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BlackRock Advantage Global Fund, Inc. BlackRock Advantage SMID Cap Fund, Inc. BlackRock Allocation Target Shares BlackRock Balanced Fund, Inc. BlackRock Bond Fund, Inc. BlackRock California Municipal Series Trust BlackRock Capital Appreciation Fund, Inc. BlackRock Emerging Markets Fund, Inc. BlackRock Equity Dividend Fund BlackRock Financial Institutions Series Trust BlackRock Funds SM BlackRock Funds II BlackRock Funds III BlackRock Funds IV BlackRock Funds V BlackRock Funds VI BlackRock Global Allocation Fund, Inc. BlackRock Index Funds, Inc.
BlackRock International Select Equity Fund BlackRock Large Cap Focus Growth Fund, Inc. BlackRock Large Cap Focus Value Fund, Inc. BlackRock Large Cap Series Funds, Inc. BlackRock Liquidity Funds BlackRock Mid-Cap Value Series, Inc. BlackRock Multi-State Municipal Series Trust BlackRock Municipal Bond Fund, Inc. BlackRock Municipal Series Trust BlackRock Natural Resources Trust BlackRock Series Fund, Inc. BlackRock Series Fund II, Inc. BlackRock Series, Inc. BlackRock Strategic Global Bond Fund, Inc. BlackRock Unconstrained Equity Fund BlackRock Variable Series Funds, Inc. BlackRock Variable Series Funds II, Inc.
Supplement dated October 16, 2026 to the Statement of Additional Information (“SAI”) of each of the funds listed in Appendix A (each, a “Fund”), as amended from time to time.
Each Fund’s SAI is amended as follows:
The list in the section entitled “Purchase of Shares - Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments” in Part II, or in the section entitled “Miscellaneous Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments,” “Investment Advisory Arrangements - Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments” or “Investment Adviser and Other Service Providers - Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments,” as applicable, of each Fund’s current SAI, is deleted in its entirety and replaced with the following:
&Partners AccuTech Systems Corporation ADP Broker-Dealer, Inc. Advisor Credit Exchange, LLC Advisor Group, Inc. AE Wealth Management, LLC Alight Solutions LLC Allianz Life Financial Services, LLC Allianz Life Insurance Company of New York Allianz Life Insurance Company of North America Altruist Financial LLC American Enterprise Investment Services, Inc. American General Life Insurance Company American United Life Insurance Company Annuity Investors Life Insurance Company Anthem Securities LLC Argent Institutional Trust Company Ascensus Broker Dealer Services, Inc. Ascensus, Inc. Atomic Brokerage LLC Avantax Investment Services, LLC Bancroft Capital LLC
Bank of America, N.A. Bank of New York Mellon Barclays Capital Inc. Benefit Plans Administrative Services, Inc. Benefit Trust Company Beta Capital Securities LLC bfinance US Ltd. BlackRock Advisors, LLC BMO Capital Markets Corp. BNP Paribas BNP Paribas Investment Partners UK Limited BNY Mellon, N.A. BofA Securities, Inc. BOKF, N.A. Brighthouse Life Insurance Company Brighthouse Life Insurance Company of NY Broadridge Business Process Outsourcing, LLC Brown Brothers Harriman & Co. Cabrera Capital Markets, LLC Capital One, N.A. Cetera Advisor Networks LLC Cetera Advisors LLC
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Cetera Financial Group Cetera Financial Specialists LLC Cetera Investment Services LLC CF Secured, LLC Charles Schwab & Co., Inc. Charles Schwab Trust Bank Chicago Mercantile Exchange Inc. CIM Investment Management, Inc. Citco Securities, LLC CitiBank, National Association Citigroup Global Markets, Inc. Citizens Bank Citizens Business Bank CME Shareholder Servicing LLC CMFG Life Insurance Company Comerica Bank Commonwealth Financial Network Computershare Trust Company Conduent HR Services, LLC Delaware Life Insurance Company Delaware Trust Company Deutsche Bank AG Deutsche Bank Trust Company Americas Digital Retirement Solutions, Inc. Dunham & Associates Investment Counsel, Inc. Dynasty Financial Partners LLC Edward D. Jones & Co., L.P. Empire Fidelity Investments Life Insurance Company Empower Annuity Insurance Company of America Empower Financial Services, Inc. Empower Life & Annuity Insurance Company of New York Empower Plan Services, LLC Envestnet Asset Management, Inc. Equitable Advisors, LLC Equitable Life Insurance Company E*trade Savings Bank Federal Deposit Insurance Corporation Fidelity Brokerage Services LLC Fidelity Investments Institutional Operations Company, Inc. Fidelity Investments Life Insurance Company Fifth Third Securities, Inc. First Allied Securities, Inc. First Command Financial Planning, Inc. First Hawaiian Bank First Republic Bank First Security Benefit Life Insurance and Annuity Company of New York First Symetra National Life Insurance Company of New York First-Citizens Bank & Trust Company FIS Brokerage & Securities Services LLC
FNEX Capital, LLC Forethought Life Insurance Company FSC Securities Corporation Genworth Life and Annuity Insurance Company Genworth Life Insurance Company of New York Global Atlantic Distributors, LLC Goldman Sachs & Co. Great Pacific Securities, LLC Guardian Insurance & Annuity Co., Inc. Hancock Whitney Bank Hartford Funds Management Company Hartford Securities Distribution Company, Inc. Hazeltree Fund Services, Inc. Hightower Securities, Inc. Hilltop Securities Inc. HSBC Bank USA, N.A. Huntington Securities, Inc. Institutional Cash Distributors, LLC Integrity Life Insurance Company Interactive Brokers, LLC Investment Trust of California J.P. Morgan Institutional Investments Inc. J.P. Morgan Securities LLC Jefferies LLC Jefferson National Life Insurance Company Jefferson National Life Insurance Company of New York John Hancock Life Insurance Company (U.S.A.) John Hancock Life Insurance Company of New York John Hancock Trust Company JPMorgan Chase Bank, N.A. Kestra Investment Services, LLC Lincoln Financial Advisors Corporation Lincoln Financial Securities Corporation Lincoln Life & Annuity Company of New York Lincoln National Life Insurance Company Lincoln Retirement Services LLC Lombard International Life Assurance Company LPL Financial LLC M&T Securities Inc. Manufacturers and Traders Trust Company Massachusetts Mutual Life Insurance Company Members Life Insurance Company Merrill Lynch, Pierce, Fenner & Smith Incorporated Metavante Corporation Metropolitan Life Insurance Company Mid Atlantic Clearing & Settlement Corporation Midland Life Insurance Company Minnesota Life Insurance Company Mischler Financial Group Mizuho Securities USA Inc. MML Distributors, LLC MML Investors Services, LLC Morgan Stanley & Co. LLC
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Morgan Stanley Distribution, Inc. Morgan Stanley Smith Barney LLC MUFG Union Bank, National Association Nassau Life Insurance Company National Financial Services LLC National Integrity Life Insurance Company National Life Insurance Company Nationwide Financial Services, Inc. Nationwide Fund Distributors LLC Nationwide Retirement Solutions NCB Federal Savings Bank New England Pension Plan Systems, LLC New York Life Insurance and Annuity Corporation Newport Retirement Services, Inc. Northbrook Bank & Trust Company Northern Trust Company Northwestern Mutual Investment Services, LLC Northwestern Mutual Life Insurance Company NYLife Distributors LLC Oppenheimer & Co., Inc. Orion Advisor Services, LLC Osaic Wealth, Inc. Pacific Life & Annuity Company Pacific Life Insurance Company Pacific Select Distributors, LLC Park Avenue Securities LLC Penserra Securities LLC Pershing LLC PFPC Inc. Piper Jaffray & Co. PNC Bank, National Association PNC Capital Markets LLC PNC Investments LLC Principal Bank Principal Life Insurance Company Protective Life and Annuity Insurance Company Protective Life Insurance Company Pruco Life Insurance Company Pruco Life Insurance Company of New Jersey Prudential Annuities Distributors, Inc. Prudential Insurance Company of America Raymond James & Associates, Inc. Raymond James Financial Services, Inc. RBC Capital Markets, LLC Regions Bank Reliance Trust Company Reliastar Life Insurance Company Reliastar Life Insurance Company of New York RiverSource Distributors, Inc. RiverSource Life Insurance Co. of New York RiverSource Life Insurance Company SagePoint Financial, Inc. Sammons Retirement Solutions, Inc. Sanctuary Wealth Group, LLC
Santander Bank, N.A. Saturna Trust Company Securities America, Inc. Securities Finance Trust Company Security Benefit Life Insurance Company Security Financial Resources, Inc. Security Life of Denver Insurance Company SEI Private Trust Company SG Americas Securities, LLC Silicon Valley Bank Standard Insurance Company Standard Retirement Services, Inc. State Farm Life and Accident Assurance Company State Farm Life Insurance Company State Farm VP Management Corp. State Street Bank and Trust Company State Street Global Markets, LLC Stern Brothers & Co. Stifel, Nicolaus & Company, Incorporated Summit Brokerage Services, Inc. SVB Asset Management Symetra Life Insurance Company Syntal Capital Partners, LLC T. Rowe Price Retirement Plan Services, Inc. Talcott Resolution Life and Annuity Insurance Company Talcott Resolution Life Insurance Company TD Ameritrade Clearing, Inc. TD Ameritrade, Inc. TD Prime Services (US) LLC Teachers Insurance and Annuity Association of America Tigress Financial Partners, LLC Transamerica Financial Life Insurance Company Transamerica Life Insurance Company Treasury Brokerage Triad Advisors, LLC Truist Bank U.S. Bancorp Investments, Inc. U.S. Bank, National Association UBATCO & Co. UBS Financial Services, Inc. UBS Securities LLC Ultimus Fund Solutions, LLC UMB Bank, National Association United States Life Insurance Company in the City of New York VALIC Retirement Services Company Vanguard Group, Inc. Vanguard Marketing Corporation Voya Financial Advisors, Inc. Voya Financial Partners, LLC Voya Institutional Plan Services, LLC Voya Insurance and Annuity Company
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Voya Investments Distributor, LLC Voya Retirement Insurance and Annuity Company Waddell & Reed, Inc. Wells Fargo Advisors, LLC Wells Fargo Advisors Financial Network, LLC Wells Fargo Bank, N.A.
Wells Fargo Clearing Services, LLC Wells Fargo Investments, LLC Wells Fargo Securities, LLC Wilmington Trust, National Association Woodbury Financial Services, Inc. ZB, National Association
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Appendix A
BlackRock Advantage Global Fund, Inc.
BlackRock Advantage SMID Cap Fund, Inc.
BlackRock Allocation Target Shares BATS: Securitized Total Return Series BATS: Corporate Credit Total Return Series BATS: High Income Municipal Series BATS: High Income Taxable Series BATS: Mortgage Total Return Series BATS: Interest Rate Hedge Series BATS: Short Duration Taxable Total Return Series BATS: Short Term Municipal Income Series
BlackRock Balanced Fund, Inc.
BlackRock Bond Fund, Inc. BlackRock Total Return Fund
BlackRock California Municipal Series Trust BlackRock California Municipal Opportunities Fund
BlackRock Capital Appreciation Fund, Inc.
BlackRock Emerging Markets Fund, Inc.
BlackRock Equity Dividend Fund
BlackRock Financial Institutions Series Trust BlackRock Summit Cash Reserves Fund
BlackRock Funds SM BlackRock Advantage Emerging Markets Fund BlackRock Advantage International Fund BlackRock Advantage Large Cap Growth Fund BlackRock Advantage Small Cap Core Fund BlackRock Advantage Small Cap Growth Fund BlackRock China A Opportunities Fund BlackRock Commodity Strategies Fund BlackRock Daily Reinvestment Stablecoin Reserve Vehicle BlackRock Defensive Advantage Emerging Markets Fund BlackRock Emerging Markets ex-China Fund BlackRock Energy Opportunities Fund BlackRock Exchange Portfolio BlackRock Global Equity Market Neutral Fund BlackRock Health Sciences Opportunities Portfolio BlackRock High Equity Income Fund
BlackRock Mid-Cap Growth Equity Portfolio BlackRock Real Estate Securities Fund BlackRock Short Obligations Fund BlackRock Sustainable Aware Advantage Emerging Markets Equity Fund BlackRock Sustainable Aware Advantage Large Cap Core Fund BlackRock Tactical Opportunities Fund BlackRock Technology Opportunities Fund BlackRock Wealth Liquid Environmentally Aware Fund Circle Reserve Fund iShares Developed Real Estate Index Fund iShares Enhanced Roll Yield Index Fund iShares FTSE NAREIT All Equity REIT Index Fund iShares Municipal Bond Index Fund iShares Russell Mid-Cap Index Fund iShares Russell Small/Mid-Cap Index Fund iShares Short-Term TIPS Bond Index Fund iShares Total U.S. Stock Market Index Fund iShares U.S. Intermediate Credit Bond Index Fund iShares U.S. Intermediate Government Bond Index Fund iShares U.S. Long Credit Bond Index Fund iShares U.S. Long Government Bond Index Fund iShares U.S. Securitized Bond Index Fund
BlackRock Funds II BlackRock 20/80 Target Allocation Fund BlackRock 40/60 Target Allocation Fund BlackRock 60/40 Target Allocation Fund BlackRock 80/20 Target Allocation Fund BlackRock Dynamic High Income Portfolio BlackRock Global Dividend Portfolio BlackRock Managed Income Fund BlackRock Multi-Asset Income Portfolio BlackRock Retirement Income 2030 Fund
BlackRock Funds III BlackRock Cash Funds: Institutional BlackRock Cash Funds: Treasury BlackRock Diversified Equity Alpha Fund BlackRock Diversified Fixed Income Fund BlackRock LifePath ® Dynamic Retirement Fund BlackRock LifePath ® Dynamic 2030 Fund BlackRock LifePath ® Dynamic 2035 Fund BlackRock LifePath ® Dynamic 2040 Fund BlackRock LifePath ® Dynamic 2045 Fund
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BlackRock LifePath ® Dynamic 2050 Fund BlackRock LifePath ® Dynamic 2055 Fund BlackRock LifePath ® Dynamic 2060 Fund BlackRock LifePath ® Dynamic 2065 Fund BlackRock LifePath ® Dynamic 2070 Fund BlackRock LifePath ® Index Retirement Fund BlackRock LifePath ® Index 2030 Fund BlackRock LifePath ® Index 2035 Fund BlackRock LifePath ® Index 2040 Fund BlackRock LifePath ® Index 2045 Fund BlackRock LifePath ® Index 2050 Fund BlackRock LifePath ® Index 2055 Fund BlackRock LifePath ® Index 2060 Fund BlackRock LifePath ® Index 2065 Fund BlackRock LifePath ® Index 2070 Fund iShares MSCI Total International Index Fund iShares Russell 1000 Large-Cap Index Fund iShares S&P 500 Index Fund iShares U.S. Aggregate Bond Index Fund
BlackRock Funds IV BlackRock Credit Relative Value Fund BlackRock Systematic Multi-Strategy Fund
BlackRock Funds V BlackRock Core Bond Portfolio BlackRock Floating Rate Income Portfolio BlackRock High Yield Portfolio BlackRock Income Fund BlackRock Inflation Protected Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Strategic Income Opportunities Portfolio
BlackRock Funds VI BlackRock Advantage CoreAlpha Bond Fund
BlackRock Global Allocation Fund, Inc.
BlackRock Index Funds, Inc. iShares MSCI EAFE International Index Fund iShares Russell 2000 Small-Cap Index Fund
BlackRock International Select Equity Fund
BlackRock Large Cap Focus Growth Fund, Inc.
BlackRock Large Cap Focus Value Fund, Inc.
BlackRock Large Cap Series Funds, Inc. BlackRock Advantage Large Cap Core Fund BlackRock Advantage Large Cap Value Fund BlackRock Event Driven Equity Fund
BlackRock Liquidity Funds FedFund MuniCash TempCash BlackRock Select Treasury Based Liquidity Fund T-Fund Treasury Trust Fund
BlackRock Mid-Cap Value Series, Inc. BlackRock Mid-Cap Value Fund
BlackRock Multi-State Municipal Series Trust BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Opportunities Fund BlackRock Pennsylvania Municipal Bond Fund
BlackRock Municipal Bond Fund, Inc. BlackRock National Municipal Fund BlackRock Short Duration Muni Fund
BlackRock Municipal Series Trust BlackRock Strategic Municipal Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Series Fund, Inc. BlackRock Advantage Large Cap Core Portfolio BlackRock Balanced Portfolio BlackRock Capital Appreciation Portfolio BlackRock Global Allocation Portfolio BlackRock Government Money Market Portfolio
BlackRock Series Fund II, Inc. BlackRock High Yield Portfolio
BlackRock Series, Inc. BlackRock International Fund
BlackRock Strategic Global Bond Fund, Inc.
BlackRock Unconstrained Equity Fund
BlackRock Variable Series Funds, Inc. BlackRock 60/40 Target Allocation ETF V.I. Fund BlackRock Advantage Large Cap Core V.I. Fund BlackRock Advantage Large Cap Value V.I. Fund BlackRock Advantage SMID Cap V.I. Fund
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BlackRock Basic Value V.I. Fund BlackRock Capital Appreciation V.I. Fund BlackRock Equity Dividend V.I. Fund BlackRock Global Allocation V.I. Fund BlackRock Government Money Market V.I. Fund BlackRock International Index V.I. Fund BlackRock International V.I. Fund
BlackRock Large Cap Focus Growth V.I. Fund BlackRock Managed Volatility V.I. Fund BlackRock S&P 500 Index V.I. Fund BlackRock Small Cap Index V.I. Fund
BlackRock Variable Series Funds II, Inc. BlackRock High Yield V.I. Fund BlackRock Total Return V.I. Fund
Shareholders should retain this Supplement for future reference.
SAI-GLOBAL-1026SUP
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BlackRock Advantage Global Fund, Inc. BlackRock Advantage SMID Cap Fund, Inc. BlackRock Allocation Target Shares BlackRock Balanced Fund, Inc. BlackRock Bond Fund, Inc. BlackRock California Municipal Series Trust BlackRock Capital Appreciation Fund, Inc. BlackRock Emerging Markets Fund, Inc. BlackRock Equity Dividend Fund BlackRock Financial Institutions Series Trust BlackRock Funds SM BlackRock Funds II BlackRock Funds III BlackRock Funds IV BlackRock Funds V BlackRock Funds VI BlackRock Global Allocation Fund, Inc. BlackRock Index Funds, Inc.
BlackRock International Select Equity Fund BlackRock Large Cap Focus Growth Fund, Inc. BlackRock Large Cap Focus Value Fund, Inc. BlackRock Large Cap Series Funds, Inc. BlackRock Liquidity Funds BlackRock Mid-Cap Value Series, Inc. BlackRock Multi-State Municipal Series Trust BlackRock Municipal Bond Fund, Inc. BlackRock Municipal Series Trust BlackRock Natural Resources Trust BlackRock Series Fund, Inc. BlackRock Series Fund II, Inc. BlackRock Series, Inc. BlackRock Strategic Global Bond Fund, Inc. BlackRock Unconstrained Equity Fund BlackRock Variable Series Funds, Inc. BlackRock Variable Series Funds II, Inc.
Supplement dated September 11, 2026 to the Statement of Additional Information (“SAI”) of each of the funds listed in Appendix A (each, a “Fund”), as amended from time to time.
Each Fund’s SAI is amended as follows:
The list in the section entitled “Purchase of Shares - Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments” in Part II, or in the section entitled “Miscellaneous Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments,” “Investment Advisory Arrangements - Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments” or “Investment Adviser and Other Service Providers - Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments,” as applicable, of each Fund’s current SAI, is deleted in its entirety and replaced with the following:
&Partners AccuTech Systems Corporation ADP Broker-Dealer, Inc. Advisor Credit Exchange, LLC Advisor Group, Inc. AE Wealth Management, LLC Alight Solutions LLC Allianz Life Financial Services, LLC Allianz Life Insurance Company of New York Allianz Life Insurance Company of North America Altruist Financial LLC American Enterprise Investment Services, Inc. American General Life Insurance Company American United Life Insurance Company Annuity Investors Life Insurance Company Anthem Securities LLC Argent Institutional Trust Company Ascensus Broker Dealer Services, Inc. Ascensus, Inc. Atomic Brokerage LLC Avantax Investment Services, LLC
Bancroft Capital LLC Bank of America, N.A. Bank of New York Mellon Barclays Capital Inc. Benefit Plans Administrative Services, Inc. Benefit Trust Company Beta Capital Securities LLC bfinance US Ltd. BlackRock Advisors, LLC BMO Capital Markets Corp. BNP Paribas BNP Paribas Investment Partners UK Limited BNY Mellon, N.A. BofA Securities, Inc. BOKF, N.A. Brighthouse Life Insurance Company Brighthouse Life Insurance Company of NY Broadridge Business Process Outsourcing, LLC Brown Brothers Harriman & Co. Cabrera Capital Markets, LLC Capital One, N.A.
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Cetera Advisor Networks LLC Cetera Advisors LLC Cetera Financial Group Cetera Financial Specialists LLC Cetera Investment Services LLC CF Secured, LLC Charles Schwab & Co., Inc. Charles Schwab Trust Bank Chicago Mercantile Exchange Inc. CIM Investment Management, Inc. Citco Securities, LLC CitiBank, National Association Citigroup Global Markets, Inc. Citizens Bank Citizens Business Bank CME Shareholder Servicing LLC CMFG Life Insurance Company Comerica Bank Commonwealth Financial Network Computershare Trust Company Conduent HR Services, LLC Delaware Life Insurance Company Delaware Trust Company Deutsche Bank AG Deutsche Bank Trust Company Americas Digital Retirement Solutions, Inc. Dunham & Associates Investment Counsel, Inc. Dynasty Financial Partners LLC Edward D. Jones & Co., L.P. Empire Fidelity Investments Life Insurance Company Empower Annuity Insurance Company of America Empower Financial Services, Inc. Empower Life & Annuity Insurance Company of New York Empower Plan Services, LLC Envestnet Asset Management, Inc. Equitable Advisors, LLC Equitable Life Insurance Company E*trade Savings Bank Federal Deposit Insurance Corporation Fidelity Brokerage Services LLC Fidelity Investments Institutional Operations Company, Inc. Fidelity Investments Life Insurance Company Fifth Third Securities, Inc. First Allied Securities, Inc. First Command Financial Planning, Inc. First Hawaiian Bank First Republic Bank First Security Benefit Life Insurance and Annuity Company of New York
First Symetra National Life Insurance Company of New York First-Citizens Bank & Trust Company FIS Brokerage & Securities Services LLC FNEX Capital, LLC Forethought Life Insurance Company FSC Securities Corporation Genworth Life and Annuity Insurance Company Genworth Life Insurance Company of New York Global Atlantic Distributors, LLC Goldman Sachs & Co. Great Pacific Securities, LLC Guardian Insurance & Annuity Co., Inc. Hancock Whitney Bank Hartford Funds Management Company Hartford Securities Distribution Company, Inc. Hazeltree Fund Services, Inc. Hightower Securities, Inc. Hilltop Securities Inc. HSBC Bank USA, N.A. Huntington Securities, Inc. Institutional Cash Distributors, LLC Integrity Life Insurance Company Interactive Brokers, LLC Investment Trust of California J.P. Morgan Institutional Investments Inc. J.P. Morgan Securities LLC Jefferies LLC Jefferson National Life Insurance Company Jefferson National Life Insurance Company of New York John Hancock Life Insurance Company (U.S.A.) John Hancock Life Insurance Company of New York John Hancock Trust Company JPMorgan Chase Bank, N.A. Kestra Investment Services, LLC Lincoln Financial Advisors Corporation Lincoln Financial Securities Corporation Lincoln Life & Annuity Company of New York Lincoln National Life Insurance Company Lincoln Retirement Services LLC Lombard International Life Assurance Company LPL Financial LLC M&T Securities Inc. Manufacturers and Traders Trust Company Massachusetts Mutual Life Insurance Company Members Life Insurance Company Merrill Lynch, Pierce, Fenner & Smith Incorporated Metavante Corporation Metropolitan Life Insurance Company Mid Atlantic Clearing & Settlement Corporation Midland Life Insurance Company
2
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Minnesota Life Insurance Company Mischler Financial Group Mizuho Securities USA Inc. MML Distributors, LLC MML Investors Services, LLC Morgan Stanley & Co. LLC Morgan Stanley Distribution, Inc. Morgan Stanley Smith Barney LLC MUFG Union Bank, National Association Nassau Life Insurance Company National Financial Services LLC National Integrity Life Insurance Company National Life Insurance Company Nationwide Financial Services, Inc. Nationwide Fund Distributors LLC Nationwide Retirement Solutions NCB Federal Savings Bank New England Pension Plan Systems, LLC New York Life Insurance and Annuity Corporation Newport Retirement Services, Inc. Northbrook Bank & Trust Company Northern Trust Company Northwestern Mutual Investment Services, LLC Northwestern Mutual Life Insurance Company NYLife Distributors LLC Oppenheimer & Co., Inc. Orion Advisor Services, LLC Osaic Wealth, Inc. Pacific Life & Annuity Company Pacific Life Insurance Company Pacific Select Distributors, LLC Park Avenue Securities LLC Penserra Securities LLC Pershing LLC PFPC Inc. Piper Jaffray & Co. PNC Bank, National Association PNC Capital Markets LLC PNC Investments LLC Principal Bank Principal Life Insurance Company Protective Life and Annuity Insurance Company Protective Life Insurance Company Pruco Life Insurance Company Pruco Life Insurance Company of New Jersey Prudential Annuities Distributors, Inc. Prudential Insurance Company of America Raymond James & Associates, Inc. Raymond James Financial Services, Inc. RBC Capital Markets, LLC Regions Bank Reliance Trust Company
Reliastar Life Insurance Company Reliastar Life Insurance Company of New York RiverSource Distributors, Inc. RiverSource Life Insurance Co. of New York RiverSource Life Insurance Company SagePoint Financial, Inc. Sammons Retirement Solutions, Inc. Sanctuary Wealth Group, LLC Santander Bank, N.A. Saturna Trust Company Securities America, Inc. Securities Finance Trust Company Security Benefit Life Insurance Company Security Financial Resources, Inc. Security Life of Denver Insurance Company SEI Private Trust Company SG Americas Securities, LLC Silicon Valley Bank Standard Insurance Company State Farm Life and Accident Assurance Company State Farm Life Insurance Company State Farm VP Management Corp. State Street Bank and Trust Company State Street Global Markets, LLC Stern Brothers & Co. Stifel, Nicolaus & Company, Incorporated Summit Brokerage Services, Inc. SVB Asset Management Symetra Life Insurance Company Syntal Capital Partners, LLC T. Rowe Price Retirement Plan Services, Inc. Talcott Resolution Life and Annuity Insurance Company Talcott Resolution Life Insurance Company TD Ameritrade Clearing, Inc. TD Ameritrade, Inc. TD Prime Services (US) LLC Teachers Insurance and Annuity Association of America Tigress Financial Partners, LLC Transamerica Financial Life Insurance Company Transamerica Life Insurance Company Treasury Brokerage Triad Advisors, LLC Truist Bank U.S. Bancorp Investments, Inc. U.S. Bank, National Association UBATCO & Co. UBS Financial Services, Inc. UBS Securities LLC Ultimus Fund Solutions, LLC UMB Bank, National Association
3
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United States Life Insurance Company in the City of New York VALIC Retirement Services Company Vanguard Group, Inc. Vanguard Marketing Corporation Voya Financial Advisors, Inc. Voya Financial Partners, LLC Voya Institutional Plan Services, LLC Voya Insurance and Annuity Company Voya Investments Distributor, LLC Voya Retirement Insurance and Annuity Company
Waddell & Reed, Inc. Wells Fargo Advisors, LLC Wells Fargo Advisors Financial Network, LLC Wells Fargo Bank, N.A. Wells Fargo Clearing Services, LLC Wells Fargo Investments, LLC Wells Fargo Securities, LLC Wilmington Trust, National Association Woodbury Financial Services, Inc. ZB, National Association
4
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Appendix A
BlackRock Advantage Global Fund, Inc.
