Prospectus of the Fund is amended as
follows:
The second-to-last sentence of the second paragraph in the
subsection of the Prospectus entitled “FundOverview — Principal
Investment Strategies of the Fund” is deleted in its entirety and
replaced with thefollowing:
The Fund may invest up to 20% of its net assets in fixed-income
securities that are rated below investment grade(commonly called
“junk bonds”) by the NRSROs, including Moody’s Investors Service,
Inc., S&P GlobalRatings or Fitch Ratings, Inc., or in unrated
securities of equivalent credit quality. Split rated bonds will
beconsidered to have the higher credit rating.
The eighth paragraph in the subsection of the Prospectus
entitled “Details About the Fund — PrincipalInvestment Strategies”
is deleted in its entirety and replaced with the following:
The Fund may invest up to 20% of its net assets in fixed-income
securities that are rated below investment grade(commonly called
“junk bonds”) by the Nationally Recognized Statistical Rating
Organizations (“NRSROs”),including Moody’s, S&P or Fitch, or in
unrated securities of equivalent credit quality. Split rated bonds
will beconsidered to have the higher credit rating.
Shareholders should retain this Supplement for future
reference.
PRO-VAR-TR-0718SUP
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock iShares® Dynamic
Allocation V.I. Fund
(the “Fund”)
Supplement dated June 25, 2018 to the Fund’s Prospectusdated May
1, 2018, as supplemented to date
Effective immediately, the Fund’s Prospectus is amended as
follows:
The subsection of the Prospectus entitled “Details about the
Fund — Information About the ETFs —ETFs” is amended to add the
following underlying exchange-traded funds to the table:
Fund Name Investment Objective and Principal Investment
Strategies
iShares Global Tech ETF The fund seeks to track the investment
results of an index composed ofglobal equities in the technology
sector.
The fund seeks to track the investment results of the S&P
Global 1200Information Technology Sector IndexTM (the “Underlying
Index”), whichmeasures the performance of companies that S&P
Dow Jones Indices LLC(“SPDJI”), a subsidiary of S&P Global,
Inc., deems to be part of theinformation technology sector of the
economy and that SPDJI believes areimportant to global markets. It
is a subset of the S&P Global 1200TM. TheUnderlying Index may
include large-, mid- or small-capitalizationcompanies. As of March
31, 2017, a significant portion of the UnderlyingIndex is
represented by securities of information technology and
technologycompanies. The components of the Underlying Index are
likely to changeover time. As of March 31, 2017, the Underlying
Index was comprised ofstocks of companies in the following
countries: Australia, Brazil, Canada,China, Finland, France,
Germany, Italy, Japan, the Netherlands, SouthKorea, Spain, Sweden,
Taiwan, the United Kingdom and the United States.
iShares U.S. Technology ETF The fund seeks to track the
investment results of an index composed of U.S.equities in the
technology sector.
The fund seeks to track the investment results of the Dow Jones
U.S.Technology Index (the “Underlying Index”), which measures
theperformance of the technology sector of the U.S. equity market.
TheUnderlying Index may include large-, mid- or
small-capitalizationcompanies. As of April 30, 2017, a significant
portion of the UnderlyingIndex is represented by securities of
information technology and technologycompanies. The components of
the Underlying Index are likely to changeover time.
Shareholders should retain this Supplement for future
reference.
PRO-VAR1-0618SUP
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock Managed
Volatility V.I. Fund
(the “Fund”)
Supplement dated May 30, 2018 to theProspectus dated May 1,
2018, as supplemented to date
Effective immediately, the following changes are made to the
Fund’s Prospectus:
The last paragraph of the cover page of the Prospectus of the
Fund is deleted in its entirety and replacedwith the following:
The Securities and Exchange Commission and the Commodity Futures
Trading Commission have not approvedor disapproved these securities
or passed upon the adequacy of this Prospectus. Any representation
to thecontrary is a criminal offense.
Shareholders should retain this Supplement for future
reference.
PRO-VARMV-0518SUP
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock High Yield V.I.
Fund
BlackRock Total Return V.I. FundBlackRock U.S. Government Bond
V.I. Fund
(each, a “Fund” and collectively, the “Funds”)
Supplement dated May 18, 2018to the Prospectuses of each Fund,
as amended or supplemented to date
The Board of Directors (the “Board”) of BlackRock Variable
Series Funds, Inc., a Maryland corporation (the“Company”), has
approved an Agreement and Plan of Reorganization (the “Plan”) with
respect to each Fund,pursuant to which the Fund will reorganize
into a newly created series of a newly organized
Marylandcorporation (the “New Company” and its series, the “New
Funds”). This reorganization with respect to eachFund (each, a
“Reorganization”) is expected to close on or about September 17,
2018. Each Reorganization is notsubject to approval by shareholders
of the applicable Fund.
Each New Fund will have the same investment objective,
strategies and policies, investment adviser, portfoliomanagement
team and service providers as the corresponding Fund. Each Fund
will be the accounting survivor ofits Reorganization, meaning that
the corresponding New Fund will assume the performance and
financial historyof the Fund at the completion of the
Reorganization. In addition, each New Fund will be subject to the
samecontractual arrangements, including the same contractual fees
and expenses, as those of the corresponding Fund.No sales charge or
fee will apply to Fund shareholders in connection with their
receipt of shares of a New Fundin a Reorganization.
Each Reorganization is commonly referred to as a “shell”
reorganization, because: (i) the applicable New Fund,which mirrors
the corresponding Fund, has been created for the purpose of
receiving the assets of the Fund and(ii) the applicable New Fund
will have carried on no business activities prior to the
Reorganization.
Each Reorganization is intended to be tax-free, meaning that the
applicable Fund’s shareholders will becomeshareholders of the
corresponding New Fund without realizing any gain or loss for
federal income tax purposes.
How Will the Reorganization Affect My Investment?
Upon the consummation of a Reorganization, shareholders of the
relevant Fund will become shareholders of thecorresponding New
Fund. If you are a shareholder of one or more of the Funds, the
cash value of yourinvestment will not change. You will receive New
Fund shares with a total dollar value equal to the Fund sharesthat
you own at the time of the Reorganization. Shares of each New Fund
have identical legal characteristics asthose of the corresponding
Fund with respect to voting rights, accessibility, conversion
rights and transferability.
Each New Fund will offer the same purchase and redemption
services as the corresponding Fund. Shares of eachNew Fund may be
purchased and redeemed at the net asset value of the shares as next
determined followingreceipt of a purchase or redemption order,
provided the order is received in proper form. There will not be
anychange to the minimum initial and subsequent investment amounts
as a result of a Reorganization.
Each New Fund will have the same dividend and other
distributions policy as the corresponding Fund.Shareholders who
have elected to have dividends and capital gain distributions
reinvested in Fund shares willcontinue to have dividends and
capital gain distributions reinvested in New Fund shares following
theReorganization. Each New Fund will have the same fiscal year as
the corresponding Fund.
Reasons for the Reorganizations
The Reorganizations are being pursued in connection with a
potential reconfiguration of the boards of directors/trustees of
certain BlackRock-advised funds. This potential reconfiguration is
being considered, among other
-
reasons, in an effort to enhance the focus and specialization of
each board by aligning oversight of funds withsimilar strategies.
Each New Fund will have the same investment objective and strategy,
board of directors,portfolio management team and contractual
arrangements as the corresponding Fund. To effect the
reconfiguration,it is anticipated that, following the completion of
the Reorganizations, the board of directors of the New Companywill
call and hold a special shareholder meeting for the purpose of
voting on the election of certain individuals toserve as directors.
These individuals currently serve as board members of
BlackRock-advised funds.
How Will the Reorganization Work?
Each Reorganization will involve three steps:
• the transfer of all of the assets and liabilities of the
applicable Fund to the corresponding New Fund inexchange for shares
of the New Fund having equal value to the net assets
transferred;
• the pro rata distribution of shares of the New Fund to
shareholders of record of the corresponding Fundas of the closing
date of the Reorganization; and
• the complete liquidation and dissolution of the Fund.
Are There Any Significant Differences in the Management Fee or
Total Annual Fund Operating Expensesof the Funds and the New
Funds?
No. The contractual management fees charged by BlackRock
Advisors, LLC (“BlackRock”), the investmentadviser to the Funds and
the New Funds, are identical. Additionally, the contractual fee
rates to be charged by theother service providers to the New Funds
are commensurate with the fee rates currently charged to the Funds.
Atthe time of each Reorganization, the New Fund’s contractual caps
on total operating expenses and any othercontractual waivers in
place will be identical to those of the corresponding Fund, if
any.
Fees and Expenses of the Reorganization
Each Fund is expected to bear all or a portion of the expenses
related to the applicable Reorganization. Suchexpenses borne by a
Fund are not anticipated to have a material impact on the overall
expenses of the Fund.BlackRock has agreed to bear the portion of
expenses associated with the Reorganization that are not borne
bythe applicable Fund.
Board Consideration of the Reorganizations
The Board considered each Reorganization at a meeting held on
May 8, 2018, and approved a form of the Plan.Based on the
information requested by the Board and provided to it by BlackRock,
the Board, including amajority of the Directors/Trustees who are
not “interested persons” of the Company, unanimously concluded
thatparticipation by each Fund in the applicable Reorganization is
in the best interests of the Fund and itsshareholders and that the
interests of the Fund’s shareholders will not be diluted as a
result of the Reorganization.
Material U.S. Federal Income Tax Consequences
The following discussion summarizes the material U.S. federal
income tax consequences of each Reorganizationthat are applicable
to you as a shareholder of a Fund. The discussion is based on the
Internal Revenue Code of 1986,as amended (the “Code”), applicable
Treasury regulations, judicial authority and administrative rulings
and practice,all as of the date of this Supplement and all of which
are subject to change, including changes with retroactiveeffect.
The discussion below does not address any state, local or foreign
tax consequences of the Reorganization.Your tax treatment may vary
depending upon your particular situation. You are urged to consult
with your own taxadvisors and financial planners as to the
particular tax consequences of the Reorganization to you.
2
-
Each Reorganization is expected to qualify as a “reorganization”
under Section 368(a)(1)(F) of the Code, and theapplicable New Fund
and the corresponding Fund should each be a “party to a
reorganization” underSection 368(b) of the Code. Provided that the
Reorganization so qualifies and the New Fund and Fund are
sotreated, for U.S. federal income tax purposes, generally and
subject to the qualifications set forth below:
• Neither the New Fund nor the Fund will recognize any gain or
loss as a result of the Reorganization.
• Shareholders of the Fund will not recognize any gain or loss
as a result of the receipt of shares of theNew Fund in exchange for
such shareholder’s shares of the Fund pursuant to the
Reorganization.
• A shareholder’s aggregate tax basis in shares of the New Fund
received pursuant to the Reorganizationwill equal such
shareholder’s aggregate tax basis in shares of the corresponding
Fund held immediatelybefore the Reorganization.
• A shareholder’s holding period for shares of the New Fund
received pursuant to the Reorganizationwill include the period
during which the shareholder held shares of the Fund, provided that
suchshareholder held the respective shares of the Fund as a capital
asset.
• For purposes of Section 381 of the Code, the New Fund will be
treated as the same entity as the Fundand the tax attributes of the
Fund enumerated in Section 381(c) of the Code will be taken into
accountby the New Fund as if there had been no reorganization.
You should consult your tax advisors with respect to the effect
of the Reorganization on (i) the Fund or the NewFund with respect
to any asset as to which any unrealized gain or loss is required to
be recognized for federalincome tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting and (ii) any shareholder of the
Fund or the New Fund that is required to recognizeunrealized gains
and losses for federal income tax purposes under a mark-to-market
system of accounting.
Since its formation, each Fund believes it has qualified as a
separate “regulated investment company” (or “RIC”)under the Code.
The New Funds are new entities that will elect RIC status under the
Code following theReorganizations. Each Fund believes that it has
been, and expects to continue to be, relieved of U.S. federalincome
tax liability to the extent that it makes distributions of its
taxable income and gains to its shareholders.Prior to a
Reorganization, a Fund must continue to make timely distributions
of its previously undistributed netinvestment income and realized
net capital gains, including capital gains on any securities
disposed of inconnection with the Reorganization. Shareholders of
the Funds must include any such distributions in theirtaxable
income.
* * *
Shareholders should retain this Supplement for future
reference.
PR-VAR3-REOR-518SUP
3
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock iShares®
Alternative Strategies V.I. Fund
(the “Fund”)
Supplement dated May 18, 2018 tothe Prospectus and the Statement
of Additional Information for the Fund
dated May 1, 2018, as supplemented to date
The information in this Supplement relating to the pending
liquidation of the Fund is substantially similarto the information
in the Supplement that was previously filed on May 10, 2018, except
for the date of theexpected liquidation of the Fund.
As disclosed in the previous Supplement, on May 8, 2018, the
Board of Directors (the “Board”) of BlackRockVariable Series Funds,
Inc. (the “Company”) approved the liquidation of BlackRock iShares®
AlternativeStrategies V.I. Fund, a series of the Company.
The Fund is expected to be liquidated on or about August 31,
2018 (the “Liquidation Date”). On or before theLiquidation Date,
the Fund will cease investing its assets in accordance with its
stated investment objective andpolicies.
On the Liquidation Date, shareholders of the Fund as of the
Liquidation Date will receive, as a liquidatingdistribution, an
amount equal to their proportionate interest in the net assets of
the Fund, after the Fund has paidor provided for all of its
charges, taxes, expenses, and liabilities.