BlackRock Advantage SMID Cap Fund, Inc.
BlackRock Allocation Target Shares BATS: Securitized Total Return Series BATS: Corporate Credit Total Return Series BATS: High Income Municipal Series BATS: High Income Taxable Series BATS: Mortgage Total Return Series BATS: Interest Rate Hedge Series BATS: Short Duration Taxable Total Return Series BATS: Short Term Municipal Income Series
BlackRock Balanced Fund, Inc.
BlackRock Bond Fund, Inc. BlackRock Total Return Fund
BlackRock California Municipal Series Trust BlackRock California Municipal Opportunities Fund
BlackRock Capital Appreciation Fund, Inc.
BlackRock Emerging Markets Fund, Inc.
BlackRock Equity Dividend Fund
BlackRock Financial Institutions Series Trust BlackRock Summit Cash Reserves Fund
BlackRock Funds SM BlackRock Advantage Emerging Markets Fund BlackRock Advantage International Fund BlackRock Advantage Large Cap Growth Fund BlackRock Advantage Small Cap Core Fund BlackRock Advantage Small Cap Growth Fund BlackRock China A Opportunities Fund BlackRock Commodity Strategies Fund BlackRock Daily Reinvestment Stablecoin Reserve Vehicle BlackRock Defensive Advantage Emerging Markets Fund BlackRock Emerging Markets ex-China Fund BlackRock Energy Opportunities Fund BlackRock Exchange Portfolio BlackRock Global Equity Market Neutral Fund BlackRock Health Sciences Opportunities Portfolio
BlackRock High Equity Income Fund BlackRock Mid-Cap Growth Equity Portfolio BlackRock Real Estate Securities Fund BlackRock Short Obligations Fund BlackRock Sustainable Aware Advantage Emerging Markets Equity Fund BlackRock Sustainable Aware Advantage Large Cap Core Fund BlackRock Tactical Opportunities Fund BlackRock Technology Opportunities Fund BlackRock Wealth Liquid Environmentally Aware Fund Circle Reserve Fund iShares Developed Real Estate Index Fund iShares Enhanced Roll Yield Index Fund iShares FTSE NAREIT All Equity REIT Index Fund iShares Municipal Bond Index Fund iShares Russell Mid-Cap Index Fund iShares Russell Small/Mid-Cap Index Fund iShares Short-Term TIPS Bond Index Fund iShares Total U.S. Stock Market Index Fund iShares U.S. Intermediate Credit Bond Index Fund iShares U.S. Intermediate Government Bond Index Fund iShares U.S. Long Credit Bond Index Fund iShares U.S. Long Government Bond Index Fund iShares U.S. Securitized Bond Index Fund
BlackRock Funds II BlackRock 20/80 Target Allocation Fund BlackRock 40/60 Target Allocation Fund BlackRock 60/40 Target Allocation Fund BlackRock 80/20 Target Allocation Fund BlackRock Dynamic High Income Portfolio BlackRock Global Dividend Portfolio BlackRock Managed Income Fund BlackRock Multi-Asset Income Portfolio BlackRock Retirement Income 2030 Fund
BlackRock Funds III BlackRock Cash Funds: Institutional BlackRock Cash Funds: Treasury BlackRock Diversified Equity Alpha Fund BlackRock Diversified Fixed Income Fund BlackRock LifePath ® Dynamic Retirement Fund BlackRock LifePath ® Dynamic 2030 Fund BlackRock LifePath ® Dynamic 2035 Fund BlackRock LifePath ® Dynamic 2040 Fund BlackRock LifePath ® Dynamic 2045 Fund
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BlackRock LifePath ® Dynamic 2050 Fund BlackRock LifePath ® Dynamic 2055 Fund BlackRock LifePath ® Dynamic 2060 Fund BlackRock LifePath ® Dynamic 2065 Fund BlackRock LifePath ® Dynamic 2070 Fund BlackRock LifePath ® ESG Index Retirement Fund BlackRock LifePath ® ESG Index 2030 Fund BlackRock LifePath ® ESG Index 2035 Fund BlackRock LifePath ® ESG Index 2040 Fund BlackRock LifePath ® ESG Index 2045 Fund BlackRock LifePath ® ESG Index 2050 Fund BlackRock LifePath ® ESG Index 2055 Fund BlackRock LifePath ® ESG Index 2060 Fund BlackRock LifePath ® ESG Index 2065 Fund BlackRock LifePath ® ESG Index 2070 Fund BlackRock LifePath ® Index Retirement Fund BlackRock LifePath ® Index 2030 Fund BlackRock LifePath ® Index 2035 Fund BlackRock LifePath ® Index 2040 Fund BlackRock LifePath ® Index 2045 Fund BlackRock LifePath ® Index 2050 Fund BlackRock LifePath ® Index 2055 Fund BlackRock LifePath ® Index 2060 Fund BlackRock LifePath ® Index 2065 Fund BlackRock LifePath ® Index 2070 Fund iShares MSCI Total International Index Fund iShares Russell 1000 Large-Cap Index Fund iShares S&P 500 Index Fund iShares U.S. Aggregate Bond Index Fund
BlackRock Funds IV BlackRock Credit Relative Value Fund BlackRock Systematic Multi-Strategy Fund
BlackRock Funds V BlackRock Core Bond Portfolio BlackRock Floating Rate Income Portfolio BlackRock High Yield Portfolio BlackRock Income Fund BlackRock Inflation Protected Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Strategic Income Opportunities Portfolio
BlackRock Funds VI BlackRock Advantage CoreAlpha Bond Fund
BlackRock Global Allocation Fund, Inc.
BlackRock Index Funds, Inc. iShares MSCI EAFE International Index Fund iShares Russell 2000 Small-Cap Index Fund
BlackRock International Select Equity Fund
BlackRock Large Cap Focus Growth Fund, Inc.
BlackRock Large Cap Focus Value Fund, Inc.
BlackRock Large Cap Series Funds, Inc. BlackRock Advantage Large Cap Core Fund BlackRock Advantage Large Cap Value Fund BlackRock Event Driven Equity Fund
BlackRock Liquidity Funds FedFund MuniCash TempCash BlackRock Select Treasury Based Liquidity Fund T-Fund Treasury Trust Fund
BlackRock Mid-Cap Value Series, Inc. BlackRock Mid-Cap Value Fund
BlackRock Multi-State Municipal Series Trust BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Opportunities Fund BlackRock Pennsylvania Municipal Bond Fund
BlackRock Municipal Bond Fund, Inc. BlackRock National Municipal Fund BlackRock Short Duration Muni Fund
BlackRock Municipal Series Trust BlackRock Strategic Municipal Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Series Fund, Inc. BlackRock Advantage Large Cap Core Portfolio BlackRock Balanced Portfolio BlackRock Capital Appreciation Portfolio BlackRock Global Allocation Portfolio BlackRock Government Money Market Portfolio
BlackRock Series Fund II, Inc. BlackRock High Yield Portfolio
BlackRock Series, Inc. BlackRock International Fund
BlackRock Strategic Global Bond Fund, Inc.
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BlackRock Unconstrained Equity Fund
BlackRock Variable Series Funds, Inc. BlackRock 60/40 Target Allocation ETF V.I. Fund BlackRock Advantage Large Cap Core V.I. Fund BlackRock Advantage Large Cap Value V.I. Fund BlackRock Advantage SMID Cap V.I. Fund BlackRock Basic Value V.I. Fund BlackRock Capital Appreciation V.I. Fund BlackRock Equity Dividend V.I. Fund BlackRock Global Allocation V.I. Fund
BlackRock Government Money Market V.I. Fund BlackRock International Index V.I. Fund BlackRock International V.I. Fund BlackRock Large Cap Focus Growth V.I. Fund BlackRock Managed Volatility V.I. Fund BlackRock S&P 500 Index V.I. Fund BlackRock Small Cap Index V.I. Fund
BlackRock Variable Series Funds II, Inc. BlackRock High Yield V.I. Fund BlackRock Total Return V.I. Fund
Shareholders should retain this Supplement for future reference.
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STATEMENT OF ADDITIONAL INFORMATION
BlackRock Series Fund, Inc.
100 Bellevue Parkway, Wilmington, DE 19809 • Phone No. (800) 537-4942
BlackRock Series Fund, Inc. (the “Fund”) is an open-end management investment company that has a wide range of investment objectives among its five separate Portfolios. This Statement of Additional Information relates to: BlackRock Advantage Large Cap Core Portfolio (“Advantage Large Cap Core Portfolio”), BlackRock Balanced Portfolio (“Balanced Portfolio”, formerly known as BlackRock Sustainable Balanced Portfolio), BlackRock Capital Appreciation Portfolio (“Capital Appreciation Portfolio”), BlackRock Global Allocation Portfolio (“Global Allocation Portfolio”) and BlackRock Government Money Market Portfolio (“Government Money Market Portfolio”) (referred to herein as the “Portfolios” or, individually, a “Portfolio”). Each Portfolio is in effect a separate fund issuing its own shares. This Statement of Additional Information is not a prospectus and should be read in conjunction with the Prospectuses of the Portfolios dated May 1, 2026, as they may be amended or supplemented from time to time, which have been filed with the Securities and Exchange Commission (the “Commission” or the “SEC”) and can be obtained, without charge, by calling (800) 537-4942 or by writing to the Fund at the above address. Part I of this Statement of Additional Information and the portions of Part II of this Statement of Additional Information that relate to the Portfolios have been incorporated by reference into the Portfolios’ Prospectuses. The portions of Part II of this Statement of Additional Information that do not relate to the Portfolios do not form a part of the Portfolios’ Statement of Additional Information, have not been incorporated by reference into the Portfolios’ Prospectuses and should not be relied upon by investors in the Portfolios. The audited financial statements of the Portfolios are incorporated into this Statement of Additional Information by reference to the Portfolios’ Annual Financial Statements and Additional Information for the fiscal year ended December 31, 2025, as filed with the SEC on Form N-CSR (the “2025 Annual Financial Statements”). You may request a copy of the 2025 Annual Financial Statements at no charge by calling (800) 537-4942 between 8:00 a.m. and 6:00 p.m. Eastern time on any business day.
References to the Investment Company Act of 1940, as amended (the “Investment Company Act” or the “1940 Act”), or other applicable law, will include any rules promulgated thereunder and any guidance, interpretations or modifications by the Commission, Commission staff or other authority with appropriate jurisdiction, including court interpretations, and exemptive, no-action or other relief or permission from the Commission, Commission staff or other authority.
BlackRock Advisors, LLC (“BlackRock”) — Manager
BlackRock Investments, LLC (“BRIL”) — Distributor
The date of this Statement of Additional Information is May 1, 2026.
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TABLE OF CONTENTS
Page PART I Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9 Information on Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12 Management, Advisory and Other Service Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-22 Information on Distribution and Other Service Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-31 Computation of Offering Price Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-32 Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-32 Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-36 Special Tax Rules Applicable to Variable Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-37 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-39 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-42
PART II (All Portfolios Except the Government Money Market Portfolio and Global Allocation
fli) (
Portfolio) Investment Risks and Considerations ................................................ II-1 Management and Other Service Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-101 Selective Disclosure of Portfolio Holdings ............................................ II-104 Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-122 Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-142 Shareholder Services ............................................................. II-146 Pricing of Shares ................................................................ II-151 Portfolio Transactions and Brokerage ............................................... II-154 Dividends and Taxes ............................................................. II-159 Performance Data ............................................................... II-169 Proxy Voting Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-171 General Information ............................................................. II-172 Appendix A — Description of Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 Appendix B — Proxy Voting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
PART II (Government Money Market Portfolio) Investment Risks and Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1 Management and Other Service Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-15 Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-29 Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-49 Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-53 Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-55 Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-56 Dividends and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-57 Proxy Voting Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-61 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-61 Appendix A — Description of Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 Appendix B — Proxy Voting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
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Page
PART II (Global Allocation Portfolio)
Investment Risks and Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1 Management and Other Service Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-103 Selective Disclosure of Portfolio Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-106
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-124 Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-144 Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-148
Pricing of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-153 Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-156 Dividends and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-161
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-171
Proxy Voting Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-173 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-174
Appendix A — Description of Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix B — Proxy Voting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
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P ART I: I NFORMATION A BOUT THE P ORTFOLIOS
Part I of this Statement of Additional Information (“SAI”) sets forth information about each Portfolio. It includes information about the Fund’s Board of Directors (the “Board” or the “Board of Directors”), the management services provided to and the management fees paid by each Portfolio and information about other fees applicable to and services provided to each Portfolio. This Part I of this SAI should be read in conjunction with each Portfolio’s Prospectus and those portions of Part II of this SAI that pertain to the Portfolios.
Shares of each Portfolio are sold to separate accounts (“Separate Accounts”) of insurance companies (“Insurance Companies”) to fund certain variable life insurance and/or variable annuity contracts (together, “Contracts”) issued by such companies. Certain Insurance Companies may be affiliates of the Manager. The rights of the Insurance Companies as shareholders should be distinguished from the rights of a Contract owner, which are set forth in the Contract. A Contract owner has no interest in the shares of each Portfolio, but only in the Contract. A Contract is described in the prospectus for that Contract. That prospectus describes the relationship between increases or decreases in the net asset value of shares of each Portfolio, and any distributions on such shares, and the benefits provided under a Contract. The prospectus for the Contracts also describes various fees payable to the Insurance Companies and charges to the Separate Accounts made by the Insurance Companies with respect to the Contracts. Since shares of the Portfolios will be sold only to the Insurance Companies for the Separate Accounts, the terms “shareholder” and “shareholders” in this SAI refer to the Insurance Companies.
I. Investment Objectives and Policies
The investment objective of each Portfolio is included in its Prospectus.
The Portfolios that are subject to Rule 35d-1 under the Investment Company Act will not change their investment policies required by that rule without giving shareholders 60 days’ prior written notice.
Set forth below is a listing of some of the types of investments and investment strategies that a Portfolio may use, and the risks and considerations associated with those investments and investment strategies. Please see Part II of this SAI for further information on these investments and investment strategies. Information contained in Part II about the risks and considerati ons associated with investments and/or investment strategies applies only to the extent a Portfolio makes each type of investment or uses each investment strategy. Also set forth below is the listing of the proxy vo ting policy and related guidelines applicable to each Fund. Please see “Proxy Voting Policies and Procedures” in Part II of this SAI for further information about these policies. A copy of each policy is included in Appendix B. Information that does not apply to a Fund does not form a part of that Fund’s SAI and should not be relied on by investors in that Fund.
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Only information that is clearly identified as applic able to a Portfolio is considered to form a part of that Portfolio’s SAI.
BlackRock Advantage Large Cap Core Portfolio
BlackRock Balanced Portfolio
BlackRock Capital Appreciation Portfolio
BlackRock Global Allocation Portfolio Asset-Backed Securities XX Asset-Based Securities XXXX Precious Metal-Related Securities XXXX Borrowing and Leverage XXXX Cash Management XXXX Collateralized Debt Obligations XX Collateralized Bond Obligations X X Collateralized Loan Obligations X X Commercial Paper XXXX Commodity-Linked Derivative Instruments and Hybrid Instruments XX X Qualifying Hybrid Instruments X X Hybrid Instruments Without Principal Protection X X Limitations on Leverage X X Counterparty Risk X X X Convertible Securities XXXX Corporate Loans XX Direct Lending Credit Linked Securities XX X Debt Securities XXXX Floating and Variable Rate Securities X X Inflation-Indexed Bonds X X Investment Grade Debt Obligations XXXX High Yield Investments (“Junk Bonds”) X X Mezzanine Investments X X Pay-in-kind Bonds X X Supranational Entities X X Depositary Receipts (ADRs, EDRs and GDRs) XXXX Derivatives XXXX Hedging XXXX Speculation XXXX Risk Factors in Derivatives XXXX Correlation Risk XXXX Counterparty Risk XXXX Credit Risk XXXX Currency Risk XXXX Illiquidity Risk XXXX Index Risk XXXX Legal Risk XXXX Leverage Risk XXXX Market Risk XXXX Operational Risk XXXX
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BlackRock Advantage Large Cap Core Portfolio
BlackRock Balanced Portfolio
BlackRock Capital Appreciation Portfolio
BlackRock Global Allocation Portfolio Valuation Risk XXXX Volatility Risk XXXX Futures XXXX Swap Agreements XXXX Credit Default Swaps and Similar Instruments X X X Interest Rate Swaps, Floors and Caps X X Total Return Swaps X X X Options XXXX Options on Securities and Securities Indices XXXX Call Options XXXX Put Options XXXX Options on Government National Mortgage Association (“GNMA”) Certificates X X Options on Swaps (“Swaptions”) X X FLEX Options X Foreign Exchange Transactions XXXX Spot Transactions and FX Forwards XXXX Currency Futures XXXX Currency Options XXXX Currency Swaps XXXX Digital Asset Exposure X Distressed Securities XX X Environmental, Social and Governance (“ESG”) Integration XXXX Equity Securities XXXX Real Estate-Related Securities XXXX Securities of Smaller or Emerging Growth Companies XXXX Tracking Stocks X X Exchange-Traded Notes (“ETNs”) XX Foreign Investments XXXX Foreign Investment Risks XXXX Foreign Market Risk XXXX Foreign Economy Risk XXXX Currency Risk and Exchange Risk XXXX Governmental Supervision and Regulation/Accounting Standards XXXX Certain Risks of Holding Fund Assets Outside the United States XXXX Publicly Available Information XXXX Settlement Risk XXXX Sovereign Debt XXXX Withholding Tax Reclaims Risk XXXX U.S. Economic Trading Partners Risk XXXX Funding Agreements
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BlackRock Advantage Large Cap Core Portfolio
BlackRock Balanced Portfolio
BlackRock Capital Appreciation Portfolio
BlackRock Global Allocation Portfolio Guarantees XX Illiquid Investments XXXX Index Funds Cash Flows; Expenses Tracking Error Risk S&P 500 Index Russell Indexes MSCI Indexes FTSE Indexes Bloomberg Indexes ICE BofA Indexes Indexed and Inverse Securities XXXX Inflation Risk XXXX Initial Public Offering (“IPO”) Risk XXXX Investment in Emerging Markets XXXX Brady Bonds X X China Investments Risk X X X Investment in Other Investment Companies XXXX Exchange-Traded Funds XXXX Issuer Insolvency Risk XX X Lease Obligations Life Settlement Investments Liquidity Risk Management XXXX Market Risk/Recent Market Events XXXX Master Limited Partnerships XX X Merger Transaction Risk XX Money Market Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks XXXX Money Market Securities XXXX Mortgage-Related Securities XXX Mortgage-Backed Securities X X Collateralized Mortgage Obligations (“CMOs”) X X Adjustable Rate Mortgage Securities X X CMO Residuals X X Stripped Mortgage-Backed Securities X X Tiered Index Bonds X X TBA Commitments X X X Mortgage Dollar Rolls X X Net Interest Margin (NIM) Securities X Municipal Investments XX Risk Factors and Special Considerations Relating to Municipal Bonds X X
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BlackRock Advantage Large Cap Core Portfolio
BlackRock Balanced Portfolio
BlackRock Capital Appreciation Portfolio
BlackRock Global Allocation Portfolio Description of Municipal Bonds X X General Obligation Bonds X X Revenue Bonds X X Private Activity Bonds (“PABs”) X X Moral Obligation Bonds X X Municipal Notes X X Municipal Commercial Paper X X Municipal Lease Obligations X X Tender Option Bonds X X Yields XX Variable Rate Demand Obligations (“VRDOs”) X X Transactions in Financial Futures Contracts on Municipal Indexes X X Call Rights X X Municipal Interest Rate Swap Transactions X X Insured Municipal Bonds X X Build America Bonds X X Tax-Exempt Municipal Investments X Operational and Technology Risk XXXX Participation Notes XX Portfolio Turnover Rates XXXX Preferred Stock XXXX Tax-Exempt Preferred Shares X X X Trust Preferred Securities X X X Proxy Voting Policies XXXX Open End Active and Fixed Income Index Fund Proxy Voting Policy XXXX BlackRock Active Investment Stewardship Climate and Decarbonization Stewardship Guidelines Index Equity Fund Proxy Voting Policy BlackRock Investment Stewardship Climate and Decarbonization Stewardship Guidelines Real Estate Investment Trusts (“REITs”) XXXX Reference Rate Replacement Risk XXXX Repurchase Agreements and Purchase and Sale Contracts XXXX Restricted Securities XXXX Reverse Repurchase Agreements XXXX Rights Offerings and Warrants to Purchase XXXX Rule 144A Securities XXXX Securities Lending XXXX Short Sales See note 1 below X See note 1 below X Special Purpose Acquisition Companies XXXX
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BlackRock Advantage Large Cap Core Portfolio
BlackRock Balanced Portfolio
BlackRock Capital Appreciation Portfolio
BlackRock Global Allocation Portfolio Standby Commitment Agreements XXXX Stripped Securities XX Structured Notes XX Taxability Risk XX Temporary Defensive Measures XXXX U.S. Government Obligations XXXX U.S. Treasury Obligations XXXX U.S. Treasury Rolls X Utility Industries XXXX When-Issued Securities, Delayed Delivery Securities and Forward Commitments XXXX Yields and Ratings XX Zero Coupon Securities XX
1 The Portfolio may only make short sales “against the box.”
Government Money Market Portfolio Bank Money Instruments Commercial Paper and Other Short Term Obligations Environmental, Social and Governance (“ESG”) Integration Foreign Bank Money Instruments Foreign Short Term Debt Instruments Forward Commitments X Illiquid Investments X Investment in Other Investment Companies X Municipal Investments Municipal Securities Municipal Securities — Derivative Products Municipal Notes Municipal Commercial Paper Municipal Lease Obligations Municipal Securities — Short-Term Maturity Standards Municipal Securities — Quality Standards Municipal Securities — Other Factors Variable Rate Demand Obligations (“VRDOs”) and Participating VRDOs Operational and Technology Risk X Proxy Voting Policies X Open End Active and Fixed Income Index Fund Proxy Voting Policy X BlackRock Active Investment Stewardship Climate and Decarbonization Stewardship Guidelines Index Equity Fund Proxy Voting Policy BlackRock Investment Stewardship Climate and Decarbonization Stewardship Guidelines
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Government Money Market Portfolio Purchase of Securities with Fixed Price “Puts” Recent Market Events X Repurchase Agreements and Purchase and Sale Contracts X Reverse Repurchase Agreements X Rule 2a-7 Requirements X Securities Lending X Structured Notes Taxable Money Market Securities X U.S. Government Obligations X Variable and Floating Rate Instruments X When-Issued Securities, Delayed Delivery Securities and Forward Commitments X
Insurance Law Restrictions. In order for shares of the Portfolios to remain eligible investments for the Separate Accounts, it may be necessary, from time to tim e, for a Portfolio to limit its investments in certain types of securities in accordance with the insurance laws or regulations of the various states in which the Contracts are sold. New York insurance law requires that investments of each Portfolio be made with the degree of care of an “ordinarily prudent person.” BlackRock Advisors, LLC (“BlackRock” or the “Manager”) believes that compliance with this standard will not have any negative impact on the performance of any of the Portfolios.
Other Considerations. The Manager will use its best efforts to assure that each Portfolio complies with certain investment limitations of the Internal Revenue Service (“IRS”) to assure favorable income tax treatment for the Contracts. It is not expected that such investment limitations will materially affect the ability of any Portfolio to achieve its investment objective.
Suitability. The economic benefit of an investment in any Portfolio depends upon many factors beyond the control of the Portfolio, the Fund, the Manager and its affiliates. Each Portfolio should be considered a vehicle for diversification and not as a balanced investment program. The suitability for any particular investor of a purchase of shares in a Portfolio will depend upon, among other things, such investor’s investment objectives and such investor’s ability to accept the risks associated with investing in securities, including the risk of loss of principal.
Regulation Regarding Derivatives. The Commodity Futures Trading Commission (“CFTC”) subjects advisers to registered investment companies to regulation by the CFTC if a fund that is advised by the investment adviser either (i) invests, directly or indirectly, more than a prescribed level of its liquidation value in CFTC regulated futures, options and swaps (“CFTC Derivatives”), or (ii) markets itself as providing investment exposure to such instruments. The CFTC also subjects advisers to registered investment companies to regulation by the CFTC if the registered investment company invests in one or more commodity pools. To the extent a Portfolio uses CFTC Derivatives, it intends to do so below such prescribed levels and will not market itself as a “commodity pool” or a vehicle for trading such instruments.