A shareholder may voluntarily redeem his or her shares prior to
the Liquidation Date to the extent that theshareholder wishes to do
so.
Owners of the variable annuity or insurance contracts (each a
“Contract”) offered by the insurance companieswhose separate
accounts are invested in the Fund should consult with their
insurance company for informationregarding:
• the possibility of transferring their investment to other
mutual funds sponsored and advised byBlackRock Advisors, LLC or its
affiliates; and
• the redirection of their assets that will occur on or about
the Liquidation Date.
Contract owners are not expected to incur any tax liability in
connection with the liquidation and dissolution ofthe Fund.
In connection with its liquidation, effective August 8, 2018,
the Fund will be closed to new insurance companyseparate accounts,
including through exchanges into the Fund from other funds of the
Company.
Shareholders should retain this Supplement for future
reference.
PRSAI-VAR-0518SUP2
-
BLACKROCK VARIABLE SERIES FUNDS, INC.BlackRock iShares®
Alternative Strategies V.I. Fund
(the “Fund”)
Supplement dated May 10, 2018to the Prospectus and the Statement
of Additional Information for the Fund,
dated May 1, 2018, as supplemented to date
On May 8, 2018, the Board of Directors (the “Board”) of
BlackRock Variable Series Funds, Inc. (the“Company”) approved the
liquidation of BlackRock iShares® Alternative Strategies V.I. Fund,
a series of theCompany.
The Fund is expected to be liquidated on or about August 15,
2018 (the “Liquidation Date”). On or before theLiquidation Date,
the Fund will cease investing its assets in accordance with its
stated investment objective andpolicies.
On the Liquidation Date, shareholders of the Fund as of the
Liquidation Date will receive, as a liquidatingdistribution, an
amount equal to their proportionate interest in the net assets of
the Fund, after the Fund has paidor provided for all of its
charges, taxes, expenses, and liabilities.
A shareholder may voluntarily redeem his or her shares prior to
the Liquidation Date to the extent that theshareholder wishes to do
so.
Owners of the variable annuity or insurance contracts (each a
“Contract”) offered by the insurance companieswhose separate
accounts are invested in the Fund should consult with their
insurance company for informationregarding:
• the possibility of transferring their investment to other
mutual funds sponsored and advised byBlackRock Advisors, LLC or its
affiliates; and
• the redirection of their assets that will occur on or about
the Liquidation Date.
Contract owners are not expected to incur any tax liability in
connection with the liquidation and dissolution ofthe Fund.
In connection with its liquidation, effective August 8, 2018,
the Fund will be closed to new insurance companyseparate accounts,
including through exchanges into the Fund from other funds of the
Company.
Shareholders should retain this Supplement for future
reference.
PRSAI-VAR-0518SUP
-
MAY 1, 2018
PROSPECTUS
BlackRock Variable Series Funds, Inc.
c BlackRock Advantage Large Cap Core V.I. Fund (Class I, Class
II, Class III)
This Prospectus contains information you should know before
investing, including information about risks. Please read itbefore
you invest and keep it for future reference.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacyof this
Prospectus. Any representation to the contrary is a criminal
offense.
Not FDIC Insured • No Bank Guarantee • May Lose Value
-
Table of Contents
BlackRock Advantage Large Cap Core V.I. Fund
Fund Overview Key facts and details about the Fund listed in
this prospectus, includinginvestment objectives, principal
investment strategies, principal risk factors,fee and expense
information, and historical performance informationInvestment
Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 3Fees and Expenses of the
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 3Principal Investment Strategies of the Fund . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 4Principal Risks
of Investing in the Fund . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 4Performance Information . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6Investment Manager . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 7Portfolio Managers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 7Purchase and Sale of Fund Shares . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7Tax Information . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Payments
to Broker/Dealers and Other Financial Intermediaries . . . . . . .
. . . 7
Details About the Fund How the Fund Invests . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 8Investment Risks . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9Financial Highlights . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 14
Account Information The Insurance Companies . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I-2How to Buy and Sell Shares . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . I-3
Management of the Funds Information about BlackRock and the
Portfolio ManagersBlackRock . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . I-5Portfolio Manager Information . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . I-12Conflicts of
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . I-17Valuation of Fund
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . I-18Dividends and Taxes . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I-19
General Information Shareholder Documents . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I-21Certain Fund Policies . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . I-21Statement of
Additional Information . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . I-21
Glossary Glossary . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I-22
For More Information Funds and Service Providers . . . . . . . .
. . . . . . . . . . . . . . . . . . . Inside Back CoverAdditional
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . Back Cover
-
Fund Overview
Key Facts About BlackRock Advantage Large Cap Core V.I. Fund
Investment Objective
The investment objective of the BlackRock Advantage Large Cap
Core V.I. Fund (the “Fund”) is to seek high totalinvestment
return.
Fees and Expenses of the FundThis table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
The expensesbelow do not include separate account fees and
expenses, and would be higher if these fees and expenses
wereincluded. Please refer to your variable annuity or insurance
contract (the “Contract”) prospectus for information on theseparate
account fees and expenses associated with your Contract.
Shareholder Fees (fees paid directly from your investment)The
Fund is not subject to any shareholder fees.
Annual Fund Operating Expenses(expenses that you pay each year
as apercentage of the value of your investment)
Class IShares
Class IIShares
Class IIIShares
Management Fees1 0.46% 0.46% 0.46%Distribution and/or Service
(12b-1) Fees None 0.15% 0.25%Other Expenses2 0.26% 0.26% 0.27%Total
Annual Fund Operating Expenses3 0.72% 0.87% 0.98%Fee Waivers and/or
Expense Reimbursements1,4 (0.15)% (0.13)% (0.13)%Total Annual Fund
Operating Expenses After Fee Waiversand/or Expense
Reimbursements1,4 0.57% 0.74% 0.85%
1 As described in the “Management of the Funds” section of the
Fund’s prospectus, BlackRock Advisors, LLC (“BlackRock”) has
contractually agreed towaive the management fee with respect to any
portion of the Fund’s assets estimated to be attributable to
investments in other equity andfixed-income mutual funds and
exchange-traded funds managed by BlackRock or its affiliates that
have a contractual management fee, through April 30,2019. The
contractual agreement may be terminated upon 90 days’ notice by a
majority of the non-interested directors of BlackRock Variable
SeriesFunds, Inc. (the “Company”) or by a vote of a majority of the
outstanding voting securities of the Fund.
2 Other expenses have been restated to reflect current fees.3
The Total Annual Fund Operating Expenses do not correlate to the
ratios of expenses to average net assets given in the Fund’s most
recent
annual report which do not include the restatement of Other
Expenses to reflect current fees.4 As described in the “Management
of the Funds” section of the Fund’s prospectus, BlackRock has
contractually agreed to waive and/or reimburse fees
or expenses in order to limit Total Annual Fund Operating
Expenses After Fee Waivers and/or Expense Reimbursements (excluding
Dividend Expense,Interest Expense, Acquired Fund Fees and Expenses
and certain other Fund expenses) to 1.25% (for Class I Shares),
1.40% (for Class II Shares), and1.50% (for Class III Shares) of
average daily net assets through April 30, 2019. BlackRock has also
contractually agreed to reimburse fees in order tolimit certain
operational and recordkeeping fees to 0.05% (for Class I Shares),
0.07% (for Class II Shares), and 0.08% (for Class III Shares) of
averagedaily net assets through April 30, 2019. Each of these
contractual agreements may be terminated upon 90 days’ notice by a
majority of thenon-interested directors of the Company or by a vote
of a majority of the outstanding voting securities of the Fund.
Example:This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other
mutualfunds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all ofyour
shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year andthat the Fund’s
operating expenses remain the same. The Example does not reflect
charges imposed by the Contract. Seethe Contract prospectus for
information on such charges. Although your actual costs may be
higher or lower, based onthese assumptions and the net expenses
shown in the fee table, your costs would be:
1 Year 3 Years 5 Years 10 Years
Class I Shares $58 $215 $386 $ 880
Class II Shares $76 $265 $469 $1,061
Class III Shares $87 $299 $529 $1,190
3
-
Portfolio Turnover:The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over”
itsportfolio). A higher portfolio turnover rate may indicate higher
transaction costs. These costs, which are not reflectedin annual
fund operating expenses or in the Example, affect the Fund’s
performance. During the most recent fiscalyear, the Fund’s
portfolio turnover rate was 149% of the average value of its
portfolio.
Principal Investment Strategies of the Fund
Under normal circumstances, the Fund seeks to invest at least
80% of its net assets, plus the amount of anyborrowings for
investment purposes, in large cap equity securities and derivatives
that have similar economiccharacteristics to such securities. For
purposes of the Fund’s 80% policy, large cap equity securities are
equitysecurities that at the time of purchase have a market
capitalization within the range of companies included in theRussell
1000T Index. The Fund primarily intends to invest in equity
securities or other financial instruments that arecomponents of, or
have characteristics similar to, the securities included in the
Russell 1000T Index. The Russell1000T Index is a
capitalization-weighted index of equity securities from a broad
range of industries chosen for marketsize, liquidity and industry
group representation. The equity securities in which the Fund
invests primarily consist ofcommon stock, but may also include
preferred stock and convertible securities. From time to time, the
Fund mayinvest in shares of companies through “new issues” or
initial public offerings (“IPOs”).
The Fund may use derivatives, including options, futures, swaps
(including, but not limited to, total return swaps, someof which
may be referred to as contracts for difference) and forward
contracts, both to seek to increase the return ofthe Fund and to
hedge (or protect) the value of its assets against adverse
movements in currency exchange rates,interest rates and movements
in the securities markets. In order to manage cash flows into or
out of the Fundeffectively, the Fund may buy and sell financial
futures contracts or options on such contracts. Derivatives are
financialinstruments whose value is derived from another security,
a currency or an index, including but not limited to theRussell
1000T Index. The use of options, futures, swaps and forward
contracts can be effective in protecting orenhancing the value of
the Fund’s assets.
The Fund may seek to provide exposure to the investment returns
of real assets that trade in the commodity marketsthrough
investment in commodity-linked derivative instruments and
investment vehicles such as exchange-traded fundsthat invest
exclusively in commodities and are designed to provide this
exposure without direct investment in physicalcommodities.
The Fund may engage in active and frequent trading of portfolio
securities to achieve its primary investment strategies.
Principal Risks of Investing in the Fund
Risk is inherent in all investing. The value of your investment
in the Fund, as well as the amount of return you receiveon your
investment, may fluctuate significantly from day to day and over
time. You may lose part or all of yourinvestment in the Fund or
your investment may not perform as well as other similar
investments. The following is asummary description of the principal
risks of investing in the Fund.
j Commodities Related Investments Risk — Exposure to the
commodities markets may subject the Fund to greatervolatility than
investments in traditional securities. The value of
commodity-linked derivative investments may beaffected by changes
in overall market movements, commodity index volatility, changes in
interest rates, or factorsaffecting a particular industry or
commodity, such as drought, floods, weather, embargoes, tariffs and
internationaleconomic, political and regulatory developments.
j Convertible Securities Risk — The market value of a
convertible security performs like that of a regular debt
security;that is, if market interest rates rise, the value of a
convertible security usually falls. In addition, convertible
securities aresubject to the risk that the issuer will not be able
to pay interest or dividends when due, and their market value
maychange based on changes in the issuer’s credit rating or the
market’s perception of the issuer’s creditworthiness. Sinceit
derives a portion of its value from the common stock into which it
may be converted, a convertible security is alsosubject to the same
types of market and issuer risks that apply to the underlying
common stock.
j Derivatives Risk — The Fund’s use of derivatives may increase
its costs, reduce the Fund’s returns and/orincrease volatility.
Derivatives involve significant risks, including:
Volatility Risk — Volatility is defined as the characteristic of
a security, an index or a market to fluctuate significantlyin price
within a short time period. A risk of the Fund’s use of derivatives
is that the fluctuations in their values maynot correlate with the
overall securities markets.
4
-
Counterparty Risk — Derivatives are also subject to counterparty
risk, which is the risk that the other party in thetransaction will
not fulfill its contractual obligation.
Market and Liquidity Risk — The possible lack of a liquid
secondary market for derivatives and the resulting inabilityof the
Fund to sell or otherwise close a derivatives position could expose
the Fund to losses and could makederivatives more difficult for the
Fund to value accurately.
Valuation Risk — Valuation may be more difficult in times of
market turmoil since many investors and marketmakers may be
reluctant to purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to imperfect
matching between the derivative and the underlyingsecurity, and
there can be no assurance that the Fund’s hedging transactions will
be effective. The use of hedgingmay result in certain adverse tax
consequences.
Leverage Risk — Certain transactions in derivatives involve
substantial leverage risk and may expose the Fund topotential
losses that exceed the amount originally invested by the Fund.
Tax Risk — Certain aspects of the tax treatment of derivative
instruments, including swap agreements andcommodity-linked
derivative instruments, are currently unclear and may be affected
by changes in legislation,regulations or other legally binding
authority. Such treatment may be less favorable than that given to
a directinvestment in an underlying asset and may adversely affect
the timing, character and amount of income the Fundrealizes from
its investments.