BlackRock has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act (“CEA”) pursuant to Rule 4.5 under the CEA with respect to the Capital Appreciation Portfolio, Advantage Large Cap Core Portfolio and Government Money Market Portfolio. BlackRock is not, therefore, subject to registration or regulation as a “commodity pool operator” under the CEA in respect of such Portfolios.
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The Balanced Portfolio and Global Allocation Portfolio may also have investments in “underlying funds” (and such underlying funds themselves may invest in und erlying funds) not advised by BlackRock (which for purposes of the no-action letter referenced below may include certain securitized vehicles, mortgage real estate investment trusts and/or investment companies that may invest in CFTC Derivatives), and therefore may be viewed by the CFTC as commodity pools. BlackRock has no transparency into the holdings of these underlying funds because they are not advised by BlackRock. To address this issue of lack of transparency, the CFTC staff issued a no-action letter on November 29, 2012 permitting the adviser of a fund that invests in such underlying funds and that would otherwise have filed a claim of exclusion pursuant to Rule 4.5 to delay registration as a “commodity pool operator” until six months from the date on which the CFTC issues additional guidance on the treatment of CFTC Derivatives held by underlying funds. BlackRock, the adviser of the Balanced Portfolio and Global Allocation Portfo lio, has filed a claim with the CFTC for such Portfolios to rely on this no-action relief. Accordingly, BlackRock is not subject to registration or regulation as a “commodity pool operator” under the CEA in respect of such Portfolios.
Global Allocation Portfolio’s primary vehicle for gaining exposure to the commodities markets is expected to be through investments in BlackRock Cayman Global Allocation Portfolio I, Ltd., a wholly owned subsidiary of Global Allocation Portfolio formed in the Cayman Islands (the “Global Allocation Subsidiary” or the “Subsidiary”), which invests primarily in commodity-related instruments. The Subsidiary may also hold cash and invest in other instruments, including fixed-income securities, either as investments or to serve as margin or collateral for the Subsidiary’s derivative positions.
Investments in the Subsidiary. Global Allocation Portfolio may invest up to 25% of its total assets in the shares of its wholly-owned and controlled Global Allocation Subsidiary. Investments in the Subsidiary are expected to provide Global Allocation Portfolio with exposure to the commodity markets within the limitations of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and IRS revenue rulings, as discussed below. The Subsidiary is advised by the Manager. The Subsidiary (unlike Global Allocation Portfolio) m ay invest without limitation in commodity-related instruments. However, the Global Allocation Subsidiary is otherwise subject to the same fundamental, non-fundamental and certain other investment restricti ons as Global Allocation Portfolio, including the timing and method of the valuation of the Subsidiary’s portfolio investments and shares of the Subsidiary. The Subsidiary is managed pursuant to compliance policies and procedures that are the same, in all material respects, as the policies and procedures adopted by the Fund. The Subsidiary is a company organized under the laws of the Cayman Islands, and is overseen by its own board of directors, which is comprised of Trent Walker, Chief Financial Officer of the Fund, and John M. Perlowski, a Director, President and Chief Executive Officer of the Fund. Global Allocation Portfolio is the sole shareholder of the Global Allocation Subsidiary, and shares of the Subsidiary will not be sold or offered to other investors.
The Global Allocation Subsidiary invests primarily in commodity-related instruments. Although Global Allocation Portfolio may enter into these commodity-related instruments directly, Global Allocation Portfolio will likely gain exposure to these commodity-related instruments indirectly by investing in the Global Allocation Subsidiary. To the extent that BlackRock believes that these commodity-related instruments provide suitable exposure to the commodities market, Global Allocation Portfolio’s investments in the Subsidiary will likely increase. The Subsidiary may also hold cash and invest in other instruments, including fixed-income securities, either as investments or to serve as margin or collateral for the Subsidiary’s derivative positions.
The Manager manages the assets of the Subsidiary, but receives no additional compensation for doing so. The Manager also provides certain administrative services for the Subsidiary, but receives no additional compensation for doing so. The Subsidiary will also enter into separate contracts for the provision of advisory, sub-advisory, custody and accounting agent services with the same or with affiliates of the same service providers that provide those services to Global Allocation Portfolio.
The financial statements of the Global Allocation Subsid iary will be consolidated with the financial statements in the Annual and Semi-Annual Financial Statements and Additional Information filed on Form N-CSR of Global Allocation Portfolio.
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The Annual and Semi-Annual Reports are distributed to shareholders. Copies of the Annual and Semi-Annual Financial Statements and Additional Information a nd Annual and Semi-Annual Reports are provided without charge upon request as indicated on the front cover of this SAI.
The Subsidiary is not registered under the Investment Company Act, and, unless otherwise noted in Global Allocation Portfolio’s Prospectus or this SAI, is not subject to all the investor protections of the Investment Company Act. However, Global Allocation Portfolio wholly owns and controls the Global Allocation Subsidiary and the Portfolio and Subsidiary are managed by the Manager, making it unlikely that the Subsidiary will take action contrary to the interests of the Portfolio and its shareholders. The Fund’s Board of Directors has oversight responsibility for the investment activities of Global Allocation Portfolio, including with respect to the Portfolio’s investment in the Subsidiary , and the Portfolio’s role as sole shareholder of the Subsidiary. As noted above, the Subsidiary will be subject to the same investment restrictions and limitations, and follow the same compliance policies and procedures, as Global Allocation Portfolio. The Subsidiary is managed pursuant to compliance policies and procedures that are the same, in all material respects, as the policies and procedures adopted by the Fund. In addition, changes in the laws of the United States and/or the Cayman Islands could result in the inability of Global A llocation Portfolio and/or the Subsidiary to operate as described in Global Allocation Portfolio’s Prospectus and this SAI, and could adversely affect Global Allocation Portfolio. For example, the Cayman Islands does not currently impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax on the Subsidiary. If Cayman Islands law changes such that the Subsidiary must pay Cayman Islands taxes, shareholders of Global Allocation Portfolio would likely suffer decreased investment returns.
The Subsidiary will not be subject to U.S. federal income tax. The Subsidiary will, however, be considered a controlled foreign corporation, and Global Allocation Portfolio will be required to include as income annually amounts earned by the Subsidiary during that year, whether or not the Subsidiary distributes such amounts to the Portfolio. Gains from the sales of investments by the Subsidiary will not be eligible for capital gains treatment but instead will be treated as ordinary income when included in income by the Portfolio. Furthermore, the requirement for the Portfolio to distribute net investment income, if any, and net realized capital gain, if any, at least annually will apply to such Subsidiary income, whether or not the Subsidiary makes a distribution to the Portfolio during the taxable year. If the Subsidiary incurs net losses in any year, such losses will not offset the Portfolio’s income or gains nor carryforward to future years.
II. Investment Restrictions
The Fund has adopted the following fundamental and non-fundamental restrictions and policies relating to the investment of the assets of the Portfolios and their activities. The fundamental policies set forth below may not be changed without the approval of the holders of a majority of the outstanding voting shares of each Portfolio affected (which for this purpose and under the Investment Company Act of 1940, as amended (the “Investment Company Act”), means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares of the affected Portfolio are represented or (ii) more than 50% of the outstanding shares of the affected Portfolio). The non-fundamental policies set forth below may be changed by vote of a majority of the Fund’s Board of Directors at any time.
Restrictions Applicable to Each Portfolio (Except the Government Money Market Portfolio)
Each Portfolio (except the Government Money Market Portfolio) has adopted investment restrictions numbered (1) through (9) as fundamental policies. Unde r its fundamental investment restrictions, each Portfolio (except the Government Money Market Portfolio) may not:
(1) Make any investment inconsistent with the Portfolio’s classification as a diversified company under the Investment Company Act.
(2) Invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities).
(3) Make investments for the purpose of exercising control or management.
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(4) Purchase or sell real estate, except that a Portfolio may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.
(5) Purchase or sell commodities or contracts on comm odities, except to the extent that a Portfolio may do so in accordance with applicable law and the Prospectus and Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.
(6) Make loans to other persons, except (i) that the acquisition of bonds, debentures, or other corporate debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be deemed to be the making of a loan, (ii) that a Portfolio may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Portfolio’s Prospectus and this Statement of Additional Information, as they may be amended from time to time and (iii) as may otherwise be permitted by an exemptive order issued to the Fund by the SEC.
(7) Borrow money, except that (i) a Portfolio may borrow in amounts up to 33 1 / 3 % of its total assets (including the amount borrowed), (ii) a Portfolio may borrow up to an additional 5% of its assets for temporary purposes, (iii) a Portfolio may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities and (iv) a Portfolio may purchase securities on margin to the extent permitted by applicable law. A Portfolio may not pledge its assets other than to secure such borrowings or, to the extent permitted by a Portfolio’s investment policies as set forth in the Prospectus and the Statement of Additional Information, as they may be amended from time to time, in connection with hedging transactions, short sales, when-issued and forward comm itment transactions and similar investment strategies.
(8) Issue senior securities to the extent such issuance would violate applicable law.
(9) Underwrite securities of other issuers except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933, as amended, in selling portfolio securities.
Each Portfolio (except the Government Money Market Portfolio), and as otherwise noted below, has adopted investment restrictions numbered (a) and (b) as non -fundamental policies. Under the non-fundamental investment restrictions, each Portfolio (except the Government Money Market Portfolio), and as otherwise noted below, may not:
(a) Purchase securities of other investment compan ies, except to the extent permitted by the Investment Company Act. As a matter of policy, however, the Portfolio will not purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on Section 12(d)(1)(F) or (G) (the “fund of funds” provisions) of the Investment Company Act, at any time the Portfolio has knowledge that its shares are purchased by another investment company investor in reliance on the provisions of subparagraph (G) of Section 12(d)(1).
(b) Make short sales of securities or maintain a short position, except to the extent permitted by the Portfolio’s Prospectus and Statement of Additional Information, as amended from time to time, and applicable law.
Except with respect to restriction (7), if a percentage restriction on the investment or use of assets set forth above is adhered to at the time a transaction is effected , later changes in percentages resulting from changing values will not be considered a violation.
For purposes of investment restriction (2) above, with respect to the Fund’s industry classifications, the Fund currently utilizes any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Fund management. The policy also will be interpreted to give broad authority to the Fund as to how to classify issuers within or among industries.
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The Global Allocation Subsidiary will follow Global Allocation Portfolio’s fundamental and non-fundamental investment restrictions, described above, with respect to its investments.
Restrictions Applicable to the Government Money Market Portfolio
The Government Money Market Portfolio has adopted investment restrictions numbered (1) through (9) as fundamental policies. Additionally, the investment objective of the Government Money Market Portfolio is a fundamental policy. The Government Money Market Portfolio may not:
(1) Make any investment inconsistent with the Portfolio’s classification as a diversified company under the Investment Company Act.
(2) Invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding securities issued by the U.S. Government and its agencies and instrumentalities; and instruments issued by domestic banks; and for purposes of this restriction, issuers of asset-backed and mortgaged-backed securities will not be considered to be in an industry).
(3) Make investments for the purpose of exercising control or management.
(4) Underwrite securities of other issuers except insofar as the Government Money Market Portfolio technically may be deemed an underwriter under the Securities Act of 1933, as amended, in selling portfolio securities.
(5) Purchase or sell real estate, except that, to the e xtent permitted by applicable law, the Government Money Market Portfolio may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.
(6) Borrow money, except that (i) the Government Money Market Portfolio may borrow in amounts up to 33 1⁄ 1⁄3 ⁄3 % of its total assets (including the amount borrowed, (ii) the Government Money Market Portfolio may borrow up to an additional 5% of its total assets for temporary purposes, (iii) the Government Money Market Portfolio may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities, and (iv) the Government Money Market Portfolio may purchase securities on margin to the extent permitted by applicable law. These borrowing provisions shall not apply to reverse repurchase agreements as described in the Prospectus and Statement of Additional Information. The Government Money Market Portfolio may not pledge its assets other than to secure such borrowing or to the extent permitted by the Government Money Market Portfolio’s investment policies as set forth in the Portfolio’s Prospectus and this Statement of Additional Information, as they may be amended from time to time, in connection with hedging transactions, short s ales, when-issued, reverse repurchase and forward commitment transactions and similar investment strategies.
(7) Make loans to other persons, (i) except that the acquisition of bonds, debentures or other debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers’ acceptances, repurchase agreements or any similar instrument shall not be deemed to be the making of a loan, (ii) that the Government Money Market Portfolio may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Portfolio’s Prospectus and this Statement of Additional Information, as they may be amended from time to time and (iii) as may otherwise be permitted b y an exemptive order issued to the Portfolio by the SEC.
(8) Issue senior securities to the extent such issuance would violate applicable law.
(9) Purchase or sell commodities or contracts on commodities, except to the extent that the Government Money Market Portfolio may do so in accordance with applicable law and the Portfolio’s Prospectus and this Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.
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The Government Money Market Portfolio has adopted investment restrictions as non-fundamental policies. Under its non-fundamental investment restriction, the Government Money Market Portfolio may not:
(a) Purchase securities of other investment compan ies, except to the extent permitted by the Investment Company Act. As a matter of policy, however, the Portfolio will not purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on Section 12(d)(1)(F) or (G) (the “fund of funds” provisions) of the Investment Company Act, at any time the Portfolio has knowledge that its shares are purchased by another investment company investor in reliance on the provisions of subparagraph (G) of Section 12(d)(1).
Except with respect to restriction (6), if a percentage restriction on the investment or use of assets set forth above is adhered to at the time a transaction is effected , later changes in percentages resulting from changing values will not be considered a violation.
III. Information on Directors and Officers
The Board consists of thirteen individuals (each, a “ Director”), eleven of whom are not “interested persons” of the Fund as defined in the Investment Company Act (the “Independent Directors”). The registered investment companies advised by the Manager or its affiliates (the “BlackRock-advised Funds”) are organized into the BlackRock Multi-Asset Complex, the BlackRock Fixed-Income Complex, and the iShares Complex (each, a “BlackRock Fund Complex”). The Fund is included in the BlackRock Fund Complex referred to as the BlackRock Multi-Asset Complex. The Directors also oversee as board members the operations of the other open-end registered investment companies included in the BlackRock Multi-Asset Complex.
The Board has overall responsibility for the oversight of the Fund and each Portfolio. The Chair of the Board is an Independent Director, and the Chair of each Board committee (each, a “Committee”) is an Independent Director. The Board has five standing Committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Ad Hoc Topics Committee. The role of the Chair of the Board is to preside at all meetings of the Board and to act as a liaison with service providers, officers, attorneys and other Directors generally between meetings. The Chair of each Committee performs a similar role with respect to the Committee. The Chair of the Board or the Chair of a Committee may also perform such other functions as may be delegated by the Board or the Committee from time to time. The Independent Directors meet regularly outside the presence of Fund management, in executive session or with other service providers to each Portfolio. The Board has regular meetings five times a year, and may hold special meetings if required before its next regular meeting. Each Committee meets regularly to conduct the oversight functions delegated to that Committee by the Board and reports its findings to the Board. The Board and each standing Committee conduct annual assessments of their oversight function and structure. The Board has determined that the Board’s leadership structure is appropriate because it allows the Board to exercise independent judgment over management and to allocate areas of responsibility among Committees and the full Board to enhance effective oversight.
The Board has engaged the Manager to manage each Portfolio on a day-to-day basis. The Board is responsible for overseeing the Manager, other service providers, the operations of each Portfolio and associated risks in accordance with the provisions of the Investment Company Act, state law, other applicable laws, the Fund’s charter, and each Portfolio’s investment objective and strategies. The Board reviews, on an ongoing basis, each Portfolio’s performance, operations and investment strategies and techniques. The Board also conducts reviews of the Manager and its role in running the operations of each Portfolio.
Day-to-day risk management with respect to each Portfolio is the responsibility of the Manager or of sub-advisers or other service providers (depending on the nature of the risk), subject to the supervision of the Manager. Each Portfolio is subject to a number of risks, including investment, compliance, operational and valuation risks, among others. While there are a number of risk management functions performed by the Manager and the sub-advisers or other service providers, as applicable, it is not possible to eliminate all of the risks applicable to the Portfolios. Risk oversight forms part of the Board’s general oversight of each Portfolio and is addressed as part of various Board and Committee activities. The Board, directly or through a
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Committee, also reviews reports from, among others, management, the independent registered public accounting firm for each Portfolio, sub-advisers and internal auditors for the investment adviser or its affiliates, as appropriate, regarding risks faced by each Portfolio and management’s or the service provider’s risk functions. The Committee system facilitates the timely and efficient consideration of matters by the Directors, and facilitates effective oversight of complia nce with legal and regulatory requirements and of each Portfolio’s activities and associated risks. The Board has appointed a Chief Compliance Officer, who oversees the implementation and testing of the Fund’s compliance program and reports to the Board regarding compliance matters for the Portfolios and their service providers. The Independent Directors have engaged independent legal counsel to assist them in performing their oversight responsibilities.
Audit Committee. The members of the Audit Committee (the “Audit Committee”) are Henry R. Keizer (Chair), Neil A. Cotty, Lori Richards, Kenneth L. Urish and Claire A. Walton, all of whom are Independent Directors. The principal responsibilities of the Audit Committee are to approve, and recommend to the full Board for approval, the selection, retention, termination and compensation of each Portfolio’s independent registered public accounting firm (the “Independent Registered Public Accounting Firm”) and to oversee the Independent Registered Public Accounting Firm’s w ork. The Audit Committee’s responsibilities include, without limitation, to (1) evaluate the qualifications and independence of the Independent Registered Public Accounting Firm; (2) approve all audit engagement terms and fees for each Portfolio; (3) review the conduct and results of each independent audit of each Portfolio’s annual financial statements; (4) review any issues raised by the Independent Registered Public Accounting Firm or Fund management regarding the accounting or financial reporting policies and practices of each Portfolio and the internal controls of each Portfolio and certain service providers; (5) oversee the performance of each Portfolio’s Independent Registered Public Accounting Firm; (6) review and discuss with management and each Portfolio’s Independent Registered Public Accounting Firm the performance and findings of eac h Portfolio’s internal auditors; (7) discuss with Fund management its policies regarding risk assessment and risk management as such matters relate to each Portfolio’s financial reporting and controls; (8) resolve any disagreements between Fund management and the Independent Registered Public Accounting Firm regarding financial reporting; and (9) undertake such other duties and responsibilities as may from time to time be delegated by the Board to the Audit Committee. The Board has adopted a written charter for the Audit Committee. During the fiscal year ended December 31, 2025, the Audit Committee met four times.
Governance and Nominating Committee. The members of the Governance and Nominating Committee (the “Governance Committee”) are Cynthia A. Montgom ery (Chair), Christopher J. Ailman, Susan J. Carter, Collette Chilton and Henry R. Keizer, all of whom are Independent Directors. The principal responsibilities of the Governance Committee are to (1) identify individuals qualified to serve as Independent Directors of the Fund and recommend Independent Director nominees for election by shareholders or appointment by the Board; (2) advise the Board with respect to Board compos ition, procedures and committees (other than the Audit Committee); (3) oversee periodic self-assessments of the Board and committees of the Board (other than the Audit Committee); (4) review and make recommendati ons regarding Independent Director compensation; (5) monitor corporate governance matters and develop appropriate recommendations to the Board; (6) act as the administrative committee with respect to Board policies and procedures, committee policies and procedures (other than the Audit Committee) and codes of ethics as they relate to Independent Directors; and (7) undertake such other duties and responsibilities as may from time to time be delegated by the Board to the Governance Committee. The Governance Committee may consider nominations for Directors made by the Fund’s shareholders as it deems appropriate. Under the Fund’s Amended and Restated Bylaws (“Bylaws”), shareholders must follow certain procedures to nominate a person for election as a Director at a shareholder meeting at which Directors are to be elected. Under these advance notice procedures, notice of the proposed nominee to the Secretary of the Fund must be delivered to or mailed and received at the principal executive offices of the Fund not later than the close of business on the fifth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever first occurs. The Fund’s Bylaws provide that notice of a proposed nomination must include certain information about the shareholder and the nominee, as well as certain other information, including a written consent of
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the proposed nominee to serve if elected. Reference is made to the Fund’s Bylaws for more details. The Board has adopted a written charter for the Governance Committee. During the fiscal year ended December 31, 2025, the Governance Committee met eleven times.
Compliance Committee. The members of the Compliance Committee (the “Compliance Committee”) are Claire A. Walton (Chair), Cynthia A. Montgomery, Donald C. Opatrny, Lori Richards and Kenneth L. Urish, all of whom are Independent Directors. The Compliance Committee’s purpose is to assist the Board in fulfilling its responsibility to oversee regulatory and fiducia ry compliance matters involving the Fund, the fund-related activities of BlackRock and any sub-adviser and the Fund’s third-party service providers. The Compliance Committee’s responsibilities include, without limitation, to (1) oversee the compliance policies and procedures of the Fund and its service providers and recommend changes or additions to such policies and procedures; (2) review information on and, where appropriate, recommend policies concerning the Fund’s compliance with applicable law; (3) review reports fr om, oversee the annual performance review of, and make certain recommendations and determinations regardi ng the Fund’s Chief Compliance Officer (the “CCO”), including determining the amount and structure of the CCO’s compensation and recommending such amount and structure to the full Board for approval and ratification; and (4) undertake such other duties and responsibilities as may from time to time be delegated by the Board to the Compliance Committee. The Board has adopted a written charter for the Compliance Committee. During the fiscal year ended December 31, 2025, the Compliance Committee met four times.
Performance Oversight Committee. The members of the Performance Oversight Committee (the “Performance Oversight Committee”) are Donald C. Opatrny (Chair), Christopher J. Ailman, Susan J. Carter, Collette Chilton and Neil A. Cotty, all of whom are Independent Directors. The Performance Oversight Committee’s purpose is to assist the Board in fulfilling its responsibility to oversee each Portfolio’s investment performance relative to its agreed-upon performance objectives and to assist the Independent Directors in their consideration of investment advisory agreements. The Performance Oversight Committee’s responsibilities include, without limitation, to (1) review information on, and make recommendations to the full Board in respect of, each Portfolio’s investment objective, policies and practices; (2) review information on each Portfolio’s investment performance; (3) review information on appropriate benchmarks and competitive universes and unusual or exceptional investment matters; (4) review personnel and other resources devoted to management of each Portfolio and evaluate the nature and quality of information furnished to the Performance Oversight Committee; (5) recommend any required action regarding changes in fundamental and non-fundamental investment policies and restrictions , fund mergers or liquidations; (6) request and review information on the nature, extent and quality of services provided to the shareholders; (7) make recommendations to the Board concerning the approval or renewal of investment advisory agreements; and (8) undertake such other duties and responsibilities as may from time to time be delegated by the Board to the Performance Oversight Committee. The Board has adopted a written charter for the Performance Oversight Committee. During the fiscal year ended December 31, 2025, the Performance Oversight Committee met five times.
Ad Hoc Topics Committee. The members of the Ad Hoc Topics Committee (the “Ad Hoc Topics Committee”) are Mark Stalnecker (Chair) and Claire A. Walton, both of whom are Independent Directors, and John M. Perlowski, who serves as an interested Director. The principal responsibilities of the Ad Hoc Topics Committee are to (1) act on routine matters between meetings of the Board; (2) act on such matters as may require urgent action between meetings of the Board; and (3) exercise such other authority as may from time to time be delegated to the Ad Hoc Topics Committee by the Board. The Board has adopted a written charter for the Ad Hoc Topics Committee. During the fiscal year ended December 31, 2025, the Ad Hoc Topics Committee did not meet.
The Governance Committee has adopted a statement of policy that describes the experience, qualifications, skills and attributes that are necessary and desirable for potential Independent Director candidates (the “Statement of Policy”). The Board believes that each Independent Director satisfied, at the time he or she was initially elected or appointed a Director, and continues to satisfy, the standards contemplated by the Statement of Policy. Furthermore, in determining that a particular Independent Director was and continues to be
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qualified to serve as a Director, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Independent Directors have balanced and diverse experience, skills, attributes and qualifications, which allow the Board to operate effectively in governing the Fund and protecting the interests of shareholders. Among the attributes common to all Independent Directors are their ability to review critically, evaluate, question a nd discuss information provided to them, to interact effectively with each Portfolio’s investment adviser, sub-advisers, other service providers, counsel and the Independent Registered Public Accounting Firm, and to exercise effective business judgment in the performance of their duties as Directors.
Each Director’s ability to perform his or her duties effectively is evidenced by his or her educational background or professional training; business, consulting, public service or academic positions; experience from service as a board member of the Fund and the other funds in the BlackRock Fund Complexes (and any predecessor funds), other investment funds, public companies, non-profit entities or other organizations; ongoing commitment to and participation in Board an d Committee meetings, as well as his or her leadership of standing and ad hoc committees throughout the years; or other relevant life experiences.
Directors Elect . Jeffrey Jarczyk and Marc D. Stern have been appointed as Directors of the Fund effective July 1, 2026 (each, a “Director-Elect”). Each Director Elect is expected to qualify as an Independent Director at the time of his service. Each Director Elect has been retained as a consultant to the Independent Directors to assist the Independent Directors in the performance of their duties to the Fund and is expected to serve in that capacity until July 1, 2026.
The table below discusses some of the experiences, qualifications and skills of each of the Directors that support the conclusion that each Director should serve on the Board.