Regulatory Risk — Derivative contracts, including, without
limitation, swaps, currency forwards and non-deliverableforwards,
are subject to regulation under the Dodd-Frank Wall Street Reform
and Consumer Protection Act(“Dodd-Frank Act”) in the United States
and under comparable regimes in Europe, Asia and other
non-U.S.jurisdictions. Under the Dodd-Frank Act, certain
derivatives are subject to margin requirements and swap dealersare
required to collect margin from the Fund with respect to such
derivatives. Specifically, regulations are now ineffect that
require swap dealers to post and collect variation margin
(comprised of specified liquid instruments andsubject to a required
haircut) in connection with trading of over-the-counter (“OTC”)
swaps with the Fund. Shares ofinvestment companies (other than
certain money market funds) may not be posted as collateral under
theseregulations. Requirements for posting of initial margin in
connection with OTC swaps will be phased-in through2020. In
addition, regulations adopted by prudential regulators that will
begin to take effect in 2019 will requirecertain bank-regulated
counterparties and certain of their affiliates to include in
certain financial contracts, includingmany derivatives contracts,
terms that delay or restrict the rights of counterparties, such as
the Fund, to terminatesuch contracts, foreclose upon collateral,
exercise other default rights or restrict transfers of credit
support in theevent that the counterparty and/or its affiliates are
subject to certain types of resolution or insolvency
proceedings.The implementation of these requirements with respect
to derivatives, as well as regulations under the Dodd-FrankAct
regarding clearing, mandatory trading and margining of other
derivatives, may increase the costs and risks tothe Fund of trading
in these instruments and, as a result, may affect returns to
investors in the Fund.
j Equity Securities Risk — Stock markets are volatile. The price
of equity securities fluctuates based on changes in acompany’s
financial condition and overall market and economic conditions.
j High Portfolio Turnover Risk — The Fund may engage in active
and frequent trading of its portfolio securities. Highportfolio
turnover (more than 100%) may result in increased transaction costs
to the Fund, including brokeragecommissions, dealer mark-ups and
other transaction costs on the sale of the securities and on
reinvestment inother securities. The sale of Fund portfolio
securities may result in the realization and/or distribution
toshareholders of higher capital gains or losses as compared to a
fund with less active trading policies. These effectsof higher than
normal portfolio turnover may adversely affect Fund
performance.
j Investment Style Risk — Under certain market conditions,
growth investments have performed better during the laterstages of
economic expansion and value investments have performed better
during periods of economic recovery.Therefore, these investment
styles may over time go in and out of favor. At times when the
investment style used by theFund is out of favor, the Fund may
underperform other equity funds that use different investment
styles.
j Leverage Risk — Some transactions may give rise to a form of
economic leverage. These transactions may include,among others,
derivatives, and may expose the Fund to greater risk and increase
its costs. The use of leverage maycause the Fund to liquidate
portfolio positions when it may not be advantageous to do so to
satisfy its obligations orto meet any required asset segregation
requirements. Increases and decreases in the value of the Fund’s
portfoliowill be magnified when the Fund uses leverage.
5
-
j Market Risk and Selection Risk — Market risk is the risk that
one or more markets in which the Fund invests willgo down in value,
including the possibility that the markets will go down sharply and
unpredictably. Selection risk isthe risk that the securities
selected by Fund management will underperform the markets, the
relevant indices or thesecurities selected by other funds with
similar investment objectives and investment strategies. This means
youmay lose money.
j “New Issues” Risk — “New Issues” are IPOs of equity
securities. Securities issued in IPOs have no trading history,and
information about the companies may be available for very limited
periods. In addition, the prices of securitiessold in IPOs may be
highly volatile or may decline shortly after the initial public
offering.
j Preferred Securities Risk — Preferred securities may pay fixed
or adjustable rates of return. Preferred securitiesare subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’spreferred securities generally
pay dividends only after the company makes required payments to
holders of itsbonds and other debt. For this reason, the value of
preferred securities will usually react more strongly than bondsand
other debt to actual or perceived changes in the company’s
financial condition or prospects. Preferredsecurities of smaller
companies may be more vulnerable to adverse developments than
preferred stock of largercompanies.
Performance Information
The information shows you how the Fund’s performance has varied
year by year and provides some indication of therisks of investing
in the Fund. The Fund’s total returns prior to June 12, 2017 as
reflected in the bar chart and thetable are the returns of the Fund
that followed different investment strategies under the name
“BlackRock Large CapCore V.I. Fund.” The table compares the Fund’s
performance to that of the Russell 1000T Index. As with all
suchinvestments, past performance is not an indication of future
results. The bar chart and table do not reflect separateaccount
fees and expenses. If they did, returns would be less than those
shown. The returns for Class III Shares priorto January 27, 2009,
the recommencement of Class III Shares, are based upon performance
of the Fund’s Class IShares, as adjusted to reflect the
distribution and/or service (12b-1) fees applicable to Class III
Shares. Thisinformation may be considered when assessing the
performance of Class III Shares, but does not represent the
actualperformance of Class III Shares. To the extent that dividends
and distributions have been paid by the Fund, theperformance
information for the Fund in the chart and table assumes
reinvestment of the dividends and distributions.If the Fund’s
investment manager and its affiliates had not waived or reimbursed
certain Fund expenses during theseperiods, the Fund’s returns would
have been lower.
Class I SharesANNUAL TOTAL RETURNS
BlackRock Advantage Large Cap Core V.I. FundAs of 12/31
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2017201620152014201320122011201020092008
-38.75%
22.54%
9.12%2.40%
12.75%
33.56%
12.36% 10.55%
22.33%
0.52%
During the ten-year period shown in the bar chart, the highest
return for a quarter was 14.97% (quarter endedSeptember 30, 2009
and the lowest return for a quarter was –20.12% (quarter ended
December 31, 2008).
As of 12/31/17Average Annual Total Returns 1 Year 5 Years 10
Years
BlackRock Advantage Large Cap Core V.I. Fund: Class I Shares
22.33% 15.33% 6.79%
BlackRock Advantage Large Cap Core V.I. Fund: Class II Shares
22.12% 15.13% 6.62%
BlackRock Advantage Large Cap Core V.I. Fund: Class III Shares
21.97% 15.00% 6.50%
Russell 1000T Index (Reflects no deduction for fees, expenses or
taxes) 21.69% 15.71% 8.59%
6
-
Investment Manager
The Fund’s investment manager is BlackRock Advisors, LLC
(previously defined as “BlackRock”).
Portfolio Managers
NamePortfolio Managerof the Fund Since Title
Raffaele Savi 2017 Managing Director of BlackRock, Inc.
Travis Cooke, CFA 2017 Managing Director of BlackRock, Inc.
Richard Mathieson 2017 Managing Director of BlackRock, Inc.
Purchase and Sale of Fund Shares
Shares of the Fund currently are sold either directly or
indirectly (through other variable insurance funds) to
separateaccounts of insurance companies (the “Insurance Companies”)
and certain accounts administered by the InsuranceCompanies (the
“Accounts”) to fund benefits under the Contracts issued by the
Insurance Companies. Shares of theFund may be purchased or sold
each day the New York Stock Exchange is open.