Director Experience, Qualifications and Skills
Independent Directors Christopher J. Ailman Christopher Ailman has more than 30 years of experience in the financial services industry, including most recently serving as Chief Investment Officer of the California State Teachers Retirement System (CalSTRS) from 2000 to June 2024 where he led its investment program. Mr. Ailman currently is a principal at Ailman Advisers. In addition, he has held various roles in the industry, including as member and chair of the asset owner committee of the Kroner Center for Financial Research, chairman of the North American Chapter of the 300 Club of Global CIOs, and co-chair of the Milken Global Capital Markets Advisory Council. These positions have provided Mr. Ailman with considerable investment expertise across asset classes and strategies, and insight and perspective on the markets and the economy. In addition, Mr. Ailman serves as a member of the Governance Committee and the Performance Oversight Committee. Susan J. Carter Susan J. Carter has over 35 years of experience in investment management. She has served as President & Chief Executive Officer of Commonfund Capital, Inc. (“CCI”), a registered investment adviser focused on non-profit investors, from 1997 to 2013, Chief Executive Officer of CCI from 2013 to 2014 and Senior Advisor to CCI in 2015. Ms. Carter also served as director of the Pacific Pension Institute from 2014 to 2018, trustee to the Financial Accounting Foundation from 2017 to 2021, Advisory Board Member for the Center for Private Equity and Entrepreneurship at Tuck School of Business from 1997 to 2021, Advisory Board Member for Bridges Fund Management from 2016 to 2018, Advisory Board Member for Girls Who Invest from 2015 to 2018 and Board Member thereof from 2018 to 2022 and Practitioner Advisory Board Member for Private Capital Research Institute (“PCRI”) from 2017 to 2024. She currently serves as Member of the President’s Counsel for Commonfund. These positions have provided her with insight and perspective on the markets and the economy. Collette Chilton Collette Chilton has over 20 years of experience in investment management. She held the position of Chief Investment Officer of Williams College from October 2006 to June 2023. Prior to that she was President and Chief Investment Officer of Lucent Asset Management Corporation, where she oversaw
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approximately $40 billion in pension and retirement savings assets for the company. These positions have provided her with insight and perspective on the markets and the economy. Neil A. Cotty Neil A. Cotty has more than 30 years of experience in the financial services industry, including 19 years at Bank of America Corporation and its affiliates, where he served, at different times, as the Chief Financial Officer of various businesses including Investment Banking, Global Markets, Wealth Management and Consumer and also served ten years as the Chief Accounting Officer for Bank of America Corporation. Mr. Cotty has been determined by the Audit Committee to be an audit committee financial expert, as such term is defined in the applicable Commission rules.
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Director Experience, Qualifications and Skills Henry R. Keizer Henry R. Keizer brings over 40 years of executive, financial, operational, strategic and global expertise
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gained through his 35 year career at KPMG, a global professional services organization and by his service
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as a director to both publicly and privately held organizations. He has extensive experience with issues
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facing complex, global companies and expertise in financial reporting, accounting, auditing, risk
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management, and regulatory affairs for such companies. Mr. Keizer’s experience also includes service as
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an audit committee chair to both publicly and privately held organizations across numerous industries
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including professional services, property and casualty reinsurance, insurance, diversified financial services,
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banking, direct to consumer, business to business and technology. Mr. Keizer is a certified public
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accountant and also served on the board of the American Institute of Certified Public Accountants. Mr. Keizer has been determined by the Audit Committee to be an audit committee financial expert, as
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such term is defined in the applicable Commission rules. Cynthia A. Montgomery Cynthia A. Montgomery has served for over 20 years on the boards of registered investment companies,
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most recently as a member of the boards of certain BlackRock-advised Funds and predecessor funds,
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including the legacy Merrill Lynch Investment Managers, L.P. (“MLIM”) funds. The Board benefits from
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Ms. Montgomery’s more than 20 years of academic experience as a professor at Harvard Business School
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where she taught courses on corporate strategy and corporate governance. Ms. Montgomery also has
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business management and corporate governance experience through her service on the corporate boards
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of a variety of public companies. She has also authored numerous articles and books on these topics. Donald C. Opatrny Donald C. Opatrny has more than 40 years of business, oversight and executive experience, including
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organizations, and his experience as a partner, managing director and advisory director at Goldman Sachs
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for 32 years. He also has investment management experience as a board member of Athena Capital
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Advisors LLC. Lori Richards Lori Richards has more than 30 years of experience in the financial services industry, most notably as the f
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first Director of the Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and
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Exchange Commission (“SEC”) from 1995 to 2009. During 14 years as the Director of OCIE, she led the
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SEC’s nationwide examination oversight program for advisers, mutual funds, hedge funds, broker-dealers,
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stock exchanges, and other industry firms. Prior to that, from 1985 to 1995, she held various roles at the
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SEC, including Associate Director for Enforcement for the SEC’s Pacific Regional Office and executive
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assistant and senior advisor to then SEC Chairman Arthur Levitt. More recently, Ms. Richards served as
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Chief Compliance Officer of the Asset and Wealth Management global lines of business at JPMorgan
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Chase & Co. from 2013 to 2018 where she led its global compliance program, advised business leaders
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on compliance issues, oversaw risk assessment, monitoring, testing and training, and maintained
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relationships with regulators. In addition, Ms. Richards served as a member of the National Adjudicatory
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Council of the Financial Industry Regulatory Authority (FINRA) from 2019 to 2022 and held the chair
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and vice chair posts during her tenure. Prior thereto, from 2010 to 2013, she was a Principal at
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PricewaterhouseCoopers LLP (“PwC”) and co-leader of its Asset Management Regulatory group. At
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PwC, she assisted a broad range of financial services clients in designing and implementing risk
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management and compliance programs, and preparing for new regulatory expectations. These positions
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management regulation and compliance. In addition, Ms. Richards serves as a member of the Audit
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Committee and the Compliance Committee. Mark Stalnecker Mark Stalnecker has gained a wealth of experience in investing and asset management from his over 13
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years of service as the Chief Investment Officer of the University of Delaware as well as from his various
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positions with First Union Corporation, including Senior Vice President and State Investment Director of
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First Investment Advisors. The Board benefits from his experience and perspective as the Chief Investment
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Officer of a university endowment and from the oversight experience he gained from service on various
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private and non-profit boards. Kenneth L. Urish Kenneth L. Urish has served for over 15 years on the boards of registered investment companies, most
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recently as a member of the boards of certain BlackRock-advised Funds and predecessor funds, including
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the legacy BlackRock funds. He has over 30 years of experience in public accounting. Mr. Urish has
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served as a managing member of an accounting and consulting firm. Mr. Urish has been determined by
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the Audit Committee to be an audit committee financial expert, as such term is defined in the applicable
l Commission rules. Claire A. Walton Claire A. Walton has over 25 years of experience in investment management. She has served as the Chief
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Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to
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2015, an investment manager that specialized in long/short non-U.S. equity investments, and was an
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owner and General Partner of Neon Liberty Capital Management, LLC from 2003 to 2023, a firm
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focusing on long/short equities in global emerging and frontier markets. These positions have provided her
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with insight and perspective on the markets and the economy. Directors Elect Jeffrey Jarczyk Mr. Jarczyk is a CPA and has more than 30 years of experience in the financial services industry,
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and the Chief Accounting Officer of Fidelity Investments’ parent company, FMR LLC. Prior to working at
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Fidelity, Mr. Jarczyk was a partner at Deloitte and Arthur Andersen for approximately seventeen years.
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These positions have allowed him to work extensively with audit and risk committees and company
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executives helping to identify, manage and mitigate risks for financial services companies. Marc D. Stern Mr. Stern has more than 30 years of experience in inve
hf ffTlh sting and asset management. Mr. Stern served as the
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Chief Executive Officer at Bessemer Trust, a wealth ma
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nagement business, for 13 years. During his tenure at
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Bessemer Trust, Mr. Stern served on the firm’s board of
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directors, chaired the board’s trust and investment
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committee, and led the firm’s executive committee. He al
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so served as Bessemer’s Chief Investment Officer for ,
8 years, where he was Chair of the Investment Policy and Strategy Committee with responsibility for overall
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asset allocation and investment strategy. Mr. Stern al
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so served as Chair of the Private Clients Investment gy
group at AllianceBernstein. These positions provide Mr.
hd fd Stern with insight and perspective into investment gp pp
management, the economy, and fiduciary governance.
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Director Experience, Qualifications and Skills
Interested Directors Robert Fairbairn Robert Fairbairn has more than 25 years of experience with BlackRock, Inc. and over 30 years of
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experience in finance and asset management. In particular, Mr. Fairbairn’s positions as Vice Chairman of
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BlackRock, Inc., Member of BlackRock’s Global Operating Committee and Co-Chair of BlackRock’s
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Human Capital Committee provide the Board with a wealth of practical business knowledge and
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leadership. In addition, Mr. Fairbairn has global investment management and oversight experience
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through his former positions as Member of BlackRock’s Global Executive Committee, Global Head of
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® b
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BlackRock’s Retail and iShares ® ,
businesses, Head of BlackRock’s Global Client Group, Chairman of
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BlackRock’s international businesses and his previous oversight over BlackRock’s Strategic Partner
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Program and Strategic Product Management Group. Mr. Fairbairn also serves as a board member for the
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funds in the BlackRock Fixed-Income Complex. John M. Perlowski John M. Perlowski’s experience as Managing Director of BlackRock, Inc. since 2009, as the Head
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of BlackRock Global Accounting and Product Services since 2009, and as President and Chief Executive
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Officer of the BlackRock-advised Funds provides him with a strong understanding of the BlackRock
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advised Funds, their operations, and the business and regulatory issues facing the BlackRock-advised
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Funds. Mr. Perlowski’s prior position as Managing Director and Chief Operating Officer of the Global
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Product Group at Goldman Sachs Asset Management, and his former service as Treasurer and Senior
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Vice President of the Goldman Sachs Mutual Funds and as Director of the Goldman Sachs Offshore Funds provides the Board with the benefit of his experience with the management practices of other
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financial companies. Mr. Perlowski also serves as a board member for the funds in the BlackRock
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Fixed-Income Complex. Mr. Perlowski is a member if BlackRock’s Global Executive Committee.
Biographical Information
Certain biographical and other information relating t o the Directors of the Fund is set forth below, including their address and year of birth, principal occupations for at least the last five years, length of time served, total number of registered investment companies and inv estment portfolios overseen in the BlackRock-advised Funds and any currently held public company and other investment company directorships.
Name and Year of Birth 1,2
Position(s) Held (Length of Service) 4
Principal Occupation(s) During Past Five Years
Number of BlackRock Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen
Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Directors Mark Stalnecker 1951
Chair of the Board and Director (Since 2019)
Chief Investment Officer, University of Delaware from
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1999 to 2013; Trustee and Chair of the Finance and
hd ;
Investment Committees, Winterthur Museum and
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Country Estate from 2005 to 2016; Member of the
lbll y ;
Investment Committee, Delaware Public Employees’
fbf , py
Retirement System from 2002 to 2024; Member of the
hlh y;
Investment Committee, Christiana Care Health System
fbf h ,
from 2009 to 2017; Member of the Investment
ld ;
Committee, Delaware Community Foundation from
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2013 to 2014; Director and Chair of the Audit
f ;
Committee, SEI Private Trust Co. from 2001 to 2014.
26 RICs consisting of
fl g
169 Portfolios
None
Christopher J. Ailman 1958 Director Since 2024 Principal, Ailman Advisers, since 2024; Chief
fflfTh p, , ;
Investment Officer, California State Teachers
lf ,
Retirement System (CalSTRS) from 2000 to 2024.
26 RICs consisting of
fl g
169 Portfolios
None
Susan J. Carter 1956 Director (Since 2019)
Trustee, Financial Accounting Foundation from 2017 to
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2021; Advisory Board Member, Center for Private
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Equity and Entrepreneurship at Tuck School of Business
ff qy pp
from 1997 to 2021; Director, Pacific Pension Institute
fd ; ,
from 2014 to 2018; Senior Advisor, CCI (investment
dhf fff ; , (
adviser) in 2015; Chief Executive Officer, CCI from
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2013 to 2014; President & Chief Executive Officer, CCI
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from 1997 to 2013; Advisory Board Member, Girls Who
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Invest from 2015 to 2018 and Board Member thereof from 2018 to 2022; Advisory Board Member, Bridges
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Fund Management from 2016 to 2018; Practitioner
Add bf g;
Advisory Board Member, PCRI from 2017 to 2024;
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Lecturer in the Practice of Management, Yale School of
Ad g,
Management since 2019; Advisor to Finance Committee,
Aldf g;
Altman Foundation from 2020 to 2024; Investment
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Committee Member, Tostan since 2021; Member of the
dlfd , ;
President’s Counsel, Commonfund since 2023.
26 RICs consisting of
fl g
169 Portfolios
None
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Name and Year of Birth 1,2
Position(s) Held (Length of Service) 4
Principal Occupation(s) During Past Five Years
Number of BlackRock Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen
Public Company and Other Investment Company Directorships Held During Past Five Years Collette Chilton 1958
Director (Since 2019)
Trustee, UC Berkeley Foundation Board since 2024; Committee member, Oxford University Endowment Management since 2024; Senior advisor, Insignia since 2024; Chief Investment Officer, Williams College from 2006 to 2023; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006; Director, Boys and Girls Club of Boston since 2017; Director, B1 Capital since 2018; Director, David and Lucile Packard Foundation since 2020.
26 RICs consisting of 169 Portfolios
None
Neil A. Cotty 1954
Director (Since 2019)
Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002.
26 RICs consisting of 169 Portfolios
None
Henry R. Keizer 1956 Director (Since 2016)
Director, Park Indemnity Ltd. (captive insurer) from 2010 to 2022. 26 RICs consisting of 169 Portfolios
GrafTech International Ltd. (materials manufacturing); WABCO (commercial vehicle safety systems) from 2015 to 2020; Sealed Air Corp. (packaging); Hertz Global Holdings (car rental) from 2015 to 2021. Cynthia A. Montgomery 1952
Director (Since 2019)
Professor, Harvard Business School since 1989. 26 RICs consisting of 169 Portfolios
None
Donald C. Opatrny 1952 Director (Since 2015)
Chair of the Board of Phoenix Art Museum since 2022 and Trustee thereof since 2018; Chair of the Investment Committee of The Arizona Community Foundation since 2022 and Trustee thereof since 2020; Director, Athena Capital Advisors LLC (investment management firm) from 2013 to 2020; Trustee, Vice Chair, Member of the Executive Committee and Chair of the Investment Committee, Cornell University from 2004 to 2019; Member of Affordable Housing Supply Board of Jackson, Wyoming from 2017 to 2022; Member, Investment Funds Committee, State of Wyoming from 2017 to 2023; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014.
26 RICs consisting of 169 Portfolios
None
Lori Richards 1960 Director (Since 2024)
Trustee, SEC Historical Society since 2018; Trustee, Garrett College Foundation since 2019; Director, PharmaCann, Inc. from 2021 to 2024; Director, Wahed Invest from 2022 to 2024.
26 RICs consisting of 169 Portfolios
None
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Name and Year of Birth 1,2
Position(s) Held (Length of Service) 4
Principal Occupation(s) During Past Five Years
Number of BlackRock Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen
Public Company and Other Investment Company Directorships Held During Past Five Years Kenneth L. Urish 1951
Director (Since 2019)
Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001, Emeritus since 2022; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007; Member, Advisory Board, ESG Competent Boards since 2020.
26 RICs consisting of 169 Portfolios
None
Claire A. Walton 1957 Director (Since 2019)
Director/Treasurer, Reading Community Trust since 2024; Advisory Board Member, Grossman School of Business at the University of Vermont since 2023; Advisory Board Member, Scientific Financial Systems since 2022; General Partner of Neon Liberty Capital Management, LLC from 2003 to 2023; Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; Director, Boston Hedge Fund Group from 2009 to 2018; Director, Massachusetts Council on Economic Education from 2013 to 2015; Director, Woodstock Ski Runners from 2013 to 2022.
26 RICs consisting of 169 Portfolios
None
Directors Elect3 t3 Jeffrey Jarczyk 1964
Director Elect Director, The Friends of the Public Garden since 2021; Executive Vice President, Chief Auditor, Fidelity Investments from 2016 to 2021; Executive Vice President, Chief Accounting Officer, Fidelity Investments from 2007 to 2016.
26 RICs consisting of 169 Portfolios
None
Marc D. Stern 1962
Director Elect Chief Executive Officer and Director, Bessemer Trust from 2013 to 2026. 26 RICs consisting of 169 Portfolios
None
Interested Directors 5 Robert Fairbairn 1965
Director (Since 2015) Vice Chairman of BlackRock, Inc. since 2019; Member of BlackRock’s Global Operating Committee; Co-Chair of BlackRock’s Human Capital Committee; Senior Managing Director of BlackRock, Inc. from 2010 to 2019; oversaw BlackRock’s Strategic Partner Program and Strategic Product Management Group from 2012 to 2019; Member of the Board of Managers of BlackRock Investments, LLC from 2011 to 2018; Global Head of BlackRock’s Retail and iShares ® businesses from 2012 to 2016.
76 RICs consisting of 252 Portfolios
None
John M. Perlowski 6 1964 Director (Since 2015) President and Chief Executive Officer (Since 2010)
Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009; Member of BlackRock’s Global Executive Committee since 2025.
78 RICs consisting of 254 Portfolios
None
1 The address of each Director is c/o BlackRock, Inc., 50 Hudson Yards, New York, New York 10001. 2 Each Independent Director holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Fund’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. Directors who are “interested persons,” as defined in the Investment Company Act, serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Fund’s by-laws or statute, or until December 31 of the year in which they turn 72. The Board may determine to extend the terms of Independent Directors on a case-by-case basis, as appropriate.
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3 Jeffrey Jarczyk and Marc D. Stern have been appointed as Directors of the Fund effective July 1, 2026. Each Director Elect is expected to qualify as an Independent Director at the time of his service. Each Director Elect has been retained as a consultant to the Independent Directors to assist the Independent Directors in the performance of their duties to the Fund and is expected to serve in that capacity until July 1, 2026. 4 Following the combination of MLIM and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. In addition, effective January 1, 2019, three BlackRock Fund Complexes were realigned and consolidated into two BlackRock Fund Complexes. As a result, although the chart shows the year that each Independent Director joined the Board, certain Independent Directors first became members of the boards of other BlackRock-advised Funds, legacy MLIM funds or legacy BlackRock funds as follows: Susan J. Carter, 2016; Collette Chilton, 2015; Neil A. Cotty, 2016; Cynthia A. Montgomery, 1994; Mark Stalnecker, 2015; Kenneth L. Urish, 1999; Claire A. Walton, 2016. 5 Mr. Fairbairn and Mr. Perlowski are both “interested persons,” as defined in the Investment Company Act, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Fixed-Income Complex. 6 Mr. Perlowski is also a trustee of the BlackRock Credit Strategies Fund and BlackRock Private Investments Fund. Certain biographical and other information relating to the officers of the Fund who are not Directors is set forth below, including their address and year of birth, principal occupations for at least the last five years and length of time served.
Name and Year of Birth 1,2
Position(s) Held (Length of Service) Principal Occupation(s) During Past Five Years
Officers Who Are Not Directors Roland Villacorta 1971
Vice President (Since 2022)
Managing Director of BlackRock, Inc. since 2002; Head of Global Cash Management and Head of Securities Lending within BlackRock’s Global Markets Group since 2022; Member of BlackRock’s Global Operating Committee since 2016 and Human Capital Committee since 2023. Jennifer McGovern 1977
Vice President (Since 2014)
Managing Director of BlackRock, Inc. since 2016.
Trent Walker 1974
Chief Financial Officer (Since 2021)
Managing Director of BlackRock, Inc. since 2019; Executive Vice President of PIMCO from 2016 to 2019.
Jay M. Fife 1970 Treasurer (Since 2007)
Managing Director of BlackRock, Inc. since 2007.
Aaron Wasserman 1974
Chief Compliance Officer (Since 2023)
Managing Director of BlackRock, Inc. since 2018; Chief Compliance Officer of the BlackRock-advised funds in the BlackRock Multi-Asset Complex, the BlackRock Fixed-Income Complex and the iShares Complex since 2023; Deputy Chief Compliance Officer for the BlackRock-advised funds in the BlackRock Multi-Asset Complex, the BlackRock Fixed-Income Complex and the iShares Complex from 2014 to 2023. Lisa Belle 1968 Anti-Money Laundering Compliance Officer (Since 2019)
Managing Director of BlackRock, Inc. since 2019; Global Financial Crime Head for Asset and Wealth Management of JP Morgan from 2013 to 2019.
Janey Ahn 1975 Secretary (Since 2019)
Managing Director of BlackRock, Inc. since 2018.
1 The address of each Officer is c/o BlackRock, Inc., 50 Hudson Yards, New York, New York 10001. 2 Officers of the Fund serve at the pleasure of the Board.
Share Ownership
Information relating to each Director’s share ownersh ip in the Portfolios and in all BlackRock-advised Funds that are currently overseen by the respective Director (“Supervised Funds”) as of December 31, 2025 is set forth in the chart below. Amounts shown may include shares as to which a Director has indirect beneficial
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ownership, such as through participation in certain family accounts, 529 college savings plan interests, or similar arrangements where the Director has benefic ial economic interest but not a direct ownership interest.
Name
Dollar Range of Equity Securities in Advantage Large Cap Core Portfolio
Dollar Range of Equity Securities in Balanced Portfolio
Dollar Range of Equity Securities in Capital Appreciation Portfolio
Dollar Range of Equity Securities in Global Allocation Portfolio
Dollar Range of Equity Securities in Government Money Market Portfolio
Aggregate Dollar Range of Equity Securities in Supervised Funds
Independent Directors Christopher J. Ailman None None None None None Over $100,000 Susan J. Carter None None None None None Over $100,000 Collette Chilton None None None None None Over $100,000 Neil A. Cotty None None None None None Over $100,000 Henry R. Keizer None None None None None Over $100,000 Cynthia A. Montgomery None None None None None Over $100,000 Donald C. Opatrny None None None None None Over $100,000 Lori Richards None None None None None None Mark Stalnecker None None None None None Over $100,000 Kenneth L. Urish None None None None None Over $100,000 Claire A. Walton None None None None None Over $100,000 Interested Directors Robert Fairbairn None None None None None Over $100,000 John M. Perlowski None None None None None Over $100,000
As of April 2, 2026, the Directors and officers of the Fund as a group directly or indirectly beneficially owned an aggregate of less than 1% of any class of the outstanding shares of each Portfolio. As of December 31, 2025, none of the Independent Directors of the Fund or their immediate family members owned beneficially or of record any securities of each Portfolio’s investment adviser, sub-advisers, principal underwriter, or any person directly or indirectly controlling, controlled by, or under common control with such entities.
Compensation of Directors
Each Director who is an Independent Director is paid as compensation an annual retainer of $375,000 per year for his or her services as a board member of the BlackRock-advised Funds in the BlackRock Multi-Asset Complex, including the Fund, and a $20,000 board meeting fee to be paid for each in-person board meeting attended (and may receive a board meeting fee for telephonic attendance at board meetings), for up to five board meetings held in a calendar year (compensatio n for meetings in excess of this number to be determined on a case-by-case basis), together with out-of-pocket expenses in accordance with a board policy on travel and other business expenses relating to attendance at meetings. The Chairs of the Audit Committee, Compliance Committee, Governance Committee and Performance O versight Committee are paid as compensation an additional annual retainer of $45,000, respectively. The Chair of the Board is paid an additional annual retainer of $150,000.
Each Director Elect currently serves as a consultant to the Independent Directors in the performance of the Independent Directors’ duties to the Fund and is paid compensation at the same rate as the compensation paid to any Independent Directors who are not the Chair of the Board or a Chair of a Committee. This compensation arrangement will continue until July 1, 2026, when each Director Elect is expected to begin serving as an Independent Director and will be compensated in a manner similar to other Independent Directors.
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The following table sets forth the compensation the Fund paid to the Directors, on behalf of the Portfolios, for the fiscal year ended December 31, 2025 and the aggregate compensation paid to them by all BlackRock advised Funds for the calendar year ended December 31, 2025.
Name
Advantage Large Cap Core Portfolio Balanced Portfolio
Capital Appreciation Portfolio
Global Allocation Portfolio
Government Money Market Portfolio
Estimated Annual Benefits upon Retirement
Aggregate Compensation from the Portfolios and Other BlackRock Advised Funds 1
Independent Directors Christopher J. Ailman $752 $886 $774 $716 $692 None $445,000 Susan J. Carter $752 $886 $774 $716 $692 None $445,000 Collette Chilton $752 $886 $774 $716 $692 None $445,000 Neil A. Cotty $756 $896 $780 $719 $694 None $467,500 Henry R. Keizer 2 $767 $919 $793 $727 $700 None $490,000 Cynthia A. Montgomery 3 $767 $919 $793 $727 $700 None $490,000 Donald C. Opatrny 4 $767 $919 $793 $727 $700 None $490,000 Lori Richards $752 $886 $774 $716 $692 None $445,000 Mark Stalnecker 5 $803 $996 $836 $752 $718 None $595,000 Kenneth L. Urish $752 $886 $774 $716 $692 None $445,000 Claire A. Walton 6 $767 $919 $793 $727 $700 None $490,000 Interested Directors Robert Fairbairn None None None None None None None John M. Perlowski None None None None None None None
1 For the number of BlackRock-advised Funds from which each Director receives compensation, see “Biographical Information” beginning on page I-17. 2 Chair of the Audit Committee. 3 Chair of the Governance Committee. 4 Chair of the Performance Oversight Committee. 5 Chair of the Board and Chair of the Ad Hoc Topics Committee. 6 Chair of the Compliance Committee.
IV. Management, Advisory and Other Service Arrangements
Management Agreement
The Fund has entered into an investment management agreement relating to the Portfolios with BlackRock (the “Investment Management Agreement”), an indirect, majority owned subsidiary of BlackRock, Inc.
Pursuant to the Investment Management Agreement, th e Manager may from time to time, in its sole discretion to the extent permitted by applicable law, appoint one or more sub-advisers, including, without limitation, affiliates of the Manager, to perform management services with respect to the Fund. In addition, the Manager may delegate certain of its management functions unde r the Investment Management Agreement to one or more of its affiliates to the extent permitted by applicable law. The Manager may terminate any or all sub-advisers or such delegation arrangements in its sole discretion a t any time to the extent permitted by applicable law.
With respect to Balanced Portfolio and Global Allocatio n Portfolio, BlackRock has entered into separate sub advisory agreements (each a “Sub-Advisory Agreement” ) with BlackRock International Limited (“BIL”) and BlackRock (Singapore) Limited (“BSL”) (together, the “Sub-Advisers”). Pursuant to each Sub-Advisory Agreement, each Sub-Adviser receives for the services it provides for that portion of the applicable Portfolio for which it acts as a sub-advisor a monthly fee calculated at an annual rate equal to a percentage of the investment advisory fee received by BlackRock from the applicable Portfolio.