The Fund does not have any initial or subsequent investment
minimums. However, your Contract may require certaininvestment
minimums. See your Contract prospectus for more information.
Tax Information
Distributions made by the Fund to an Account, and exchanges and
redemptions of Fund shares made by an Account,ordinarily do not
cause the corresponding Contract holder to recognize income or gain
for U.S. federal income taxpurposes. See the Contract prospectus
for information regarding the U.S. federal income tax treatment of
thedistributions to Accounts and the holders of the Contracts.
Payments to Broker/Dealers and Other Financial
Intermediaries
BlackRock and its affiliates may make payments relating to
distribution and sales support activities to the InsuranceCompanies
and other financial intermediaries for the sale of Fund shares and
related services. These payments maycreate a conflict of interest
by influencing the Insurance Company or other financial
intermediary and your individualfinancial professional to recommend
the Fund over another investment. Visit your Insurance Company’s
website, whichmay have more information.
7
-
Details About the FundIncluded in this prospectus are sections
that tell you about buying and selling shares, management
information,shareholder features of the BlackRock Advantage Large
Cap Core V.I. Fund (the “Fund”) and your rights as a
shareholder.
How the Fund Invests
Investment ObjectiveThe investment objective of the Fund is to
seek high total investment return.
This investment objective is a fundamental policy of the Fund
and may not be changed without approval of a majority ofthe Fund’s
outstanding voting securities, as defined in the Investment Company
Act of 1940, as amended (the“Investment Company Act”).
Investment ProcessThe Fund seeks to pursue its investment
objective by investing in large cap securities in a disciplined
manner, by usingproprietary return forecast models that incorporate
quantitative analysis. These forecast models are designed
toidentify aspects of mispricing across stocks which the Fund can
seek to capture by over- and under-weighting particularequity
securities while seeking to control incremental risk. BlackRock
Advisors, LLC (“BlackRock”) then constructs andrebalances the
portfolio by integrating its investment insights with the
model-based optimization process. The Fundhas no stated minimum
holding period for investments and may buy or sell securities
whenever Fund managementsees an appropriate opportunity. The Fund
may engage in active and frequent trading of its investments.
Principal Investment StrategiesUnder normal circumstances, the
Fund seeks to invest at least 80% of its net assets, plus the
amount of any borrowings forinvestment purposes, in large cap
equity securities and derivatives that have similar economic
characteristics to suchsecurities. For purposes of the Fund’s 80%
policy, large cap equity securities are equity securities that at
the time of purchasehave a market capitalization within the range
of companies included in the Russell 1000T Index. The Fund
primarily intends toinvest in equity securities or other financial
instruments that are components of, or have characteristics similar
to, thesecurities included in the Russell 1000T Index. The Russell
1000T Index is a capitalization-weighted index of equity
securitiesfrom a broad range of industries chosen for market size,
liquidity and industry group representation. The equity securities
inwhich the Fund invests primarily consist of common stock, but may
also include preferred stock and convertible securities.From time
to time, the Fund may invest in shares of companies through “new
issues” or initial public offerings (“IPOs”).
The Fund may use derivatives, including options, futures, swaps
(including, but not limited to, total return swaps, someof which
may be referred to as contracts for difference) and forward
contracts, both to seek to increase the return ofthe Fund and to
hedge (or protect) the value of its assets against adverse
movements in currency exchange rates,interest rates and movements
in the securities markets. In order to manage cash flows into or
out of the Fundeffectively, the Fund may buy and sell financial
futures contracts or options on such contracts. Derivatives are
financialinstruments whose value is derived from another security,
a currency or an index, including but not limited to theRussell
1000T Index.
The Fund may seek to provide exposure to the investment returns
of real assets that trade in the commodity marketsthrough
investment in commodity-linked derivative instruments and
investment vehicles such as exchange-traded fundsthat invest
exclusively in commodities and are designed to provide this
exposure without direct investment in physicalcommodities.
The Fund may engage in active and frequent trading of portfolio
securities to achieve its primary investment strategies.
The above 80% policy is a non-fundamental policy of the Fund and
may not be changed without 60 days’ prior notice
toshareholders.
8
-
Other StrategiesIn addition to the principal strategies
discussed above, the Fund may also invest or engage in the
followinginvestments/strategies:
j Borrowing — The Fund may borrow for temporary or emergency
purposes, including to meet redemptions, for thepayment of
dividends, for share repurchases or for the clearance of
transactions, subject to the limits set forthunder the Investment
Company Act, the rules and regulations thereunder and any
applicable exemptive relief.
j Illiquid/Restricted Securities — The Fund may invest up to 15%
of its net assets in illiquid securities that it cannotsell within
seven days at approximately current value. The Fund may also invest
in restricted securities, which aresecurities that cannot be
offered for public resale unless registered under the applicable
securities laws or thathave a contractual restriction that
prohibits or limits their resale, such as Rule 144A securities.
They may includeprivate placement securities that have not been
registered under the applicable securities laws.
Restrictedsecurities may not be listed on an exchange and may have
no active trading market and therefore may beconsidered illiquid.
Rule 144A securities are restricted securities that can be resold
to qualified institutional buyersbut not to the general public and
may be considered to be liquid securities.
j Investment Companies — The Fund has the ability to invest in
other investment companies, such asexchange-traded funds (“ETFs”),
unit investment trusts, and open-end and closed-end funds. The Fund
may invest inaffiliated investment companies, including affiliated
money market funds and affiliated ETFs.
j Money Market Securities — The Fund may invest in money market
securities or commercial paper.
j Real Estate Investment Trusts — The Fund may invest in real
estate investment trusts (“REITs”).
j Securities Lending — The Fund may lend securities with a value
up to 331⁄3% of its total assets to financialinstitutions that
provide cash or securities issued or guaranteed by the U.S.
Government as collateral.
j Temporary Defensive Strategies — As a temporary measure for
defensive purposes, the Fund may invest withoutlimit in cash, cash
equivalents or short-term U.S. Government securities. These
investments may include highquality, short-term money market
instruments such as U.S. Treasury and agency obligations,
commercial paper(short-term, unsecured, negotiable promissory notes
of a domestic or foreign company), short-term debt obligationsof
corporate issuers and certificates of deposit and bankers’
acceptances. These investments may adversely affectthe Fund’s
ability to meet its investment objective.
j When-Issued and Delayed Delivery Securities and Forward
Commitments — The purchase or sale of securities ona when-issued
basis or on a delayed delivery basis or through a forward
commitment involves the purchase or saleof securities by the Fund
at an established price with payment and delivery taking place in
the future. The Fundenters into these transactions to obtain what
is considered an advantageous price to the Fund at the time
ofentering into the transaction.
ABOUT THE PORTFOLIO MANAGEMENT OF THE FUND
The Fund is managed by a team of financial professionals.
Raffaele Savi, Travis Cooke, CFA, and Richard Mathiesonare the
portfolio managers and are jointly and primarily responsible for
the day-to-day management of the Fund.Please see “Management of the
Funds—Portfolio Manager Information” for additional information
about theportfolio management team.
Investment Risks
This section contains a discussion of the general risks of
investing in the Fund. The “Investment Objectives andPolicies”
section in the Statement of Additional Information (“SAI”) also
includes more information about the Fund, itsinvestments and the
related risks. As with any fund, there can be no guarantee that the
Fund will meet its investmentobjective or that the Fund’s
performance will be positive for any period of time. An investment
in the Fund is notinsured or guaranteed by the Federal Deposit
Insurance Corporation or by any bank or governmental agency.
9
-
Principal Risks of Investing in the Fund:
Commodities Related Investments Risk — Exposure to the
commodities markets may subject the Fund to greatervolatility than
investments in traditional securities. The value of
commodity-linked derivative investments may beaffected by changes
in overall market movements, commodity index volatility, changes in
interest rates, or factorsaffecting a particular industry or
commodity, such as drought, floods, weather, embargoes, tariffs and
internationaleconomic, political and regulatory developments.
Convertible Securities Risk — The market value of a convertible
security performs like that of a regular debt security;that is, if
market interest rates rise, the value of a convertible security
usually falls. In addition, convertible securitiesare subject to
the risk that the issuer will not be able to pay interest or
dividends when due, and their market valuemay change based on
changes in the issuer’s credit rating or the market’s perception of
the issuer’s creditworthiness.Since it derives a portion of its
value from the common stock into which it may be converted, a
convertible security isalso subject to the same types of market and
issuer risks that apply to the underlying common stock.
Derivatives Risk — The Fund’s use of derivatives may increase
its costs, reduce the Fund’s returns and/or increasevolatility.
Derivatives involve significant risks, including:
Volatility Risk — The Fund’s use of derivatives may reduce the
Fund’s returns and/or increase volatility. Volatility isdefined as
the characteristic of a security, an index or a market to fluctuate
significantly in price within a short timeperiod. A risk of the
Fund’s use of derivatives is that the fluctuations in their values
may not correlate with theoverall securities markets.
Counterparty Risk — Derivatives are also subject to counterparty
risk, which is the risk that the other party in thetransaction will
not fulfill its contractual obligation.
Market and Liquidity Risk — Some derivatives are more sensitive
to interest rate changes and market pricefluctuations than other
securities. The possible lack of a liquid secondary market for
derivatives and the resultinginability of the Fund to sell or
otherwise close a derivatives position could expose the Fund to
losses and couldmake derivatives more difficult for the Fund to
value accurately. The Fund could also suffer losses related to
itsderivatives positions as a result of unanticipated market
movements, which losses are potentially unlimited.
Finally,BlackRock may not be able to predict correctly the
direction of securities prices, interest rates and other
economicfactors, which could cause the Fund’s derivatives positions
to lose value.
Valuation Risk — Valuation may be more difficult in times of
market turmoil since many investors and marketmakers may be
reluctant to purchase complex instruments or quote prices for them.
Derivatives may also exposethe Fund to greater risk and increase
its costs. Certain transactions in derivatives involve substantial
leverage riskand may expose the Fund to potential losses that
exceed the amount originally invested by the Fund.
Hedging Risk — When a derivative is used as a hedge against a
position that the Fund holds, any loss generated bythe derivative
generally should be substantially offset by gains on the hedged
investment, and vice versa. Whilehedging can reduce or eliminate
losses, it can also reduce or eliminate gains. Hedges are sometimes
subject toimperfect matching between the derivative and the
underlying security, and there can be no assurance that theFund’s
hedging transactions will be effective. The use of hedging may
result in certain adverse tax consequencesnoted below.
Tax Risk — The federal income tax treatment of a derivative may
not be as favorable as a direct investment in anunderlying asset
and may adversely affect the timing, character and amount of income
the Fund realizes from itsinvestments. As a result, a larger
portion of the Fund’s distributions may be treated as ordinary
income rather thancapital gains. In addition, certain derivatives
are subject to mark-to-market or straddle provisions of the
InternalRevenue Code of 1986, as amended (the “Internal Revenue
Code”). If such provisions are applicable, there couldbe an
increase (or decrease) in the amount of taxable dividends paid by
the Fund. In addition, the tax treatment ofcertain derivatives,
such as swaps, is unsettled and may be subject to future
legislation, regulation oradministrative pronouncements issued by
the Internal Revenue Service (“IRS”).
Regulatory Risk — Derivative contracts, including, without
limitation, swaps, currency forwards and non-deliverableforwards,
are subject to regulation under the Dodd-Frank Wall Street Reform
and Consumer Protection Act(“Dodd-Frank Act”) in the United States
and under comparable regimes in Europe, Asia and other
non-U.S.jurisdictions. Under the Dodd-Frank Act, certain
derivatives are subject to margin requirements and swap dealersare
required to collect margin from the Fund with respect to such
derivatives. Specifically, regulations are now ineffect that
require swap dealers to post and collect variation margin
(comprised of specified liquid instruments andsubject to a required
haircut) in connection with trading of over-the-counter (“OTC”)
swaps with the Fund. Shares ofinvestment companies (other than
certain money market funds) may not be posted as collateral under
theseregulations. Requirements for posting of initial margin in
connection with OTC swaps will be phased-in through
10
-
2020. In addition, regulations adopted by prudential regulators
that will begin to take effect in 2019 will requirecertain
bank-regulated counterparties and certain of their affiliates to
include in certain financial contracts, includingmany derivatives
contracts, terms that delay or restrict the rights of
counterparties, such as the Fund, to terminatesuch contracts,
foreclose upon collateral, exercise other default rights or
restrict transfers of credit support in theevent that the
counterparty and/or its affiliates are subject to certain types of
resolution or insolvency proceedings.The implementation of these
requirements with respect to derivatives, as well as regulations
under the Dodd-FrankAct regarding clearing, mandatory trading and
margining of other derivatives, may increase the costs and risks
tothe Fund of trading in these instruments and, as a result, may
affect returns to investors in the Fund.
Future regulatory developments may impact the Fund’s ability to
invest or remain invested in certain derivatives.Legislation or
regulation may also change the way in which the Fund itself is
regulated. BlackRock cannot predictthe effects of any new
governmental regulation that may be implemented on the ability of
the Fund to use swaps orany other financial derivative product, and
there can be no assurance that any new governmental regulation will
notadversely affect the Fund’s ability to achieve its investment
objective.