The Investment Management Agreement will continue in effect for an initial period of two years and from year to year thereafter if approved annually (a) by the Board of Directors of the Fund or by a majority of the outstanding shares of the respective Portfolios, and (b) by a majority of the Directors who are not parties to
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such contract or interested persons (as defined in the Investment Company Act), of any such party. The Investment Management Agreement is not assignable and may be terminated without penalty on 60 days’ written notice at the option of either party or by the vote of the shareholders of the Fund. The sub-advisory agreements with respect to Balanced Portfolio and Global Allocation Portfolio will continue in effect for an initial period of two years and from year to year thereafter if approved annually (a) by the Board of Directors of the Fund or by a majority of the outstanding shares of the applicable Portfolio, and (b) by a majority of the Directors who are not parties to such contract or interested persons (as defined in the Investment Company Act), of any such party. The sub-advisory agreements are not assignable and may be terminated without penalty on 60 days’ written notice at the option of either party or by the vote of the shareholders of the applicable Portfolio.
Management Fee. Under the Investment Management Agreement, the management fee is calculated based on the average daily net assets of six combined funds (collectively, the “Combined Portfolios”). The six Combined Portfolios consist of the five Portfolios and the one series of BlackRock Series Fund II, Inc., the BlackRock High Yield Portfolio.
The portion of the assets of a Combined Portfolio to which the rate at each breakpoint level applies will be determined on a “uniform percentage” basis. The uniform percentage applicable to a breakpoint level is determined by dividing the amount of the aggregate average daily net assets of the six Combined Portfolios that falls within that breakpoint level by the aggregate average daily net assets of the six Combined Portfolios. The amount of the fee for a Combined Portfolio at each breakpoint level is determined by multiplying the average daily net assets of that Combined Portfolio by the uniform percentage applicable to that breakpoint level and multiplying the product by the applicable management fee rate.
BlackRock has voluntarily agreed to waive a portion of its fees and/or reimburse operating expenses to enable the Government Money Market Portfolio to maintain a minimum daily net investment income dividend. BlackRock may discontinue this waiver and/or reimbursement at any time without notice. Taking into account this voluntary waiver and/or reimbursement of fees, the Total Annual Fund Operating Expenses for the Government Money Market Portfolio may be lower than shown in the Annual Fund Operating Expenses table.
BlackRock has contractually agreed to waive the management fee with respect to any portion of each Portfolio’s assets (other than the Government Money Market Portfolio) estimated to be attributable to investments in other equity and fixed-income mutual funds and exchange-traded funds managed by BlackRock or its affiliates that have a contractual management fee, through June 30, 2027. BlackRock has also contractually agreed to waive the management fee with respect to any portion of Global Allocation Portfolio’s assets estimated to be attributable to inv estments in other exchange-traded products sponsored by BlackRock or its affiliates, through June 30, 2027. In addition, with respect to each Portfolio (other than the Government Money Market Portfolio), BlackRock has contractually agreed to waive its management fees by the amount of investment advisory fees the Portfolio pays to BlackRock indirectly through its investment in money market funds managed by BlackRock or its affiliates through June 30, 2027. The contractual agreements may be terminated upon 90 days’ notice by a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Portfolio.
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The following tables show the management fees paid to the Manager (which includes amounts paid by the Manager to the Sub-Advisers), and the amounts waived and/or reimbursed by the Manager, with respect to each Portfolio for the last three fiscal years:
Fees Paid to the Manager For the Year Ended December 31, Fees Waived by the Manager 1 For the Year Ended December 31, 2025 2024 2023 2025 2024 2023 Advantage Large Cap Core Portfolio $799,088 $772,300 $671,183 $1,470 $1,392 $10,246 Balanced Portfolio $1,721,957 $1,710,812 $1,646,572 $21,192 $36,161 $38,062 Capital Appreciation Portfolio $943,901 $896,849 $714,773 $551 $246 $200 Global Allocation Portfolio $565,983 $553,379 $549,734 $326,013 $421,085 $407,888 Government Money Market Portfolio $404,344 $424,967 $409,438 $25,204 $9,676 $26,259
Fees Reimbursed by the Manager For the Year Ended December 31, 2025 2024 2023 Advantage Large Cap Core Portfolio $200,166 $213,094 $219,003 Balanced Portfolio $472,155 $465,507 $483,293 Capital Appreciation Portfolio $248,145 $240,303 $172,069 Global Allocation Portfolio $221,683 $201,959 $222,968 Government Money Market Portfolio $143,053 $164,694 $165,057
1 The Manager has contractually agreed to waive and/or reimburse fees and/or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements for each Portfolio (excluding any Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Portfolio expenses (as defined in each Portfolio’s Prospectus)) to 0.50% of each respective Portfolio’s average daily net assets through June 30, 2027, with the exception of the Capital Appreciation Portfolio, the Global Allocation Portfolio and the Government Money Market Portfolio. BlackRock has contractually agreed to waive and/or reimburse fees and/or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements for each of the Capital Appreciation Portfolio and the Global Allocation Portfolio (excluding any Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Portfolio expenses (as defined in each Portfolio’s Prospectus)) to 0.57% of each respective Portfolio’s average daily net assets through June 30, 2027. Effective June 2, 2025, BlackRock has contractually agreed to waive and/or reimburse fees and/or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements of the Government Money Market Portfolio (excluding any Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Portfolio expenses (as defined in the Government Money Market Portfolio’s Prospectus)) to 0.43% of the Government Money Market Portfolio’s average daily net assets through June 30, 2027. Prior to June 2, 2025, BlackRock has contractually agreed to waive and/or reimburse fees and/or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements of the Government Money Market Portfolio (excluding any Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Portfolio expenses (as defined in the Government Money Market Portfolio’s Prospectus)) to 0.50% of the Government Money Market Portfolio’s average daily net assets through June 30, 2027. These contractual arrangements may be terminated, with respect to each Portfolio, upon 90 days’ notice by a majority of the Independent Directors of the Portfolio or by a vote of a majority of the outstanding voting securities of the Portfolio.
The Manager has entered into administrative services agreements with certain Insurance Companies, including Transamerica Life Insurance Company and Transamerica Financial Life Insurance Company, pursuant to which the Manager compensates such companies for administrative responsibilities relating to the Company, which are performed by such Insurance Companies.
Payment of Expenses. The Investment Management Agreement obligates the Manager to provide investment advisory services and to pay all compensation of and furnish office space for officers and employees of the Fund connected with investment and economic research, trading and investment management of the Portfolios, as well as the fees of all Directors of the Fund who are affiliated persons of the Manager. Each Portfolio pays all other expenses incurred in its operation, including a portion of the Fund’s general administrative expenses allocated on the basis of the Portfolio’s asset size. Expenses that will be borne directly by the Portfolios include redemption expenses, expenses of portfolio transactions, shareholder servicing costs, expenses of registering the shares under Federal, state or foreign laws, pricing costs (including the daily calculation of net asset value), interest, certain taxes, charges of the custodian and transfer agent and other expenses attributable to a particular Portfolio. Expenses which will be allocated on the basis of size of the respective Portfolios include directors’ fees, legal expenses, state franchise taxes, auditing services, costs of printing proxies, stock certificates, shareholder reports
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and prospectuses and statements of additional information (to the extent not paid for by BlackRock Investments, LLC (“BRIL” or the “Distributor”), SEC fees, accounting costs and other expenses properly payable by the Fund and allocable on the basis of size of the respective Portfolios. Any litigation costs may be directly applicable to the Portfolios or allocated on the basis of the size of the respective Portfolios. The Board of Directors has determined that this is an appropriate method of allocation of expenses.
Generally, only insurance company separate accounts may purchase Portfolio shares, for the benefit of such insurance company’s contract holders who elect to have all or a portion of their premium contributions invested in shares of the Portfolios. Accordingly, ea ch insurance company separate account that owns shares of a Portfolio maintains omnibus accounts with the Fund’s transfer agent for the benefit of the insurance company’s contract owners, often resulting in considerabl e savings in administrative expenses for the Fund’s management. The Manager, the Distributor or their affiliates may make payments out of their own resources to insurance companies and other financial intermedia ries to compensate them for performing sub-transfer agency, recordkeeping and other administrative services on behalf of individual contract owners.
Portfolio Manager Information
Each Portfolio is managed by the portfolio manager or management team described in its Prospectus.
Other Portfolios and Accounts Managed
Set forth below is information regarding other funds and accounts managed by each Portfolio’s (other than the Government Money Market Portfolio’s) portfolio manager or managers as of December 31, 2025.
Advantage Large Cap Core Portfolio
Number of Other Accounts Managed and Assets by Account Type
Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based
Name of Portfolio Manager
Other Registered Investment Companies
Other Pooled Investment Vehicles Other Accounts
Other Registered Investment Companies
Other Pooled Investment Vehicles Other Accounts Raffaele Savi 36 63 19 0 11 3 $44.70 Billion $49.39 Billion $36.98 Billion $0 $21.68 Billion $4.36 Billion Travis Cooke, CFA 32 126 18 0 4 6 $28.72 Billion $27.33 Billion $15.79 Billion $0 $7.53 Billion $5.87 Billion Richard Mathieson 33 305 46 0 5 9 $34.08 Billion $38.68 Billion $65.30 Billion $0 $2.60 Billion $10.85 Billion
Balanced Portfolio
Number of Other Accounts Managed and Assets by Account Type
Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based
Name of Portfolio Manager
Other Registered Investment Companies
Other Pooled Investment Vehicles
Other Accounts
Other Registered Investment Companies
Other Pooled Investment Vehicles
Other Accounts Philip J. Green 27 53 16 0 6 6
$$$$$$ $20.66 Billion $26.89 Billion $13.00 Billion $0 $2.60 Billion $6.07 Billion Michael Pensky, CFA 37 54 6 0 8 0
$$$$$$ $110.22 Billion $19.78 Billion $1.04 Billion $0 $3.10 Billion $0 Daniel Felder, CFA 22 14 14 0 0 4 $12.35 Billion $8.73 Billion $11.71 Billion $0 $0 $4.13 Billion
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Capital Appreciation Portfolio
Number of Other Accounts Managed and Assets by Account Type
Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based
Name of Portfolio Manager
Other Registered Investment Companies
Other Pooled Investment Vehicles Other Accounts
Other Registered Investment Companies
Other Pooled Investment Vehicles Other Accounts Sally Du, CFA 12 7 0 0 0 0 $21
11 Billi$707 Billi$0 $0 $0 $0 $21.11 Billion $7.07 Billion $0 $0 $0 $0 Reid Menge 16 7 2 0 0 0 $40
07 Billi$2127 Billi$1950 Milli$0 $0 $0 $40.07 Billion $21.27 Billion $195.0 Million $0 $0 $0
Global Allocation Portfolio
Number of Other Accounts Managed and Assets by Account Type
Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based
Name of Portfolio Manager
Other Registered Investment Companies
Other Pooled Investment Vehicles Other Accounts
Other Registered Investment Companies
Other Pooled Investment Vehicles Other Accounts Rick Rieder 22 27 41 0 4 1 $122.0 Billion $50.35 Billion $5.28 Billion $0 $27.92 Million $104.9 Million Russ Koesterich, CFA, JD 9 9 33 0 0 0 $32
41 Billi$2303 Billi$1408 Milli$0 $0 $0 $32.41 Billion $23.03 Billion $140.8 Million $0 $0 $0
Portfolio Manager Compensation Overview
The discussion below describes the portfolio managers’ compensation as of December 31, 2025.
BlackRock’s financial arrangements with its portfolio ma nagers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.
Base Compensation. Generally, portfolio managers receive base compensation based on their position with the firm.
Discretionary Incentive Compensation
Mr. Menge and Ms. Du
Generally, discretionary incentive compensation for Fundamental Equities portfolio managers is based on a formulaic compensation program. BlackRock’s form ulaic portfolio manager compensation program is based on team revenue and pre-tax investment performance relative to appropriate competitors or benchmarks over 3-and 5-year performance periods, as applicable. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Portfolio or other accounts managed by the portfolio managers are measured. BlackRock’s global c ompensation team determines the benchmarks or rankings against which the performance of funds and other accounts managed by each portfolio management team is compared and the period of time over which performance is evaluated. With respect to these portfolio managers, such benchmarks for the Portfolios and other accounts are:
Portfolio Manager Portfolios Managed Applicable Benchmarks Sally Du, CFA ........... Capital Appreciation
Pfli p
Portfolio ..............
S&P 500 Index; ICE BofA US 3-month Treasury Bill Index; Russell
1000 Id 1000 Index. Reid Menge ............. Capital Appreciation
Pfli p
Portfolio ..............
MSCI ACWI 25% Call Overwrite Index; MSCI All Country World
Id(NTl R)MSCI All CWld Ifi ; y
Index (Net Total Return); MSCI All Country World Information
ThlIdNRiUSD ();
Technology Index — Net Return in USD. A smaller element of portfolio manager discretionary comp ensation may include consideration of: financial results, expense control, profit margins, strategic planning and implementation, quality of client service, market share,
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corporate reputation, capital allocation, compliance and risk control, leadership, technology and innovation. These factors are considered collectively by BlackRock management and the relevant Chief Investment Officers.
Discretionary Incentive Compensation
Messrs. Cooke, Mathieson and Savi
Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. Among other things, Bl ackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Funds and other accounts managed by each portfolio manager relative to the various benchmarks. Performance is generally assessed over trailing 1-, 3-, and 5-year periods relative to applicable benchmarks. The performance of Messrs. Cooke, Mathieson and Savi is not measured against a specific benchmark.
Discretionary Incentive Compensation
Messrs. Felder, Green and Pensky
Discretionary incentive compensation is a function of several components: the commercial performance of BlackRock, Inc., the commercial performance of the portfo lio manager’s group, client investment performance relative to predetermined benchmarks for which the portfolio manager’s group is responsible, and the individual’s contribution to the overall performance of these portfolios and BlackRock. Commercial and investment performance is generally assessed over trailing 1-,3-, and 5-year periods. The relative benchmarks for these portfolio managers are from table below here.
Portfolio Manager Funds Managed Applicable Benchmarks Daniel Felder, CFA
PhiliG Philip Green .............
Balanced Portfolio ...... A combination of market-based indices (Russell 1000, MSCI All
Wld IdICE BfA 3Mh US T Bill)i (,
Country World Index, ICE BofA 3-Month US T Bill), certain custom
idid ifd id y ,
indices and certain fund industry peer groups. Michael Pensky, CFA ...... Balanced Portfolio ...... A combination of market-based indices (MSCI EAFE, Russell 3000,
bUSABd IdICE BfA 3Mh US T Bil (, , Bloomberg U.S. Aggregate Bond Index, ICE BofA 3-Month US T Bill),
iid idid ifd id g ggg,
certain customized indices and certain fund industry peer groups.
Discretionary Incentive Compensation
Messrs. Rieder and Koesterich
Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, benchmarks are the same as the benchmark or benchmarks against which the performance of Global Allocation Portfolio or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s c ompensation based on the performance of the Portfolio and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1- and 5year periods, as applicable, and is generally assessed over trailing 1-, 3- and 5-year periods relative to benchmarks plus an alpha target as well as against peer groups. With respect to these portfolio managers in relation to these portfolios, the benchmarks for the Portfolio and other accounts are:
Portfolio Manager Funds Managed Applicable Benchmarks Rick Rieder Russ Koesterich, CFA, JD Global Allocation Portfolio ..............
S&P 500 Index, FTSE World ex-US Index, ICE BofA Current 5-Year
TIdFTSE NUS DllWld GBd Id , ,
Treasury Index, FTSE Non-US Dollar World Government Bond Index,
MSCI Wld NTR Idd MSCI ACWI MiiVlili y ,
MSCI World Net TR Index and MSCI ACWI Minimum Volatility
(USD) Id(USD) (USD) Index (USD)
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Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc. stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.
Portfolio managers receive their annual discretionary incentive compensation in the form of cash. Portfolio managers whose total compensation is above a specified threshold also receive deferred BlackRock, Inc. stock awards annually as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. In some cases, additional deferred BlackRock, Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align interests with long-term shareholders and motivate performance. Deferred BlackRock, Inc. stock awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of these Portfolios have deferred BlackRock, Inc. stock awards.
For certain portfolio managers, a portion of the discretionary incentive compensation is also distributed in the form of deferred cash awards that notionally track the returns of select BlackRock investment products they manage, which provides direct alignment of portfolio manager discretionary incentive compensation with investment product results. Deferred cash awards vest ratably over a number of years and, once vested, settle in the form of cash. Only portfolio managers who manage specified products and whose total compensation is above a specified threshold are eligible to participate in the deferred cash award program.
Other Compensation Benefits. In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:
Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (“RSP”), and the BlackRock Employee Stock Purchase Plan (“ESPP”). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equa l to 3-5% of eligible compensation up to the IRS limit ($350,000 for 2025). The RSP offers a range of investment op tions, including registered investment companies and collective investment funds managed by the firm. Bl ackRock contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.
Portfolio Ownership
The following table sets forth the dollar range of equity securities of the Portfolios beneficially owned by each portfolio manager as of the fiscal year ended December 31, 2025.
Portfolio Manager Portfolio(s) Managed Dollar Range of Equity Securities of the Portfolio(s) Owned Travis Cooke, CFA .......... Advantage Large Cap Core Portfolio None Sally Du, CFA ............ Capital Appreciation Portfolio None Daniel Felder, CFA .......... Balanced Portfolio None Philip J. Green ............ Balanced Portfolio None Russ Koesterich, CFA, JD ....... Global Allocation Portfolio None Richard Mathieson .......... Advantage Large Cap Core Portfolio None Reid Menge ............. Capital Appreciation Portfolio None Michael Pensky, CFA ......... Balanced Portfolio None Rick Rieder ............. Global Allocation Portfolio None Raffaele Savi ............ Advantage Large Cap Core Portfolio None
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Portfolio Manager Potential Material Conflicts of Interest
BlackRock has built a professional working environm ent, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Portfolios, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Portfolios. In addition, BlackRock, its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Portfolios. BlackRock, or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Portfolios by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a Portfolio. It should also be noted that Messrs. Cooke, Koesterich, Mathieson, Rieder, Green, Menge and Savi may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Messrs. Cooke, Koesterich, Mathieson, Rieder, Green, Menge and Savi may therefore be entitled to receive a portion of any incentive fees earned on such accounts.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.
Accounting Services. The Fund has entered into an agreement with JPM pursuant to which JPM provides certain accounting services to the Fund. JPM records investment, capital share and income and expense activities; verifies and transmits trade tickets; maintains accounting ledgers for investment securities; maintains tax lots; reconciles cash with the Fund’s custodian; reports cash balances to the Manager; prepares certain financial statements; calculates expenses, gains, l osses and income; controls disbursements; works with independent pricing sources; and computes and reports net asset value. In connection with its accounting services, JPM also provides certain administration services. The Fund pays a fee for these services. The Manager provides certain additional accounting services to the Portfolio and the Fund reimburses the Manager for these services.
The table below sets forth the fees paid by the Fund to JPM and the Manager for accounting services for the periods indicated:
Fees Paid to JPM Fees Paid to the Manager For the Year Ended December 31, For the Year Ended December 31, 2025 2024 2023 2025 2024 2023 Advantage Large Cap Core Portfolio $35,290 $43,586 $53,994 $0 $0 $0 Balanced Portfolio $52,237 $57,932 $62,580 $0 $0 $0 Capital Appreciation Portfolio $39,390 $45,189 $54,435 $0 $0 $0
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Fees Paid to JPM Fees Paid to the Manager For the Year Ended December 31, For the Year Ended December 31, 2025 2024 2023 2025 2024 2023 Global Allocation Portfolio $174,481 $182,562 $151,333 $0 $0 $0 Government Money Market Portfolio $17,029 $26,625 $37,237 $0 $0 $0
Custodian Services. The custodian is responsible for safeguarding and controlling a Portfolio’s cash and securities, handling the receipt and delivery of securities a nd collecting interest and dividends on the Portfolio’s investments. The custodian is authorized to establish separate accounts in foreign currencies and to cause foreign securities owned by a Portfolio to be held in its offices outside the United States and with certain foreign banks and securities depositories. JPMorgan Chase Bank, N.A. (“JPM”), 383 Madison Avenue, New York, New York 10179, is the custodian to each Portfolio.
Transfer Agency Agreement. BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon” or the “Transfer Agent”), which has its principal place of business at 118 Flanders Road, Westborough, MA 01581, serves as the Fund’s Transfer Agent pursuant to a Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement (the “Transfer Agen cy Agreement”) with the Fund. Pursuant to the Transfer Agency Agreement, the Transfer Agent is responsible for t he issuance, transfer and redemption of shares and the opening and maintenance of insurance contract owners’ accounts. BNY Mellon will receive annual compensation from each Portfolio and will be entitle d to reimbursement of out-of-pocket expenses.
Organization and Management of Wholly-Owned Subsidiary. Global Allocation Portfolio intends to gain exposure to commodity markets by investing up to 25% of its total assets in the Global Allocation Subsidiary. The Global Allocation Subsidiary invests primarily in commodity-related instruments.
The Subsidiary is a company organized under the laws of the Cayman Islands, whose registered office is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman KYI-1104, Cayman Islands. The Subsidiary’s affairs are overseen by a board of directors, which is comprised of John M. Perlowski and Trent Walker, each a member of the Fund’s Board of Directors.
The Manager provides investment management and administrative services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing it with investment advisory or administrative services. However, Global Allocatio n Portfolio pays the Manager based on the Portfolio’s assets, including the assets invested in the Subsidiary. The Subsidiary entered into contracts for the provision of advisory, custody, and audit services with the same service providers that provide those services to Global Allocation Portfolio.
The Subsidiary is managed pursuant to compliance policies and procedures that are the same, in all material respects, as the policies and procedures adopted by the Fund. As a result, the Manager, in managing the Subsidiary’s portfolio, is subject to the same investment policies and restrictions that apply to the management of Global Allocation Portfolio, and, in particular, to the requirements relating to portfolio leverage, liquidity, brokerage, and the timing and method of the valuation of the Subsidiary’s portfolio investments and shares of the Subsidiary. These policies and restrictions are described elsewhere in detail in this SAI. Global Allocation Portfolio and the Subsidiary test for compliance with certain investment restrictions on a consolidated basis.
Credit Agreement. The Fund, on behalf of the Portfolios (other than Government Money Market Portfolio), along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.4 billion credit agreement with a group of lenders, which facility terminates on April 8, 2027, unless otherwise extended or renewed (the “Credit Ag reement”). Excluding commitments designated for certain Participating Funds, the Participating Funds, including the Portfolios, can borrow up to an aggregate commitment amount of $1.75 billion at any time outsta nding, subject to asset coverage and other limitations as specified in the Credit Agreement. The Portfolios may borrow under the Credit Agreement to meet shareholder redemptions and for other lawful purposes. However, the Portfolios may not borrow under the Credit Agreement for leverage. The Portfolios may borrow up to the maximum amount allowable under the Portfolios’ current Prospectuses and SAI, subject to various other legal, regulatory or contractual limits.
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Borrowing results in interest expense and other fees and expenses for the Portfolios which may impact the Portfolios’ net expenses. The costs of borrowing may reduce the Portfolios’ returns. Each Portfolio is charged its pro rata share of upfront fees and commitment fees on the aggregate commitment amount based on its net assets. If the Portfolios borrow pursuant to the Cred it Agreement, the Portfolios will be charged interest at a variable rate.
V. Information on Distribution and Other Service Arrangements
Distribution and Other Arrangements. BRIL acts as the Fund’s sole distributor. The Fund has entered into a distribution agreement (the “Distribution Agreem ent”) with BRIL, an affiliate of the Manager, with respect to the sale of the Portfolios’ shares to the Distributor fo r resale to Insurance Companies’ accounts. Such shares will be sold at their respective net asset values and therefore will involve no sales charge.
The Distribution Agreement is subject to the same renew al requirements and termination provisions as the Investment Management Agreement described above.
The Manager, the Distributor and their affiliates may make payments relating to distribution and sales support activities out of their past profits or other sources available to them (and not as an additional charge to a Portfolio). From time to time, the Manager, the Dis tributor or their affiliates may compensate affiliated and unaffiliated insurance companies for the sale and distribution of shares of a Portfolio or for services to a Portfolio and its contract holders. These payments may be made to insurance companies to pay for marketing support activities, training sales personnel regarding the Portfolios, compensating financial intermediaries and broker-dealers to pay or reimburse them for their servi ces or expenses in connection with the distribution of variable annuity and variable life insurance contracts i nvesting directly in Portfolio shares, and compensating sales personnel in connection with the allocation of cash values and premium of variable annuity and variable life insurance contracts to investments in Portfolio shares. The payments made by the Manager, the Distributor and their affiliates are based on a percentage of the value of shares sold to insurance companies for their customers’ investment subaccounts, and may be different for different insurance companies. The payments described above are made from the Manager’s, the Distributor’s or their affiliates’ own assets pursuant to agreements with insurance companies and d o not change the price paid by insurance companies for the purchase of a Portfolio’s shares or the amount a Portfolio will receive as proceeds from such sales.
The payments described above may be made, at the discretion of BRIL, BlackRock or their affiliates, to insurance companies in connection with the sale and di stribution of Portfolio shares. Pursuant to applicable Financial Industry Regulatory Authority (“FINRA”) reg ulations, the details of certain of these payments, including the insurance companies receiving such paym ents in connection with the sale and distribution of Portfolio shares, are required to be disclosed. As of the date of this SAI, as amended or supplemented from time to time, no insurance companies are receiving such payments. In lieu of payments pursuant to the foregoing, the Manager, the Distributor or their affiliates may make payments to insurance companies of an agreed-upon amount that will not exceed the amount that would have been payable pursuant to the above, and may also make similar payments to other insurance companies.
If investment advisers, distributors or affiliates of mutual funds pay bonuses and incentives in differing amounts, financial firms and their financial consultants may have financial incentives for recommending a particular mutual fund over other mutual funds. In addition, depending on the arrangements in place at any particular time, a financial firm and its financial c onsultants may also have a financial incentive for recommending a particular share class over other share classes. You should consult your financial adviser and review carefully any disclosure by the financial firm as to compensation received by your financial adviser and for more information about the payments described above.