Risks Specific to Certain Derivatives Used by the Fund
Swaps — Swap agreements, including total return swaps that may
be referred to as contracts for difference, aretwo-party contracts
entered into for periods ranging from a few weeks to more than one
year. In a standard “swap”transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned
or realized onparticular predetermined investments or instruments,
which can be adjusted for an interest factor. Swapagreements
involve the risk that the party with whom the Fund has entered into
the swap will default on itsobligation to pay the Fund and the risk
that the Fund will not be able to meet its obligations to pay the
other party tothe agreement. Swap agreements may also involve the
risk that there is an imperfect correlation between the returnon
the Fund’s obligation to its counterparty and the return on
referenced asset. In addition, swap agreements aresubject to market
and liquidity risk, leverage risk and hedging risk.
Forward Foreign Currency Exchange Contracts — Forward foreign
currency exchange transactions are OTC contractsto purchase or sell
a specified amount of a specified currency or multinational
currency unit at a price and futuredate set at the time of the
contract. Forward foreign currency exchange contracts do not
eliminate fluctuations inthe value of non-U.S. securities but
rather allow the Fund to establish a fixed rate of exchange for a
future point intime. This strategy can have the effect of reducing
returns and minimizing opportunities for gain.
Futures — Futures are standardized, exchange-traded contracts
that obligate a purchaser to take delivery, and aseller to make
delivery, of a specific amount of an asset at a specified future
date at a specified price. The primaryrisks associated with the use
of futures contracts and options are: (a) the imperfect correlation
between the changein market value of the instruments held by the
Fund and the price of the futures contract or option; (b) the
possiblelack of a liquid secondary market for a futures contract
and the resulting inability to close a futures contract
whendesired; (c) losses caused by unanticipated market movements,
which are potentially unlimited; (d) the investmentadviser’s
inability to predict correctly the direction of securities prices,
interest rates, currency exchange rates andother economic factors;
and (e) the possibility that the counterparty will default in the
performance of itsobligations.
Options — An option is an agreement that, for a premium payment
or fee, gives the option holder (the purchaser)the right but not
the obligation to buy (a “call option”) or sell (a “put option”)
the underlying asset (or settle for cashin an amount based on an
underlying asset, rate, or index) at a specified price (the
“exercise price”) during a periodof time or on a specified date.
Investments in options are considered speculative. When the Fund
purchases anoption, it may lose the total premium paid for it if
the price of the underlying security or other assets
decreased,remained the same or failed to increase to a level at or
beyond the exercise price (in the case of a call option)
orincreased, remained the same or failed to decrease to a level at
or below the exercise price (in the case of a putoption). If a put
or call option purchased by the Fund were permitted to expire
without being sold or exercised, itspremium would represent a loss
to the Fund. To the extent that the Fund writes or sells an option,
if the decline orincrease in the underlying asset is significantly
below or above the exercise price of the written option, the
Fundcould experience a substantial loss.
Equity Securities Risk — Common and preferred stocks represent
equity ownership in a company. Stock markets arevolatile. The price
of equity securities will fluctuate and can decline and reduce the
value of a portfolio investing inequities. The value of equity
securities purchased by the Fund could decline if the financial
condition of the companiesthe Fund invests in declines or if
overall market and economic conditions deteriorate. The value of
equity securitiesmay also decline due to factors that affect a
particular industry or industries, such as labor shortages or an
increasein production costs and competitive conditions within an
industry. In addition, the value may decline due to general
11
-
market conditions that are not specifically related to a company
or industry, such as real or perceived adverseeconomic conditions,
changes in the general outlook for corporate earnings, changes in
interest or currency rates orgenerally adverse investor
sentiment.
High Portfolio Turnover Risk — The Fund may engage in active and
frequent trading of its portfolio securities. Highportfolio
turnover (more than 100%) may result in increased transaction costs
to the Fund, including brokeragecommissions, dealer mark-ups and
other transaction costs on the sale of the securities and on
reinvestment in othersecurities. The sale of Fund portfolio
securities may result in the realization and/or distribution to
shareholders ofhigher capital gains or losses as compared to a fund
with less active trading policies. These effects of higher
thannormal portfolio turnover may adversely affect Fund
performance.
Investment Style Risk — Under certain market conditions, growth
investments have performed better during the laterstages of
economic expansion and value investments have performed better
during periods of economic recovery.Therefore, these investment
styles may over time go in and out of favor. At times when the
investment style used bythe Fund is out of favor, the Fund may
underperform other equity funds that use different investment
styles.
Leverage Risk — Some transactions may give rise to a form of
economic leverage. These transactions may include,among others,
derivatives, and may expose the Fund to greater risk and increase
its costs. As an open-end investmentcompany registered with the
Securities Exchange Commission (the “SEC”), the Fund is subject to
the federal securitieslaws, including the Investment Company Act of
1940, the rules thereunder, and various SEC and SEC staff
interpretivepositions. In accordance with these laws, rules and
positions, the Fund must “set aside” liquid assets (often
referredto as “asset segregation”), or engage in other SEC- or
staff-approved measures, to “cover” open positions withrespect to
certain kinds of instruments. The use of leverage may cause the
Fund to liquidate portfolio positions whenit may not be
advantageous to do so to satisfy its obligations or to meet any
required asset segregation requirements.Increases and decreases in
the value of the Fund’s portfolio will be magnified when the Fund
uses leverage.
Market Risk and Selection Risk — Market risk is the risk that
one or more markets in which the Fund invests will godown in value,
including the possibility that the markets will go down sharply and
unpredictably. Selection risk is therisk that the securities
selected by Fund management will underperform the markets, the
relevant indices or thesecurities selected by other funds with
similar investment objectives and investment strategies. This means
you maylose money.
“New Issues” Risk — “New Issues” are IPOs of equity securities.
Investments in companies that have recently gonepublic have the
potential to produce substantial gains for the Fund. However, there
is no assurance that the Fund willhave access to profitable IPOs
and therefore investors should not rely on these past gains as an
indication of futureperformance. The investment performance of the
Fund during periods when it is unable to invest significantly or at
allin IPOs may be lower than during periods when the Fund is able
to do so. In addition, as the Fund increases in size,the impact of
IPOs on the Fund’s performance will generally decrease. Securities
issued in IPOs are subject to many ofthe same risks as investing in
companies with smaller market capitalizations. Securities issued in
IPOs have notrading history, and information about the companies
may be available for very limited periods. In addition, the
pricesof securities sold in IPOs may be highly volatile or may
decline shortly after the initial public offering. When an
initialpublic offering is brought to the market, availability may
be limited and the Fund may not be able to buy any shares atthe
offering price, or, if it is able to buy shares, it may not be able
to buy as many shares at the offering price as itwould like.
Preferred Securities Risk — Preferred securities may pay fixed
or adjustable rates of return. Preferred securities aresubject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferredsecurities generally
pay dividends only after the company makes required payments to
holders of its bonds and otherdebt. For this reason, the value of
preferred securities will usually react more strongly than bonds
and other debt toactual or perceived changes in the company’s
financial condition or prospects. Preferred securities of
smallercompanies may be more vulnerable to adverse developments
than preferred stock of larger companies.
The Fund may also be subject to certain other risks assoc