Furthermore, the Manager, the Distributor and their affiliates may contribute to various non-cash and cash incentive arrangements to promote the sale of shares, and may sponsor various contests and promotions subject to applicable FINRA regulations in which participants may receive prizes such as travel awards, merchandise and cash. Subject to applicable FINRA regulations, the Manager, the Distributor and their affiliates may also (i) pay for the travel expenses, meals, lodging and entertainment of broker/dealers, financial
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institutions and their salespersons in connection with educational and sales promotional programs, (ii) sponsor speakers, educational seminars and charitable events and (iii) provide other sales and marketing conferences and other resources to broker/dealers, financial institutions and their salespersons.
Insurance companies may charge their clients additional fees for account-related services. Insurance companies may charge their customers a service fee in connectio n with the purchase or redemption of Portfolio shares. The amount and applicability of such a fee is determined and disclosed to its customers by each individual insurance company. Service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in the Prospectuses and this SAI. Your insurance company will provide you with specific information about any service fees you will be charged.
A Portfolio may enter into agreements with insurance c ompanies pursuant to which the Portfolio will pay an insurance company for administrative, networking, recordkeeping, sub-transfer agency and shareholder services. These payments are generally based on either (1) a percentage of the average daily net assets of Portfolio shareholders serviced by an insurance company or (2) a fixed dollar amount for each account serviced by an insurance company. The aggregate amount of these payments may be substantial. From time to time, the Manager, the Distributor or their affiliates also may pay a portion of the fees for administrative, networking, recordkeeping, sub-transfer agency and shareholder services described above at its or their own expense and out of its or their legitimate profits.
VI. Computation of Offering Price Per Share
The offering price for a Portfolio’s shares is equal to the net asset value computed by dividing the value of the Portfolio’s net assets by the number of shares outstanding. For more information on the purchasing and valuation of shares, please see “Purchase of Shares” and “Pricing of Shares,” as applicable, in the relevant Part II of this SAI for your Portfolio. The Subsidiary is subject to the same valuation policies as Global Allocation Portfolio as described in “Pricing of Shares” in Part II of this SAI. Global Allocation Portfolio’s investment in the Subsidiary is valued based on the value of the Subsidiary’s portfolio investments. The Subsidiary prices its portfolio investments pursuant to the same pricing and valuation methodologies and procedures used by Global Allocation Portfolio, which require, among other things, that the Subsidiary’s portfolio investments be marked-to-market (that is, the value on the Subsidiary’s books changes) each business day to reflect changes in the market value of the investment.
VII. Portfolio Transactions and Brokerage
See “Portfolio Transactions and Brokerage” and “Portfolio Transactions,” as applicable, in the relevant Part II of this SAI for your Portfolio for more information.
Brokerage Commissions
Information about the brokerage commissions paid by the Fund, including commissions paid to Affiliates, is set forth in the following table:
Aggregate Brokerage Commissions Paid
Commissions Paid to Affiliates For the Year Ended December 31, For the Year Ended December 31, 2025 2024 2023 2025 2024 2023 Advantage Large Cap Core Portfolio $35,341 $48,733 $56,025 $0 $0 $0 Balanced Portfolio $75,846 $77,065 $87,110 $0 $0 $0 Capital Appreciation Portfolio 1 $51,154 $13,813 $19,356 $0 $0 $0 Global Allocation Portfolio $123,578 $143,800 $127,521 $0 $0 $0 Government Money Market Portfolio $0 $0 $0 $0 $0 $0 1 The increase in the brokerage commissions paid by BlackRock Capital Appreciation Portfolio for the fiscal year ended December 31, 2025 as compared to the prior fiscal year was primarily driven by increased market volatility and turnover. The following table shows the dollar amount of brokerage commissions paid to brokers for providing Section 28(e) research/brokerage services under Section 28(e) of the Securities Exchange Act of 1934, as
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amended, and the approximate dollar amount of the transactions involved for the fiscal year ended December 31, 2025. The provision of Section 28(e) research/brokerage services was not necessarily a factor in the placement of all brokerage business with such brokers.
Amount of Commissions Paid to Brokers for Providing 28(e) Eligible Research Services
Amount of Brokerage Transactions Involved Advantage Large Cap Core Portfolio $19,523 $147,978,883 Balanced Portfolio $19,904 $93,158,242 Capital Appreciation Portfolio $34,673 $228,830,690 Global Allocation Portfolio $23,263 $79,229,252
Securities Lending
To the extent that a Portfolio engages in securities lending, the Portfolio conducts its securities lending pursuant to an exemptive order from the Commission permitting it to lend portfolio securities to borrowers affiliated with the Portfolio and to retain an affiliate of the Portfolio as securities lending agent. To the extent that a Portfolio engages in securities lending, BlackRock Investment Management, LLC (“BIM”) acts as securities lending agent for the Portfolio, subject to the overall supervision of the Manager, pursuant to a written agreement (the “Securities Lending Agency Ag reement”). BIM administers the lending program in accordance with guidelines approved by the Board.
Those Portfolios that engage in securities lending retain a portion of the securities lending income and remit the remaining portion to BIM as compensation for its services as securities lending agent. Securities lending income is generally equal to the total of income earned from the reinvestment of cash collateral (and excludes collateral investment fees as defined below), and any fees or other payments to and from borrowers of securities. As securities lending agent, BIM bears all operational costs directly related to securities lending. Each Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BlackRock (the “collateral investment fees”); however, the securities lending agent has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees a Portfolio bears to an annual rate of 0.04%. Such money market fund shares will not be subject to a sales load, distribution fee or service fee.
To the extent that a Portfolio invests cash collateral in a non-government money market fund, the Portfolio may be subject to a discretionary liquidity fee of up to 2% on all redemptions. Discretionary liquidity fees may be imposed or terminated at any time at the discretion of the board of directors of the money market fund, or its delegate, if it is determined that such fee would be, or would not be, respectively, in the best interest of the money market fund. Additionally, a Portfolio will be subject to a mandatory liquidity fee if the money market fund’s total net redemptions on a single day exceed 5% of the money market fund’s net assets, unless the liquidity costs are de minimis (i.e., less than one basis point (0.01%)). The money market fund will determine the size of the mandatory liquidity fee by making a good faith estimate of certain costs the money market fund would incur if it were to sell a pro rata amount of each security in the portfolio to satisfy the amount of net redemptions on that day. There is no limit to the size of a mandatory liquidity fee. If the money market fund cannot estimate the costs of selling a pro rata amount of each portfolio security in good faith and supported by data, it is required to apply a default liquidity fee of 1% on the value of shares redeemed on that day. The imposition of any such discretionary or mandatory liquidity fee would reduce the Portfolios’ returns on securities lending.
Under the securities lending program, the Portfolios are categorized into one of several specific asset classes. The determination of a Portfolio’s asset class category (fix ed-income, domestic equity, international equity, or fund of funds), each of which may be subject to a different fee arrangement, is based on a methodology agreed to by the the Portfolios and BIM.
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Pursuant to the current securities lending agreement: (i) if Government Money Market Portfolio were to engage in securities lending, the Portfolio retains 82% of securities lending income (which excludes collateral investment fees); and (ii) this amount can never be less than 70% of the sum of securities lending income plus collateral investment fees.
Pursuant to the current securities lending agreement: (i) Advantage Large Cap Core Portfolio, Global Allocation Portfolio and Capital Appreciation Portfo lio retain 81% of securities lending income (which excludes collateral investment fees); and (ii) this amount can never be less than 70% of the sum of securities lending income plus collateral investment fees.
Pursuant to the current securities lending agreement: (i) Balanced Portfolio retains 82% of securities lending income (which excludes collateral investment fees); and (ii) this amount can never be less than 70% of the sum of securities lending income plus collateral investment fees.
In addition, commencing the business day following the date that the aggregate securities lending income earned across the BlackRock Multi-Asset Complex in a calendar year exceeds specific thresholds, each Portfolio, pursuant to the current securities lending agreement, will receive for the remainder of that calendar year securities lending income as follows:
Government Money Market Portfolio
(i) if the Portfolio were to engage in securities lending, 85% of securities lending income (which excludes collateral investment fees); and (ii) this amount can never be less than 70% of the sum of securities lending income plus collateral investment fees.
Advantage Large Cap Core Portfolio, Global Allocation Portfolio and Capital Appreciation Portfolio
(i) 84% of securities lending income (which excludes collateral investment fees); and (ii) this amount can never be less than 70% of the sum of securities lending income plus collateral investment fees.
Balanced Portfolio
(i) 85% of securities lending income (which excludes collateral investment fees); and (ii) this amount can never be less than 70% of the sum of securities lending income plus collateral investment fees.
The services provided to each Portfolio by BIM, in the most recent fiscal year ended December 31, 2025 primarily included the following:
(1) selecting borrowers from an approved list of bo rrowers and executing a securities lending agreement as agent on behalf of each Portfolio with each such borrower;
(2) negotiating the terms of securities loans, including the amount of fees;
(3) directing the delivery of loaned securities;
(4) monitoring the daily value of the loaned securities and directing the payment of additional collateral or the return of excess collateral, as necessary;
(5) investing cash collateral received in connection with any loaned securities;
(6) monitoring distributions on loaned securitie s (for example, interest and dividend activity);
(7) in the event of default by a borrower with respect to any securities loan, using the collateral or the proceeds of the liquidation of collateral to purchase rep lacement securities of the same issue, type, class and series as that of the loaned securities; and
(8) terminating securities loans and arranging for the return of loaned securities to each Portfolio at loan termination.
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The following table shows the dollar amounts of incom e and fees/compensation related to the securities lending activities of each Portfolio during its most recent fiscal year ended December 31, 2025.
Advantage Large Cap Core Portfolio
Balanced Portfolio
Capital Appreciation Portfolio
Global Allocation Portfolio
Government Money Market Portfolio Gross income from securities lending activities $103,276 $121,975 $198,872 $164,647 $0
Fees and/or compensation for securities lending activities and related services Securities lending income paid to BIM for g p
services as securities lending agent $1,170 $1,617 $2,061 $3,679 $0 Cash collateral management expenses not included in securities lending income paid g p
to BIM $917 $1,083 $1,772 $1,443 $0 Administrative fees not included in securities lending income paid to BIM $0 $0 $0 $0 $0 Indemnification fees not included in securities lending income paid to BIM $0 $0 $0 $0 $0 Rebates (paid to borrowers) $95,912 $111,509 $185,565 $143,727 $0 Other fees not included in securities lending income paid to BIM $0 $0 $0 $0 $0 Aggregate fees/compensation for securities lending activities $97,999 $114,209 $189,398 $148,849 $0 Net income from securities lending activities $5,277 $7,766 $9,474 $15,798 $0
Regular Broker/Dealer Information:
As of December 31, 2025, the value of each Portfolio’s holdings of the securities of its regular brokers or dealers (as defined in Rule 10b-1 under the Investment Company Act), if any portion of such holdings were purchased during the fiscal year ended December 31, 2025, is as follows:
Advantage Large Cap Core Portfolio
Regular Broker-Dealer Debt (D)/Equity (E) Aggregate Holdings (000’s) BofA Securities, Inc. E $2,998 J.P. Morgan Securities LLC E $2,597 Morgan Stanley & Co. LLC E $1,868 Citigroup Global Markets Inc. E $1,407
Balanced Portfolio
Regular Broker-Dealer Debt (D)/Equity (E) Aggregate Holdings (000’s) Morgan Stanley & Co. LLC D $2,910 J.P. Morgan Securities LLC D $2,364 Goldman Sachs & Co. LLC D $2,145 Citigroup Global Markets Inc. D $1,987 BofA Securities, Inc. D $1,980 BMO Capital Markets Corp. D $369 Wells Fargo Securities, LLC D $136 Barclays Capital, Inc. D $13 Merrill Lynch, Pierce, Fenner & Smith Inc. D $6 BofA Securities, Inc. E $2,624 Morgan Stanley & Co. LLC E $2,364 J. P. Morgan Securities LLC E $1,933
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Regular Broker-Dealer Debt (D)/Equity (E) Aggregate Holdings (000’s) Citigroup Global Markets Inc. E $1,210 BNP Paribas Securities Corp. E $893 UBS Securities LLC E $144 Barclays Capital, Inc. E $109 Wells Fargo Securities, LLC E $20
Capital Appreciation Portfolio
Regular Broker-Dealer Debt (D)/Equity (E) Aggregate Holdings (000’s) Citigroup Global Markets Inc. E $3,739 J.P. Morgan Securities LLC E $2,578
Global Allocation Portfolio
Regular Broker-Dealer Debt (D)/Equity (E) Aggregate Holdings (000’s) J.P. Morgan Securities LLC D $369 Deutsche Bank Securities Inc. D $233 Goldman Sachs & Co. LLC D $173 Citigroup Global Markets Inc. D $86 Morgan Stanley & Co. LLC D $16 UBS Securities LLC D $9 BofA Securities, Inc. E $1,299 J.P. Morgan Securities LLC E $1,227 Citigroup Global Markets Inc. E $1,084 Deutsche Bank Securities Inc. E $287 Goldman Sachs & Co. LLC E $181 Morgan Stanley & Co. LLC E $119 Nomura Securities International, Inc. E $59 UBS Securities LLC E $16
Government Money Market Portfolio
Regular Broker-Dealer Debt (D)/Equity (E) Aggregate Holdings (000’s) None None None
VIII. Purchase of Shares
The Fund continuously offers shares of each Portfolio at prices equal to the respective per share net asset value of the Portfolios. BRIL acts as the Fund’s sole distributor.
Net asset value is determined in the manner set forth under “Determination of Net Asset Value.”
The Fund and the Distributor reserve the right to suspend the sale of shares of each Portfolio in response to conditions in the securities markets or otherwise. Any order may be rejected by the Fund or the Distributor.
Generally, only insurance company separate accounts may purchase Portfolio shares, for the benefit of such insurance company’s contract holders who elect to have all or a portion of their premium contributions invested in shares of the Portfolios. Accordingly, each insurance company separate account that owns shares of the Portfolios maintains omnibus accounts with the Transfer Agent for the benefit of the insurance company’s contract owners, often resulting in considerable savings in administrative expenses for the Fund’s management. The Manager, the Distributor or their affiliates may make payments out of their own resources to insurance companies and other financial intermediaries to compensate them for performing sub-transfer agency, recordkeeping and other administrative services on behalf of individual contract owners. The aggregate amount
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of these payments may be substantial. From time to time, the Manager, the Distributor or their affiliates also may pay a portion of the fees for administrative, networking, recordkeeping, sub-transfer agency and shareholder services described above at its or their own expense and out of its or their legitimate profits.
Pricing of Fund Shares — Government Money Market Portfolio
In accordance with the SEC rule applicable to the valuation of the portfolio securities of the Government Money Market Portfolio and consistent with its operating policies, the Government Money Market Portfolio will maintain a dollar-weighted average portfolio maturity of 60 days or less, purchase instruments having remaining maturities of 397 calendar days or less only (with certain exceptions), and invest only in securities determined by the Manager to be “eligible securities” under the rule. In addition, the Directors have established procedures designed to stabilize, to the extent reasonably possible, the Portfolio’s price per share as computed for the purpose of sales and redemptions at $1.00. The Government Money Market Portfolio calculates net asset value using amortized cost. Deviations of more than an insignificant amount between the net asset value calculated using market quotations and that calculated pursuant to the amortized cost method will be reported to the Directors by the Manager. In the event the Directors determine that a deviation exists which may result in material dilution or other unfair resu lts to investors or existing shareholders, the Portfolio will take such corrective action as it regards as necessary and appropriate, including the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; or establishing a net asset value per share by using available market quotations.
If in the view of the Board of Directors of the Fund it is inadvisable to continue the practice of maintaining the net asset value of the Government Money Market Portfolio at $1.00 per share, the Board of Directors of the Fund reserves the right to alter the procedure. The Fund will notify the accounts of any such alteration.
See “Pricing of Shares” in Part II of this SAI for more information on the valuation of shares.
IX. Special Tax Rules Applicable to Variable Contracts
Each Portfolio has elected to be treated, and intends to qualify each year, as a regulated investment company under the Internal Revenue Code. In order to qualify to be taxable as a regulated investment company, each Portfolio must meet certain income and asset diversification tests and distribution requirements. As regulated investment companies, the Portfolios will not be subject to U.S. federal income tax on their net investment income and net capital gains that they distribute to their shareholders.
Distributions made by a Portfolio to an Account, and exchanges and redemptions of Portfolio shares made by an Account, ordinarily do not cause the corresponding Contract holder to recognize income or gain for U.S. federal income tax purposes. See the Contract prospectus for information regarding the U.S. federal income tax treatment of the distributions to Accounts and the holders of the Contracts.
In order for the Contract holders to be eligible for such U.S. federal income tax deferral, each separate account of the Insurance Companies (referred to as “segregated asset accounts” for U.S. federal income tax purposes) must comply with certain asset diversification requirements and investor control prohibitions.
Diversification Requirements
Specifically, each segregated asset account is required to comply with the diversification requirements of Section 817(h) of the Internal Revenue Code and the regul ations thereunder relating to the tax-deferred status of segregated asset accounts. If a segregated asset account fails these requirements, (i) the Contract would not be treated as an annuity or life insurance contract under the Internal Revenue Code and (ii) the holders of such Contract would be required to include as ordinary income the “income on the contract” for each taxable year. Generally, the “income on the contract” is the excess of (i) the sum of the increase in the net surrender value of the Contract during the taxable year and the cost of the life insurance protection provided under the Contract during the year, over (ii) the premiums paid under the Contract during the taxable year. Contract holders could also be taxable in future years even if the segregated asset account subsequently complied with the diversification tests.
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To satisfy these diversification requirements, as of the end of each calendar quarter or within 30 days thereafter, each segregated asset account must meet one of two tests. Either (i) the segregated asset account must have no more than 55% of its total assets represented by any one investment, no more than 70% of its total assets represented by any two investments, no more than 80% of its total assets represented by any three investments, and no more than 90% of its total assets represented by any four investments or (ii) the segregated asset account must both (a) meet all the tax diversification requirements under Section 851(b)(3) of the Internal Revenue Code (which are applicable to all regulated investment companies) and (b) have no more than 55% of the value of its total assets be attributable to cash, cash items (including receivables), Government securities or securities of other regulated investment companies. For purposes of the first test, all securities of the same issuer are considered a single investment, but in the case of Government securities, each Government agency or instrumentality is considered to be a separate issuer. An alternative test to establish diversification may be available under certain circumstances.
Section 817(h) of the Internal Revenue Code provides a look-through rule for purposes of testing the diversification of a segregated asset account that invests in a regulated investment company such as a Portfolio. If the look-through rule applies, a beneficial interest in a regulated investment company will not be treated as a single investment of a segregated asset account for purposes of the diversification requirements described above; instead, a pro rata portion of each asset of the regulated investment company shall be treated as an asset of the segregated asset account. Treasury Regulations Section 1.817-5(f)(2) provides (except as otherwise permitted) that the look-through rule will apply to a regulated investment company only if (i) all the beneficial interests in the regulated investment company are held by one or more segregated asset accounts of one or more insurance companies and (ii) public access to such regulated investment company is available exclusively through the purchase of a variable contract.
Failure by the Fund to satisfy the Section 817(h) requirements by failing to comply with the “55%-70%-80%90%” diversification test or the safe harbor described above could cause the variable contracts to lose their favorable tax status and require a contract holder to i nclude in ordinary income any income accrued under the contracts for the current and all prior taxable years. Under certain circumstances described in the applicable Treasury regulations, inadvertent failure to satisfy the Section 817(h) diversification requirements may be corrected, but such a correction could require a payment to the IRS with respect to the period or periods during which the investments of the account did not meet the diversification requirements. The amount of any such payment could be based on the tax contract holders would have incurred if they were treated as receiving the income on the contract for the period during which the diversification requirements were not satisfied. Any such failure could also result in adverse tax consequences for the Insurance Company issuing the contracts.
Investor Control Prohibitions
For a Contract to qualify for U.S. federal income tax deferral, it must avoid the prohibition on investor control so that assets in the segregated asset accounts supporting the Contract are considered to be owned for U.S. federal income tax purposes by the Insurance Company and not by the Contract holder. Accordingly, a Contract holder should not have an impermissible level of control over a segregated asset account’s or a Portfolio’s investment in any particular asset. If the Contract holder were considered the owner of the Portfolio shares for U.S. federal income tax purposes, income and gain earned from such Portfolio shares for the current, future and prior taxable years w ould be taxable currently to the Contract holders.
The IRS may consider several factors in determining whether a contract holder has an impermissible level of investor control over a segregated asset account. One factor the IRS considers when a segregated asset account invests in one or more regulated investment companies is whether shares in the regulated investment companies are publicly available or whether such shares are available exclusively through the purchase of a variable contract. Each Portfolio sells its shares directly to separate accounts established and maintained by insurance companies for the purpose of funding variable annuity and variable life insurance contracts and to certain qualified pension and retirement plans, or to other regulated investment companies meeting such requirements, and not to other categories of shareholders.
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A second factor the IRS considers when a segregated asset account invests in one or more regulated investment companies is whether a regulated investment company’s investment strategies are sufficiently broad and general (such as stocks, bonds or money market instruments) to prevent a Contract holder from being deemed to be making particular investment decisions through its investment in the segregated asset account. Under current IRS guidance, the investment strategies of each Portfolio are expected to be sufficiently broad to satisfy this factor and prevent a Contract holder from being deemed to be making particular investment decisions through its investment in the segregated asset account.
Each Portfolio intends (1) to comply with the requirem ents necessary to allow a segregated asset account that invests in the Portfolio to look-through to the Portfolio’s investments for purposes of satisfying the asset diversification requirements of Section 817(h) of the Code, (2) to comply with such asset diversification requirements necessary to prevent the Contract holders from losing their special tax treatment because of investments in the Portfolio, and (3) to comply with the requirements necessary to prevent the Contract holders from having an impermissible level of control over the Portfolio’s assets.
In the event that additional rules, regulations or other guidance is issued by the IRS or the Treasury Department concerning this issue, such guidance could affect the treatment of the Fund as described above, including retroactively. In addition, there can be no assurance that the Fund will be able to continue to operate as currently described, or that the Fund will not have to change its investment objective or investment policies in order to prevent, on a prospective basis, any such rules and regulations from causing variable contract owners to be considered the owners of the shares of the Fund.
Tax Treatment to Insurance Companies
Dividends paid by a Portfolio may be included in the respective Insurance Company’s gross income. The tax treatment of these dividends depends on the Insurance Company’s tax status. A description of an Insurance Company’s tax status is contained in the prospectus for the Contract.
Dividends and interest received by a Portfolio and capital gains recognized by a Portfolio may give rise to withholding and other taxes imposed by foreign count ries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. As a shareholder in a Portfolio, an Insurance Company may be able to claim a credit or take a deduction for foreign taxes paid by the Portfolio if certain requirements are met.
This section summarizes some of the consequences under current federal tax law of an investment in a Portfolio. It is not a substitute for individualized tax advice. Consult your tax adviser about the potential tax consequences of an investment in a Portfolio under all applicable tax laws.
X. Additional Information
Organization of the Fund
The Fund was incorporated under the laws of the State of Maryland on September 4, 1980 as the Merrill Lynch Investment Series Fund, Inc. On January 16, 1981, the Fund changed its name to Merrill Lynch Series Fund, Inc. and on or about May 1, 2005, the Fund changed its name to FAM Series Fund, Inc. and effective September 29, 2006 to BlackRock Series Fund, Inc. The authorized capital stock of the Fund consists of 4,640,000,000 shares of Common Stock, par value $0.10 per share. The shares of Common Stock are divided into five classes: Advantage Large Cap Core Portfolio Common Stock, Balanced Portfolio Common Stock, Capital Appreciation Portfolio Common Stock, Globa l Allocation Portfolio Common Stock, and Government Money Market Portfolio Common Stock. Each Portfolio’s class of Common Stock consists of 100,000,000 shares, except for the Government Money Market Portfolio, which has 2,000,000,000 authorized shares and the Balanced Portfolio, which has 300,000,000 author ized shares. The remaining 2,040,000,000 shares of Common Stock are unclassified. All shares of Common Stock have equal voting rights, except that only shares of the respective Portfolios are entitled to vote on matt ers concerning only that Portfolio. Pursuant to the Investment Company Act and the rules and regulations thereunder, certain matters approved by a vote of all
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shareholders of the Fund may not be binding on a class whose shareholders have not approved such matter. Each issued and outstanding share of a class is entitled to one vote and to participate equally in dividends and distributions declared with respect to such class and in net assets of such class upon liquidation or dissolution remaining after satisfaction of outstanding liabilities. The shares of each class, when issued, will be fully paid and nonassessable, have no preference, preemptive, conversi on, exchange or similar rights, and will be freely transferable. Holders of shares of any class are entitled to redeem their shares as set forth under “Redemption of Shares.” Shares do not have cumulative voting rights and the holders of more than 50% of the shares of the Fund voting for the election of directors can elect all of the directors of the Fund if they choose to do so and in such event the holders of the remaining shares would not be able to elect any directors. The Fund does not intend to hold meetings of shareholders unless under the Investment Company Act shareholders are required to act on any of the following matters: (i) election of directors; (ii) approval of an investment advisory agreement; (iii) approval of a distribution agreement; and (iv) ratification of the selection of independent accountants.
Independent Registered Public Accounting Firm
Deloitte & Touche LLP, with offices located at 115 Federal Street, Boston, Massachusetts 02110, serves as the Fund’s independent registered public accounting firm.
Counsel
Ropes & Gray LLP, with offices at 1211 Avenue of the Americas, New York, New York 10036, serves as the Portfolios’ counsel.
Reports
The Fund issues to the Insurance Companies reports, at least semi-annually, containing unaudited financial statements and annual reports containing financial stat ements examined by auditors approved annually by the Directors.
Inquiries
Inquiries by Insurance Companies that offer Portfolio shares may be addressed to the Fund at the address or telephone number set forth on the cover page of this SAI.
Additional Benchmark Performance Information
As noted in the Prospectus, performance of the BlackRock Balanced Portfolio’s benchmark, MSCI All Country World Index (Net), shown in the Prospectus ge nerally assumes the reinvestment of dividends after the deduction of the maximum withholding tax in each country applicable to non-residents of the country as determined by the index provider. Please see below for the performance of MSCI All Country World Index that does not reflect the deduction of such maximum withholding taxes for the period noted below:
For the periods ended 12/31/25 Average Annual Total Returns 1 Year 5 Years 10 Years MSCI All Country World Gross TR Index (Reflects no deduction for fees, expenses or taxes) ...........................
22.87% 11.70% 12.28%
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Principal Shareholders
To the knowledge of the Fund, the following entities owned of record or beneficially 5% or more of a class of a Portfolio’s shares as of April 1, 2026.
Fund Name Name and Address of Shareholder Percent BlackRock Advantage Large Cap Core Portfolio Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
68.70%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
12.85%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
11.37%
Transamerica Financial Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
6.12%
BlackRock Balanced Portfolio Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
78.34%
Transamerica Financial Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
10.16%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
7.87%
BlackRock Capital Appreciation Portfolio Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
70.48%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
13.31%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
8.83%
Transamerica Financial Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
6.35%
BlackRock Global Allocation Portfolio Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
61.85%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
22.13%
Transamerica Financial Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
9.30%
BlackRock Government Money Market Portfolio Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
69.25%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
12.62%
Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
10.38%
Transamerica Financial Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA 52499-0001
6.70%
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XI. Financial Statements
The audited financial statements, financial high lights and notes thereto in the Portfolios’ Annual Financial Statements and Additional Information for the fiscal year ended December 31, 2025, as filed with the SEC on Form N-CSR (the “2025 Annual Financial Statements”), are incorporated in this SAI by reference. No other parts of the 2025 Annual Financial Statements are incorporated by reference herein. The 2025 Annual Financial Statements have been audited by Deloitte & Touche LLP. The report of Deloitte & Touche LLP is incorporated herein by reference. Such 2025 Annual Financi al Statements have been incorporated herein in reliance upon the report of such firm given their authority as experts in accounting and auditing. Additional copies of the Portfolios’ annual and semi-annual reports to shareholders and the Portfolios’ Annual and Semi Annual Financial Statements and Additional Information may be obtained at no charge by telephoning the Distributor at the telephone number appearing on the front page of this SAI.
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PART II
Throughout this Statement of Additional Information (“SAI”), each BlackRock-advised fund may be referred to as a “Fund” or collectively with others as the “Funds.” Certain Funds may also be referred to as “Municipal Funds” if they invest certain of their assets in municipal investments described below.
Each Fund is organized either as a Maryland corporati on, a Massachusetts business trust or a Delaware statutory trust. In each jurisdiction, nomenclature vari es. For ease and clarity of presentation, shares of common stock and shares of beneficial interest are re ferred to herein as “shares” or “Common Stock,” holders of shares of Common Stock are referred to as “shareholders,” the trustees or directors of each Fund are referred to as “Directors,” the boards of tru stees/directors of each Fund are referred to as the “Board of Directors” or the “Board,” BlackRock A Advisors, LLC, BlackRock Fund Advisors or their respective affiliates is the investment adviser or r manager of each Fund and is referred to herein as the “Manager” or “BlackRock,” and the investment advisory agreement or r management agreement applicable to each Fund is referred to as the “Management Agreement.” Each Fund’s Articles of Incorporation or Declaration of Tr ust, together with all amendments thereto, is referred to as its “charter.” The Investment Company Act of 1940, as amended, is referred to herein as the “Investment Company Act.” The Securities Act of 1933, as amended, is referred to herein as the “Securities Act.” The Securities and Exchange Commission is referred to herein as the “Commission” or the “SEC.”
Certain Funds are “feeder” funds (each, a “Feeder Fund”) that invest all or a portion of their assets in a corresponding “master” portfolio (each, a “Master Portfolio”) of a master limited liability company (each, a “Master LLC”), a mutual fund that has the same objective and strategies as the Feeder Fund. All investments are generally made at the level of the Master Portfolio. This structure is sometimes called a “master/feeder” structure. A Feeder Fund’s investment results will correspond directly to the investment results of the underlying Master Portfolio in which it invests. For simplicity, this SAI uses the term “Fund” to include both a Feeder Fund and its Master Portfolio.
In addition to containing information about the Funds, Part II of this SAI contains general information about all funds in the BlackRock-advised fund complex. Certain information contained herein may not be relevant to a particular Fund.
Investment Risks and Considerations
Set forth below are descriptions of some of the types of investments and investment strategies that one or more of the Funds may use, and the risks and considerations associated with those investments and investment strategies. Please see each Fund’s prospectuses (the “Prospectus”) and the “Investment Objective and Policies,” “Investment Objectives and Policies” or “Investment Strategies and Risks of the Fund” section, as applicable, of Part I of this SAI for further information on each Fund’s investment policies and risks. Information contained in this section about the risks and considerations associated with a Fund’s investments and/or investment strategies applies only to those Funds specifically identified in Part I of this SAI as making each type of investment or using each investment strategy (each, a “Covered Fund”). Information that does not apply to a Covered Fund does not form a part of that Covered Fund’s SAI and should not be relied on by investors in that Covered Fund. Only information that is clearly identified as applicable to a Covered Fund is considered to form a part of that Covered Fund’s SAI.
Asset-Backed Securities. Asset-backed securities are securities backed by home equity loans, installment sale contracts, credit card receivables or other assets. Asset-backed securities are “pass through” securities, meaning that principal and interest payments — net of expenses — made by the borrower on the underlying assets (such as credit card receivables) are passed through to a Fund. The
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value of asset-backed securities, like that of traditional fixed-income securities, typically increases when interest rates fall and decreases when interest rates rise. However, asset-backed securities differ from traditional fixed-income securities because of their potential for prepayment. The price paid by a Fund for its asset-backed securities, the yield the Fund expects to receive from such securities and the average life of the securities are based on a number of factors, including the anticipated rate of prepayment of the underlying assets. In a period of declining interest rates, borrowers may prepay the underlying assets more quickly than anticipated, thereby reducing the yield to maturity and the average life of the asset-backed securities. Moreover, when a Fund reinvests the proceeds of a prepayment in these circumstances, it will likely receive a rate of interest that is lower than the rate on the security that was prepaid. To the extent that a Fund purchases asset-backed securities at a premium, prepayments may result in a loss to the extent of the premium paid. If a Fund buys such securities at a discount, both scheduled payments and unscheduled prepayments will increase current and total returns and unscheduled prepayments will also accelerate the recognition of income which, when distributed to shareholders, will be taxable as ordinary income. In a period of rising interest rates, prepayments of the underlying assets may occur at a slower than expected rate, creating maturity extension risk. This particular risk may effectively change a security that was considered short- or intermediate-term at the time of purchase into a longer term security. Since the value of longer-term securities generally fluctuates more widely in response to changes in interest rates than does the value of shorter-term securities, maturity extension risk could increase the volatility of the Fund. When interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities, and, as noted above, changes in market rates of interest may accelerate or retard prepayments and thus affect maturities.
Asset-Based Securities. Certain Funds may invest in debt, preferred or convertible securities, the principal amount, redemption terms or conversion terms of which are related to the market price of some natural resource asset such as gold bullion. These securities are referred to as “asset-based securities.” A Fund will purchase only asset-based securities that are rated, or are issued by issuers that have outstanding debt obligations rated, investment grade (for example, AAA, AA, A or BBB by S&P Global Ratings (“S&P”) or Fitch Ratings (“Fitch”), or Baa by Moody’s Investors Service, Inc. (“Moody’s”) or commercial paper rated A-1 by S&P or Prime-1 by Moody’s) or by issuers that the Manager has determined to be of similar creditworthiness. Obligations ranked in the fourth highest rating category, while considered “investment grade,” may have certain speculative characteristics and may be more likely to be downgraded than securities rated in the three highest rating categories. If an asset-based security is backed by a bank letter of credit or other similar facility, the Manager may take such backing into account in determining the creditworthiness of the issuer. While the market prices for an asset-based security and the related natural resource asset generally are expected to move in the same direction, there may not be perfect correlation in the two price movements. Asset-based securities may not be secured by a security interest in or claim on the underlying natural resource asset. The asset-based securities in which a Fund may invest may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Certain asset-based securities may be payable at maturity in cash at the stated principal amount or, at the option of the holder, directly in a stated amount of the asset to which it is related. In such instance, because no Fund presently intends to invest directly in natural resource assets, a Fund would sell the asset-based security in the secondary market, to the extent one exists, prior to maturity if the value of the stated amount of the asset exceeds the stated principal amount and thereby realize the appreciation in the underlying asset.
Precious Metal-Related Securities. A Fund may invest in the equity and other securities of companies that explore for, extract, process or deal in precious metals ( e.g. , gold, silver and platinum), and in asset-based securities indexed to the value of such metals. Such securities may be purchased when they are believed to be attractively priced in relation to the value of a company’s precious metal-related assets or when the values of precious metals are expected to benefit from inflationary pressure or other economic, political or financial uncertainty or instability. Based on historical experience, during
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periods of economic or financial instability the securities of companies involved in precious metals may be subject to extreme price fluctuations, reflecting the high volatility of precious metal prices during such periods. In addition, the instability of precious metal prices may result in volatile earnings of precious metal-related companies, which may, in turn, adversely affect the financial condition of such companies. The major producers of gold include the Republic of South Africa, Russia, Canada, the United States, Brazil and Australia. Sales of gold by Russia are largely unpredictable and often relate to political and economic considerations rather than to market forces. Economic, financial, social and political factors within South Africa may significantly affect South African gold production.
Borrowing and Leverage. Each Fund may borrow as a temporary measure for extraordinary or emergency purposes, including to meet redemptions or to settle securities transactions. Certain Funds will not purchase securities at any time when borrowings exceed 5% of their total assets, except (a) to honor prior commitments or (b) to exercise subscription rights when outstanding borrowings have been obtained exclusively for settlements of other securities transactions.
Certain Funds may also borrow in order to make investments, to the extent disclosed in such Fund’s Prospectus. The purchase of securities while borrowings are outstanding will have the effect of leveraging the Fund. Such leveraging increases the Fund’s exposure to capital risk, and borrowed funds are subject to interest costs that will reduce net income. The use of leverage by a Fund creates an opportunity for greater total return, but, at the same time, creates special risks. For example, leveraging may exaggerate changes in the net asset value (“NAV”) of Fund shares and in the yield on the Fund’s portfolio. Although the principal of such borrowings will be fixed, the Fund’s assets may change in value during the time the borrowings are outstanding. Borrowings will create interest expenses for the Fund that can exceed the income from the assets purchased with the borrowings. To the extent the income or capital appreciation derived from securities purchased with borrowed funds exceeds the interest the Fund will have to pay on the borrowings, the Fund’s return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such borrowed funds is not sufficient to cover the cost of borrowing, the return to the Fund will be less than if leverage had not been used and, therefore, the amount available for distribution to shareholders as dividends will be reduced. In the latter case, the Manager in its best judgment nevertheless may determine to maintain the Fund’s leveraged position if it expects that the benefits to the Fund’s shareholders of maintaining the leveraged position will outweigh the current reduced return.
Certain types of borrowings by a Fund may result in the Fund being subject to covenants in credit agreements relating to asset coverage, portfolio composition requirements and other matters. It is not anticipated that observance of such covenants would impede the Manager from managing a Fund’s portfolio in accordance with the Fund’s investment objectives and policies. However, a breach of any such covenants not cured within the specified cure period may result in acceleration of outstanding indebtedness and require the Fund to dispose of portfolio investments at a time when it may be disadvantageous to do so.
Each Fund may at times borrow from affiliates of the Manager, provided that the terms of such borrowings are no less favorable than those available from comparable sources of funds in the marketplace.
Cash Management. Generally, the Manager will employ futures and options on futures to provide liquidity necessary to meet anticipated redemptions or for day-to-day operating purposes. However, if considered appropriate in the opinion of the Manager, a portion of a Fund’s assets may be invested in certain types of instruments with remaining maturities of 397 days or less for liquidity purposes. Such instruments would consist of: (i) obligations of the U.S. Government, its agencies, instrumentalities, authorities or political subdivisions (“U.S. Government Securities”); (ii) other fixed-income securities rated Aa or higher by Moody’s or AA or higher by S&P or, if unrated, of comparable quality in the
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opinion of the Manager; (iii) commercial paper; (iv) bank obligations, including negotiable certificates of deposit, time deposits and bankers’ acceptances; and (v) repurchase agreements. At the time the Fund invests in commercial paper, bank obligations or repurchase agreements, the issuer or the issuer’s parent must have outstanding debt rated Aa or higher by Moody’s or AA or higher by S&P or outstanding commercial paper, bank obligations or other short-term obligations rated Prime-1 by Moody’s or A-1 by S&P; or, if no such ratings are available, the instrument must be of comparable quality in the opinion of the Manager. For more information on money market instruments, see “Money Market Securities” below.
Collateralized Debt Obligations. Certain Funds may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”), collateralized loan obligations (“CLOs”) and other similarly structured securities. CDOs are types of asset-backed securities. A CBO is ordinarily issued by a trust or other special purpose entity (“SPE”) and is typically backed by a diversified pool of fixed-income securities (which may include high risk, below investment grade securities) held by such issuer. A CLO is ordinarily issued by a trust or other SPE and is typically collateralized by a pool of loans, which may include, among others, domestic and non-U.S. senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans, held by such issuer. Investments in a CLO organized outside of the United States may not be deemed to be foreign securities if the CLO is collateralized by a pool of loans, a substantial portion of which are U.S. loans. Although certain CDOs may benefit from credit enhancement in the form of a senior-subordinate structure, over collateralization or bond insurance, such enhancement may not always be present, and may fail to protect a Fund against the risk of loss on default of the collateral. Certain CDO issuers may use derivatives contracts to create “synthetic” exposure to assets rather than holding such assets directly, which entails the risks of derivative instruments described elsewhere in this SAI. CDOs may charge management fees and administrative expenses, which are in addition to those of a Fund.
For both CBOs and CLOs, the cash flows from the SPE are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the “equity” tranche, which bears the first loss from defaults from the bonds or loans in the SPE and serves to protect the other, more senior tranches from default (though such protection is not complete). Since it is partially protected from defaults, a senior tranche from a CBO or CLO typically has higher ratings and lower yields than its underlying securities, and may be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, downgrades of the underlying collateral by rating agencies, forced liquidation of the collateral pool due to a failure of coverage tests, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults as well as investor aversion to CBO or CLO securities as a class. Interest on certain tranches of a CDO may be paid in kind or deferred and capitalized (paid in the form of obligations of the same type rather than cash), which involves continued exposure to default risk with respect to such payments.
The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus are not registered under the securities laws. However, an active dealer market may exist for CDOs, allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed-income securities and asset-backed securities generally discussed elsewhere in this SAI, CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the risk that the collateral may default or decline in value or be downgraded, if rated by a nationally recognized statistical rating organization (“NRSRO”); (iii) a Fund may invest in tranches of CDOs that are subordinate to other tranches; (iv) the structure and complexity of the transaction and the legal documents could lead to disputes among investors regarding the characterization of proceeds; (v) the
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investment return achieved by the Fund could be significantly different than those predicted by financial models; (vi) the lack of a readily available secondary market for CDOs; (vii) the risk of forced “fire sale” liquidation due to technical defaults such as coverage test failures; and (viii) the CDO’s manager may perform poorly.
Commercial Paper. Certain Funds may purchase commercial paper. Commercial paper purchasable by each Fund includes “Section 4(a)(2) paper,” a term that includes debt obligations issued in reliance on the “private placement” exemption from registration afforded by Section 4(a)(2) of the Securities Act. Section 4(a)(2) paper is restricted as to disposition under the Federal securities laws, and is frequently sold (and resold) to institutional investors such as the Fund through or with the assistance of investment dealers who make a market in the Section 4(a)(2) paper, thereby providing liquidity. Certain transactions in Section 4(a)(2) paper may qualify for the registration exemption provided in Rule 144A under the Securities Act. Most Funds can purchase commercial paper rated (at the time of purchase) “A-1” by S&P or “Prime-1” by Moody’s or when deemed advisable by a Fund’s Manager or sub-adviser, “high quality” issues rated “A-2”, “Prime-2” or “F-2” by S&P, Moody’s or Fitch, respectively.
Commercial paper is generally considered to be short-term unsecured debt of corporations. Like all fixed income securities, commercial paper prices are susceptible to fluctuations in interest rates. If interest rates rise, commercial paper prices will decline and vice versa. However, the short-term nature of a commercial paper investment generally makes it less susceptible to volatility than many other fixed income securities because interest rate risk typically increases as maturity lengths increase. Commercial paper tends to yield smaller returns than longer-term corporate debt because securities with shorter maturities typically have lower effective yields than those with longer maturities.
Commodity-Linked Derivative Instruments and Hybrid Instruments. Certain Funds seek to gain exposure to the commodities markets primarily through investments in hybrid instruments. Hybrid instruments are either equity or debt derivative securities with one or more commodity-dependent components that have payment features similar to a commodity futures contract, a commodity option contract, or a combination of both. Therefore, these instruments are “commodity-linked.” They are considered “hybrid” instruments because they have both commodity-like and security-like characteristics. Hybrid instruments are derivative instruments because at least part of their value is derived from the value of an underlying commodity, futures contract, index or other readily measurable economic variable.
The prices of commodity-linked derivative instruments may move in different directions than investments in traditional equity and debt securities when the value of those traditional securities is declining due to adverse economic conditions. As an example, during periods of rising inflation, debt securities have historically tended to decline in value due to the general increase in prevailing interest rates. Conversely, during those same periods of rising inflation, the prices of certain commodities, such as oil and metals, have historically tended to increase. Of course, there cannot be any guarantee that these investments will perform in that manner in the future, and at certain times the price movements of commodity-linked instruments have been parallel to those of debt and equity securities. Commodities have historically tended to increase and decrease in value during different parts of the business cycle than financial assets. Nevertheless, at various times, commodities prices may move in tandem with the prices of financial assets and thus may not provide overall portfolio diversification benefits. Under favorable economic conditions, the Fund’s investments may be expected to under perform an investment in traditional securities. Over the long term, the returns on the Fund’s investments are expected to exhibit low or negative correlation with stocks and bonds.
Qualifying Hybrid Instruments. Certain Funds may invest in hybrid instruments that qualify for exclusion from regulation under the Commodity Exchange Act and the regulations adopted thereunder. A hybrid instrument that qualifies for this exclusion from regulation must be “predominantly a security.” A hybrid
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instrument is considered to be predominantly a security if (a) the issuer of the hybrid instrument receives payment in full of the purchase price of the hybrid instrument, substantially contemporaneously with delivery of the hybrid instrument; (b) the purchaser or holder of the hybrid instrument is not required to make any payment to the issuer in addition to the purchase price paid under subparagraph (a), whether as margin, settlement payment, or otherwise, during the life of the hybrid instrument or at maturity; (c) the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements; and (d) the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery (or option on such a contract) subject to applicable provisions of the Commodity Exchange Act. Hybrid instruments may be principal protected, partially protected, or offer no principal protection. A principal protected hybrid instrument means that the issuer will pay, at a minimum, the par value of the note at maturity. Therefore, if the commodity value to which the hybrid instrument is linked declines over the life of the note, the Fund will receive at maturity the face or stated value of the note. With a principal protected hybrid instrument, the Fund will receive at maturity the greater of the par value of the note or the increase in its value based on the underlying commodity or index. This protection is, in effect, an option whose value is subject to the volatility and price level of the underlying commodity. The Manager’s decision whether to use principal protection depends in part on the cost of the protection. In addition, the protection feature depends upon the ability of the issuer to meet its obligation to buy back the security, and, therefore, depends on the creditworthiness of the issuer. With full principal protection, the Fund will receive at maturity of the hybrid instrument either the stated par value of the hybrid instrument, or potentially, an amount greater than the stated par value if the underlying commodity, index, futures contract or economic variable to which the hybrid instrument is linked has increased in value. Partially protected hybrid instruments may suffer some loss of principal if the underlying commodity, index, futures contract or economic variable to which the hybrid instrument is linked declines in value during the term of the hybrid instrument. However, partially protected hybrid instruments have a specified limit as to the amount of principal that they may lose.
Hybrid Instruments Without Principal Protection. Certain Funds may invest in hybrid instruments that offer no principal protection. At maturity, there is a risk that the underlying commodity price, futures contract, index or other economic variable may have declined sufficiently in value such that some or all of the face value of the hybrid instrument might not be returned. The Manager, at its discretion, may invest in a partially protected principal structured note or a note without principal protection. In deciding to purchase a note without principal protection, the Manager may consider, among other things, the expected performance of the underlying commodity futures contract, index or other economic variable over the term of the note, the cost of the note, and any other economic factors that the Manager believes are relevant.
Limitations on Leverage. Some of the hybrid instruments in which a Fund may invest may involve leverage. To avoid being subject to undue leverage risk, a Fund will seek to limit the amount of economic leverage it has under any one hybrid instrument that it buys and the leverage of the Fund’s overall portfolio. A Fund will not invest in a hybrid instrument if, at the time of purchase: (i) that instrument’s “leverage ratio” exceeds 300% of the price increase in the underlying commodity, futures contract, index or other economic variable or (ii) the Fund’s “portfolio leverage ratio” exceeds 150%, measured at the time of purchase. “Leverage ratio” is the expected increase in the value of a hybrid instrument, assuming a one percent price increase in the underlying commodity, futures contract, index or other economic factor. In other words, for a hybrid instrument with a leverage factor of 150%, a 1% gain in the underlying economic variable would be expected to result in a 1.5% gain in value for the hybrid instrument. Conversely, a hybrid instrument with a leverage factor of 150% would suffer a 1.5% loss if the underlying economic variable lost 1% of its value. “Portfolio leverage ratio” is defined as the average (mean) leverage ratio of all instruments in a Fund’s portfolio, weighted by the market values of such instruments or, in the case of futures contracts, their notional values. A Fund may at times or from
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time to time decide not to use leverage in its investments or use less leverage than may otherwise be allowable.
Counterparty Risk. A significant risk of hybrid instruments is counterparty risk. Unlike exchange-traded futures and options, which are standard contracts, hybrid instruments are customized securities, tailor made by a specific issuer. With a listed futures or options contract, an investor’s counterparty is the exchange clearinghouse. Exchange clearinghouses are capitalized by the exchange members and typically have high investment grade ratings ( e.g. , ratings of AAA or AA by S&P). Therefore, the risk is small that an exchange clearinghouse might be unable to meet its obligations at maturity. However, with a hybrid instrument, a Fund will take on the counterparty credit risk of the issuer. That is, at maturity of the hybrid instrument, there is a risk that the issuer may be unable to perform its obligations under the structured note.
Convertible Securities. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock or other equity security of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to nonconvertible income securities in that they ordinarily provide a stable stream of income with generally higher yields than those of common stocks of the same or similar issuers, but lower yields than comparable nonconvertible securities. The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security’s investment value. Convertible securities rank senior to common stock in a corporation’s capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument.
The characteristics of convertible securities make them potentially attractive investments for an investment company seeking a high total return from capital appreciation and investment income. These characteristics include the potential for capital appreciation as the value of the underlying common stock increases, the relatively high yield received from dividend or interest payments as compared to common stock dividends and decreased risks of decline in value relative to the underlying common stock due to their fixed-income nature. As a result of the conversion feature, however, the interest rate or dividend preference on a convertible security is generally less than would be the case if the securities were issued in nonconvertible form.
In analyzing convertible securities, the Manager will consider both the yield on the convertible security relative to its credit quality and the potential capital appreciation that is offered by the underlying common stock, among other things.
Convertible securities are issued and traded in a number of securities markets. Even in cases where a substantial portion of the convertible securities held by a Fund are denominated in U.S. dollars, the underlying equity securities may be quoted in the currency of the country where the issuer is domiciled. As a result, fluctuations in the exchange rate between the currency in which the debt security is denominated and the currency in which the share price is quoted will affect the value of the convertible security. With respect to convertible securities denominated in a currency different from that of the underlying equity securities, the conversion price may be based on a fixed exchange rate established at the time the security is issued, which may increase the effects of currency risk. As described below, a Fund is authorized to enter into foreign currency hedging transactions in which it may seek to reduce the effect of exchange rate fluctuations.
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Apart from currency considerations, the value of convertible securities is influenced by both the yield on nonconvertible securities of comparable issuers and by the value of the underlying common stock. The value of a convertible security viewed without regard to its conversion feature ( i.e. , strictly on the basis of its yield) is sometimes referred to as its “investment value.” To the extent interest rates change, the investment value of the convertible security typically will fluctuate. At the same time, however, the value of the convertible security will be influenced by its “conversion value,” which is the market value of the underlying common stock that would be obtained if the convertible security were converted. Conversion value fluctuates directly with the price of the underlying common stock. If the conversion value of a convertible security is substantially below its investment value, the price of the convertible security is governed principally by its investment value. To the extent the conversion value of a convertible security increases to a point that approximates or exceeds its investment value, the price of the convertible security will be influenced principally by its conversion value. A convertible security will sell at a premium over the conversion value to the extent investors place value on the right to acquire the underlying common stock while holding a fixed-income security. The yield and conversion premium of convertible securities issued in Japan and the Euromarket are frequently determined at levels that cause the conversion value to affect their market value more than the securities’ investment value.
Holders of convertible securities generally have a claim on the assets of the issuer prior to the common stockholders but may be subordinated to other debt securities of the same issuer. A convertible security may be subject to redemption at the option of the issuer at a price established in a charter provision, indenture or other governing instrument pursuant to which the convertible security was issued. If a convertible security held by a Fund is called for redemption, the Fund will be required to redeem the security, convert it into the underlying common stock or sell it to a third party. Certain convertible debt securities may provide a put option to the holder, which entitles the holder to cause the security to be redeemed by the issuer at a premium over the stated principal amount of the debt security under certain circumstances.
A Fund may also invest in synthetic convertible securities. Synthetic convertible securities may include either Cash-Settled Convertibles or Manufactured Convertibles. “Cash-Settled Convertibles” are instruments that are created by the issuer and have the economic characteristics of traditional convertible securities but may not actually permit conversion into the underlying equity securities in all circumstances. As an example, a private company may issue a Cash-Settled Convertible that is convertible into common stock only if the company successfully completes a public offering of its common stock prior to maturity and otherwise pays a cash amount to reflect any equity appreciation. “Manufactured Convertibles” are created by the Manager or another party by combining separate securities that possess one of the two principal characteristics of a convertible security, i.e. , fixed income (“fixed-income component”) or a right to acquire equity securities (“convertibility component”). The fixed-income component is achieved by investing in nonconvertible fixed-income securities, such as nonconvertible bonds, preferred stocks and money market instruments. The convertibility component is achieved by investing in call options, warrants, or other securities with equity conversion features (“equity features”) granting the holder the right to purchase a specified quantity of the underlying stocks within a specified period of time at a specified price or, in the case of a stock index option, the right to receive a cash payment based on the value of the underlying stock index.
A Manufactured Convertible differs from traditional convertible securities in several respects. Unlike a traditional convertible security, which is a single security that has a unitary market value, a Manufactured Convertible is comprised of two or more separate securities, each with its own market value. Therefore, the total “market value” of such a Manufactured Convertible is the sum of the values of its fixed-income component and its convertibility component.
More flexibility is possible in the creation of a Manufactured Convertible than in the purchase of a traditional convertible security. Because many corporations have not issued convertible securities, the
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Manager may combine a fixed-income instrument and an equity feature with respect to the stock of the issuer of the fixed-income instrument to create a synthetic convertible security otherwise unavailable in the market. The Manager may also combine a fixed-income instrument of an issuer with an equity feature with respect to the stock of a different issuer when the Manager believes such a Manufactured Convertible would better promote a Fund’s objective than alternative investments. For example, the Manager may combine an equity feature with respect to an issuer’s stock with a fixed-income security of a different issuer in the same industry to diversify the Fund’s credit exposure, or with a U.S. Treasury instrument to create a Manufactured Convertible with a higher credit profile than a traditional convertible security issued by that issuer. A Manufactured Convertible also is a more flexible investment in that its two components may be purchased separately and, upon purchasing the separate securities, “combined” to create a Manufactured Convertible. For example, the Fund may purchase a warrant for eventual inclusion in a Manufactured Convertible while postponing the purchase of a suitable bond to pair with the warrant pending development of more favorable market conditions.
The value of a Manufactured Convertible may respond to certain market fluctuations differently from a traditional convertible security with similar characteristics. For example, in the event a Fund created a Manufactured Convertible by combining a short-term U.S. Treasury instrument and a call option on a stock, the Manufactured Convertible would be expected to outperform a traditional convertible of similar maturity that is convertible into that stock during periods when Treasury instruments outperform corporate fixed-income securities and underperform during periods when corporate fixed-income securities outperform Treasury instruments.
Corporate Loans. Certain Funds may invest in corporat e loans. Corporate loans are generally non-investment grade floating rate instruments. Usually , they are freely callable at the issuer’s option. Certain Funds may invest in fixed and floating rate loans (“Loans”) arranged through private negotiations between a corporate borrower or a foreign soverei gn entity and one or more financial institutions or institutional investors (“Lenders”). A Fund may invest in such Loans in the form of participations in Loans (“Participations”) and assignments of all or a porti on of Loans from third parties (“Assignments”). A Fund considers these investments to be investments in debt securities for purposes of its investment policies. Participations typically will result in the Fund havi ng a contractual relationship only with the Lender, not with the borrower. The Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling t he Participation and only upon receipt by the Lender of the payments from the borrower. In connection wit h purchasing Participations, the Fund generally will have no right to enforce compliance by the borrower w with the terms of the loan agreement relating to the Loans, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the Loan in which it has purc hased the Participation. As a result, the Fund will assume the credit risk of both the borrower and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling the Participation, the Fund may be treated as a general creditor of the Lender and may not benefit from any set-off between the Lender and the borrower. The Fund will acquire Participations only if the Lender interpositioned between the Fund and the borrower is determined by the Fund’s manager to be creditworthy. When the Fund purchases Assignments from Lenders, the Fund will acquire direct rights against the borrower on the Loan, and will not have exposure to a counterparty’s credit risk. The Funds may enter into Participations and Assignments on a forward commitment or “when-issued” basis, whereby a Fund would agree to purchase a Participation or Assignment at set terms in the future. For more information on forward commitments and when-issued securities, see “When-Issued Securities, Delayed Delivery Securities and Forward Commitments” below. A Fund may have difficulty disposing of Assignments and Participations. In certain cases, the market for such instruments may lack sufficient liquidity, and therefore the Fund anticipates that in such cases such instruments could be sold only to a limited number of institutional investors. The lack of a sufficiently liquid secondary market may have an
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adverse impact on the value of such instruments and on the Fund’s ability to dispose of particular Assignments or Participations in response to a specific economic event, such as deterioration in the creditworthiness of the borrower. Leading financial institutions often act as agent for a broader group of Lenders, generally referred to as a syndicate. The syndicate’s agent arranges the loans, holds collateral and accepts payments of principal and interest. Failure by the syndicate agent to fulfill its obligations may delay or adversely affect receipt of payment by the Fund.
The Loans in which the Fund may invest are subject to the risk of loss of principal and income. Although borrowers frequently provide collateral to secure repayment of these obligations they do not always do so. If they do provide collateral, the value of the collateral may not completely cover the borrower’s obligations at the time of a default. If a borrower files for protection from its creditors under the U.S. bankruptcy laws, these laws may limit a Fund’s rights to its collateral. In addition, the value of collateral may erode during a bankruptcy case. In the event of a bankruptcy, the holder of a Loan may not recover its principal, may experience a long delay in recovering its investment and may not receive interest during the delay.
Transactions in corporate loans may settle on a delayed basis. As a result, the proceeds from the sale of corporate loans may not be readily available to make additional investments or to meet a Fund’s redemption obligations. To the extent the extended settlement process gives rise to short-term liquidity needs, a Fund may hold additional cash, sell investments or temporarily borrow from banks and other lenders.
In certain circumstances, Loans may not be deemed to be securities under certain federal securities laws. Therefore, in the event of fraud or misrepresentation by a borrower or an arranger, Lenders and purchasers of interests in Loans, such as the Funds, may not have the protection of the anti-fraud provisions of the federal securities laws as would otherwise be available for bonds or stocks. Instead, in such cases, parties generally would rely on the contractual provisions in the Loan agreement itself and common-law fraud protections under applicable state law.
Direct Lending . The Fund may act as the originator for direct loans and engage in direct lending. Direct loans between the Fund and a borrower may not be administered by an underwriter or agent bank. The Fund may provide financing to commercial borrowers directly or through companies acquired (or created) and owned by or otherwise affiliated with the Fund. The terms of the direct loans are negotiated with borrowers in private transactions. Furthermore, a direct loan may be secured or unsecured.
In determining whether to make a direct loan, the Fund will rely primarily upon the creditworthiness of the borrower and/or any collateral for payment of interest and repayment of principal. The risks associated with direct loans are substantially similar to those associated with investing in corporate loans. In making a direct loan, the Fund is exposed to the risk that the borrower may default or become insolvent and, consequently, that the Fund will lose money on the loan. Furthermore, direct loans may subject the Fund to liquidity and interest rate risk and certain direct loans may be deemed illiquid. Direct loans are not publicly traded and may not have a secondary market. The lack of a secondary market for direct loans may have an adverse impact on the ability of the Fund to dispose of a direct loan and/or to value the direct loan.
When engaging in direct lending, the Fund’s performance may depend, in part, on the ability of the Fund to originate loans on advantageous terms. In originating loans, the Fund will compete with a broad spectrum of lenders. Increased competition for, or a diminishment in the available supply of, qualifying loans could result in lower yields on such loans, which could reduce Fund performance.
As part of its lending activities, the Fund may originate loans to companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other
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reorganization and liquidation proceedings. Although the terms of such financing may result in significant financial returns to the Fund, they involve a substantial degree of risk. The level of analytical sophistication, both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties is unusually high.
Credit Linked Securities. Among the income producing securities in which a Fund may invest are credit linked securities, which are issued by a limited purpose trust or other vehicle that, in turn, invests in a derivative instrument or basket of derivative instruments, such as credit default swaps, interest rate swaps and other securities, in order to provide exposure to certain fixed-income markets. For instance, a Fund may invest in credit linked securities as a cash management tool in order to gain exposure to a certain market and/or to remain fully invested when more traditional income producing securities are not available.
Like an investment in a bond, investments in these credit linked securities represent the right to receive periodic income payments (in the form of distributions) and payment of principal at the end of the term of the security.
However, these payments are conditioned on the issuer’s receipt of payments from, and the issuer’s potential obligations to, the counterparties to the derivative instruments and other securities in which the issuer invests. For instance, the issuer may sell one or more credit default swaps, under which the issuer would receive a stream of payments over the term of the swap agreements provided that no event of default has occurred with respect to the referenced debt obligation upon which the swap is based. If a default occurs, the stream of payments may stop and the issuer would be obligated to pay the counterparty the par (or other agreed upon value) of the referenced debt obligation. This, in turn, would reduce the amount of income and principal that a Fund would receive. A Fund’s investments in these instruments are indirectly subject to the risks associated with derivative instruments, including, among others, credit risk, default or similar event risk, counterparty risk, interest rate risk, leverage risk and management risk. It is also expected that the securities will be exempt from registration under the Securities Act. Accordingly, there may be no established trading market for the securities and they may constitute illiquid investments.
Debt Securities. Debt securities, such as bonds, involve credit risk. This is the risk that the issuer will not make timely payments of principal and interest. The degree of credit risk depends on the issuer’s financial condition and on the terms of the debt securities. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of a Fund’s investment in that issuer. Credit risk is reduced to the extent a Fund limits its debt investments to U.S. Government Securities.
All debt securities, however, are subject to interest rate risk. This is the risk that the value of the security may fall when interest rates rise. If interest rates move sharply in a manner not anticipated by Fund management, a Fund’s investments in debt securities could be adversely affected and the Fund could lose money. In general, the market price of debt securities with longer maturities will go up or down more in response to changes in interest rates than will the market price of shorter-term debt securities.
During periods of rising interest rates, the average life of certain fixed-income securities is extended because of slower than expected principal payments. This may lock in a below-market interest rate and extend the duration of these fixed-income securities, especially mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, these securities may exhibit additional volatility and lose value. This is known as extension risk.
The value of fixed-income securities in the Funds can be expected to vary inversely with changes in prevailing interest rates. Fixed-income securities with longer maturities, which tend to produce higher
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yields, are subject to potentially greater capital appreciation and depreciation than securities with shorter maturities. The Funds are not restricted to any maximum or minimum time to maturity in purchasing individual portfolio securities, and the average maturity of a Fund’s assets will vary.
Floating and Variable Rate Securities. Certain Funds may invest in debt instruments that pay a variable coupon rate. Securities with floating or variable interest rates can be less sensitive to interest rate changes than securities with fixed interest rates, but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline. The impact of interest rate changes on floating rate investments is typically mitigated by the periodic interest rate reset of the investments. Benchmark interest rates used for floating and variable rate securities may not accurately track market interest rates.
Inflation-Indexed Bonds. Certain Funds may invest in inflation-indexed bonds, which are fixed-income securities or other instruments whose principal value is periodically adjusted according to the rate of inflation. Two structures are common. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. Most other issuers pay out the Consumer Price Index (“CPI”) accruals as part of a semi-annual coupon.
Inflation-indexed securities issued by the U.S. Treasury have maturities of five, ten or thirty years, although it is possible that securities with other maturities will be issued in the future. The U.S. Treasury securities pay interest on a semi-annual basis, equal to a fixed percentage of the inflation adjusted principal amount. For example, if a Fund purchased an inflation-indexed bond with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5% semi-annually), and inflation over the first six months was 1%, the mid-year par value of the bond would be $1,010 and the first semi annual interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the second half of the year resulted in the whole year’s inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and the second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward, and, consequently, the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed, and will fluctuate. Certain Funds may also invest in other inflation related bonds which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal. In addition, if the Fund purchases inflation-indexed bonds offered by foreign issuers, the rate of inflation measured by the foreign inflation index may not be correlated to the rate of inflation in the United States.
The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates, in turn, are tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-indexed bonds. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-indexed bonds. There can be no assurance, however, that the value of inflation-indexed bonds will be directly correlated to changes in interest rates.
While these securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond’s inflation measure.
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In general, the measure used to determine the periodic adjustment of U.S. inflation-indexed bonds is the Consumer Price Index for Urban Consumers (“CPI-U”), which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States.
Any increase in the principal amount of an inflation-indexed bond will be considered taxable ordinary income, even though investors do not receive their principal until maturity.
Investment Grade Debt Obligations. Certain Funds may invest in “investment grade securities,” which are securities rated in the four highest rating categories of an NRSRO or deemed to be of equivalent quality by a Fund’s Manager. Certain Funds may invest in debt securities rated Aaa by Moody’s or AAA by S&P. It should be noted that debt obligations rated in the lowest of the top four ratings ( i.e. , “Baa” by Moody’s or “BBB” by S&P) are considered to have some speculative characteristics and are more sensitive to economic change than higher rated securities. If an investment grade security of a Fund is subsequently downgraded below investment grade, the Fund’s Manager will consider such an event in determining whether the Fund should continue to hold the security. Subject to its investment strategies, there is no limit on the amount of such downgraded securities a Fund may hold.
See Appendix A to this SAI for a description of applicable securities ratings.
High Yield Investments (“Junk Bonds”).
Non-investment grade or “high yield” fixed-income or convertible securities commonly known to investors as “junk bonds” are debt securities that are rated below investment grade by the major rating agencies or are securities that Fund management believes are of comparable quality. While generally providing greater income and opportunity for gain, non-investment grade debt securities may be subject to greater risks than securities which have higher credit ratings, including a high risk of default, and their yields will fluctuate over time. High yield securities will generally be in the lower rating categories of recognized rating agencies (rated “Ba” or lower by Moody’s or “BB” or lower by S&P) or will be non-rated. The credit rating of a high yield security does not necessarily address its market value risk, and ratings may from time to time change, positively or negatively, to reflect developments regarding the issuer’s financial condition. High yield securities are considered to be speculative with respect to the capacity of the issuer to timely repay principal and pay interest or dividends in accordance with the terms of the obligation and may have more credit risk than higher rated securities.
The major risks in junk bond investments include the following:
• Junk bonds may be issued by less creditworthy companies. These securities are vulnerable to adverse changes in the issuer’s industry and to general economic conditions. Issuers of junk bonds may be unable to meet their interest or principal payment obligations because of an economic downturn, specific issuer developments or the unavailability of additional financing.
• The issuers of junk bonds may have a larger amount of outstanding debt relative to their assets than issuers of investment grade bonds. If the issuer experiences financial stress, it may be unable to meet its debt obligations. The issuer’s ability to pay its debt obligations also may be lessened by specific issuer developments, or the unavailability of additional financing. Issuers of high yield securities are often in the growth stage of their development and/or involved in a reorganization or takeover.
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• Junk bonds are frequently ranked junior to claims by other creditors. If the issuer cannot meet its obligations, the senior obligations are generally paid off before the junior obligations, which will potentially limit a Fund’s ability to fully recover principal or to receive interest payments when senior securities are in default. Thus, investors in high yield securities have a lower degree of protection with respect to principal and interest payments than do investors in higher rated securities.
• Junk bonds frequently have redemption features that permit an issuer to repurchase the security from a Fund before it matures. If an issuer redeems the junk bonds, a Fund may have to invest the proceeds in bonds with lower yields and may lose income.
• Prices of junk bonds are subject to extreme price fluctuations. Negative economic developments may have a greater impact on the prices of junk bonds than on those of other higher rated fixed income securities.
• Junk bonds may be less liquid than higher rated fixed-income securities even under normal economic conditions. Under certain economic and/or market conditions, a Fund may have difficulty disposing of certain high yield securities due to the limited number of investors in that sector of the market. There are fewer dealers in the junk bond market, and there may be significant differences in the prices quoted for junk bonds by the dealers, and such quotations may not be the actual prices available for a purchase or sale. Because junk bonds are less liquid than higher rated bonds, judgment may play a greater role in valuing certain of a Fund’s portfolio securities than in the case of securities trading in a more liquid market.
• The secondary markets for high yield securities are not as liquid as the secondary markets for higher rated securities. The secondary markets for high yield securities are concentrated in relatively few market makers and participants in the markets are mostly institutional investors, including insurance companies, banks, other financial institutions and mutual funds. In addition, the trading volume for high yield securities is generally lower than that for higher rated securities and the secondary markets could contract under adverse market or economic conditions independent of any specific adverse changes in the condition of a particular issuer. Under certain economic and/or market conditions, a Fund may have difficulty disposing of certain high yield securities due to the limited number of investors in that sector of the market. An illiquid secondary market may adversely affect the market price of the high yield security, which may result in increased difficulty selling the particular issue and obtaining accurate market quotations on the issue when valuing a Fund’s assets. Market quotations on high yield securities are available only from a limited number of dealers, and such quotations may not be the actual prices available for a purchase or sale. When the secondary market for high yield securities becomes more illiquid, or in the absence of readily available market quotations for such securities, the relative lack of reliable objective data makes it more difficult to value a Fund’s securities, and judgment plays a more important role in determining such valuations.
• A Fund may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting issuer.
• The junk bond markets may react strongly to adverse news about an issuer or the economy, or to the perception or expectation of adverse news, whether or not it is based on fundamental analysis. Additionally, prices for high yield securities may be affected by legislative and regulatory developments. These developments could adversely affect a Fund’s NAV and investment practices, the secondary market for high yield securities, the financial condition of issuers of these securities and the value and liquidity of outstanding high yield securities, especially in a thinly traded market. For example, federal legislation requiring the divestiture by federally insured savings and loan associations of their investments in high yield bonds and limiting the deductibility of interest by certain corporate issuers of high yield bonds adversely affected the market in the past.
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• The rating assigned by a rating agency evaluates the issuing agency’s assessment of the safety of a non-investment grade security’s principal and interest payments, but does not address market value risk. Because such ratings of the ratings agencies may not always reflect current conditions and events, in addition to using recognized rating agencies and other sources, the Manager or sub-adviser performs its own analysis of the issuers whose non-investment grade securities a Fund holds. Because of this, the Fund’s performance may depend more on the Manager’s or sub-adviser’s own credit analysis than in the case of mutual funds investing in higher-rated securities.
In selecting non-investment grade securities, the Manager or sub-adviser considers factors such as those relating to the creditworthiness of issuers, the ratings and performance of the securities, the protections afforded the securities and the diversity of the Fund. The Manager or sub-adviser continuously monitors the issuers of non-investment grade securities held by the Fund for their ability to make required principal and interest payments, as well as in an effort to control the liquidity of the Fund so that it can meet redemption requests. If a security’s rating is reduced below the minimum credit rating that is permitted for a Fund, the Fund’s adviser or sub-adviser will consider whether the Fund should continue to hold the security.
In the event that a Fund investing in high yield securities experiences an unexpected level of net redemptions, the Fund could be forced to sell its holdings without regard to the investment merits, thereby decreasing the assets upon which the Fund’s rate of return is based.
The costs attributable to investing in the junk bond markets are usually higher for several reasons, such as higher investment research costs and higher commission costs.
Mezzanine Investments. Certain Funds, consistent with their restrictions on investing in securities of a specific credit quality, may invest in certain high yield securities known as mezzanine investments, which are subordinated debt securities which are generally issued in private placements in connection with an equity security ( e.g. , with attached warrants). Such mezzanine investments may be issued with or without registration rights. Similar to other high yield securities, maturities of mezzanine investments are typically seven to ten years, but the expected average life is significantly shorter at three to five years. Mezzanine investments are usually unsecured and subordinate to other obligations of the issuer.
Pay-in-kind Bonds. Certain Funds may invest in pay-in-kind, or PIK, bonds. PIK bonds are bonds which pay interest through the issuance of additional debt or equity securities. Similar to zero coupon obligations, pay-in-kind bonds also carry additional risk as holders of these types of securities realize no cash until the cash payment date unless a portion of such securities is sold and, if the issuer defaults, a Fund may obtain no return at all on its investment. The market price of pay-in-kind bonds is affected by interest rate changes to a greater extent, and therefore tends to be more volatile, than that of securities which pay interest in cash. Additionally, current U.S. federal tax law requires the holder of pay-in-kind bonds to accrue income with respect to these securities prior to the receipt of cash payments. To maintain its qualification as a regulated investment company and avoid liability for U.S. federal income and excise taxes, each Fund may be required to distribute income accrued with respect to these securities and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements.
Supranational Entities. A Fund may invest in debt securities of supranational entities. Examples of such entities include the International Bank for Reconstruction and Development (the World Bank), the European Steel and Coal Community, the Asian Development Bank and the Inter-American Development Bank. The government members, or “stockholders,” usually make initial capital contributions to the supranational entity and in many cases are committed to make additional capital
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contributions if the supranational entity is unable to repay its borrowings. There is no guarantee that one or more stockholders of a supranational entity will continue to make any necessary additional capital contributions. If such contributions are not made, the entity may be unable to pay interest or repay principal on its debt securities, and a Fund may lose money on such investments.
Depositary Receipts (ADRs, EDRs and GDRs). Certain Funds may invest in the securities of foreign issuers in the form of Depositary Receipts or other securities convertible into securities of foreign issuers. Depositary Receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. The Fund may invest in both sponsored and unsponsored American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”) and other similar global instruments. ADRs typically are issued by an American bank or trust company and evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as Continental Depositary Receipts, are receipts issued in Europe, typically by foreign banks and trust companies, that evidence ownership of either foreign or domestic underlying securities. GDRs are depositary receipts structured like global debt issues to facilitate trading on an international basis. In addition to investment risks associated with the underlying issuer, Depositary Receipts expose a Fund to additional risks associated with the non-uniform terms that apply to Depositary Receipt programs, credit exposure to the depository bank and to the sponsors and other parties with whom the depository bank establishes the programs, currency risk and the risk of an illiquid market for Depositary Receipts. Unsponsored ADR, EDR and GDR programs are organized independently and without the cooperation of the issuer of the underlying securities. Unsponsored programs generally expose investors to greater risks than sponsored programs and do not provide holders with many of the shareholder benefits that come from investing in a sponsored Depositary Receipt. Available information concerning the issuer may not be as current as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs and GDRs may be more volatile than if such instruments were sponsored by the issuer. Depositary Receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Investments in ADRs, EDRs and GDRs present additional investment considerations as described under “Foreign Investment Risks.”
Derivatives.
General. Each Fund may use instruments referred to as derivatives, which are financial instruments that derive their value from one or more securities, commodities (such as gold or oil), currencies, interest rates, credit events or indices (a measure of value or rates, such as the S&P 500 Index or the prime lending rate) or other reference asset. Derivatives may allow a Fund to increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than with other transactions. Certain Funds may use derivatives to maintain a portion of their long and short positions. Unless otherwise permitted, no Fund may use derivatives to gain exposure to an asset or asset class it is prohibited by its investment restrictions from purchasing directly. As described below, derivatives can be used for hedging or speculative purposes. Funds will engage in transaction-level payment netting, i.e. , the payment obligations of derivatives contracts are netted against one another with the Fund receiving or paying, as the case may be, only the net amount of the two payment streams.
Hedging. Each Fund may use derivatives for hedging purposes, in which a derivative is used to offset the risks associated with other Fund holdings. Losses on other investments may be substantially reduced by gains on a derivative that reacts in an opposite manner to market movements. Although hedging may reduce losses, it may also reduce or eliminate gains. In addition, hedging may cause losses if the market moves in an unanticipated manner, or if the cost of the derivative outweighs the benefit of the hedge. The effectiveness of hedging may be reduced by correlation risk, i.e. , the risk that changes in the value of the derivative will not match those of the holdings being hedged as expected by a Fund, which may result in additional losses to the Fund. The inability to close or offset derivatives
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could also reduce the effectiveness of a Fund’s hedging. There is no assurance that a Fund’s hedging will be effective. No Fund is required to use derivatives to hedge.
Speculation. Certain Funds may also use derivatives for speculative purposes to seek to enhance returns. The use of a derivative is speculative if the Fund is primarily seeking to achieve gains, rather than offset the risk of other positions. To the extent a Fund invests in a derivative for speculative purposes, the Fund will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost, and the potential for loss in certain cases may be unlimited.
Regulation of Derivatives.
Rule 18f-4 Under the Investment Company Act. Rule 18f-4 under the Investment Company Act permits a Fund to enter into Derivatives Transactions (as defined below) and certain other transactions notwithstanding the restrictions on the issuance of “senior securities” under Section 18 of the Investment Company Act. Section 18 of the Investment Company Act, among other things, prohibits open-end funds, including the Funds, from issuing or selling any “senior security,” other than borrowing from a bank (subject to a requirement to maintain 300% “asset coverage”).
Under Rule 18f-4, “Derivatives Transactions” include the following: (1) any swap, security-based swap (including a contract for differences), futures contract, forward contract, option (excluding purchased options), any combination of the foregoing, or any similar instrument, under which a Fund is or may be required to make any payment or delivery of cash or other assets during the life of the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise; (2) any short sale borrowing; (3) reverse repurchase agreements and similar financing transactions (e.g., recourse and non-recourse tender option bonds, and borrowed bonds), if a Fund elects to treat all of these transactions as Derivatives Transactions under Rule 18f-4; and (4) when-issued or forward-settling securities (e.g., firm and standby commitments, including to-be-announced (“TBA”) commitments, and dollar rolls) and non-standard settlement cycle securities, unless such transactions meet the Delayed Settlement Securities Provision (as defined below under “—When-Issued Securities, Delayed Delivery Securities and Forward Commitments”).
Unless a Fund is relying on the Limited Derivatives User Exception (as defined below), the Fund must comply with Rule 18f-4 with respect to its Derivatives Transactions. Rule 18f-4, among other things, requires a Fund to adopt and implement a comprehensive written derivatives risk management program (“DRMP”) and comply with a relative or absolute limit on Fund leverage risk calculated based on value-at-risk (“VaR”). The DRMP is administered by a “derivatives risk manager,” who is appointed by the Fund’s Board, including a majority of the independent Directors, and periodically reviews the DRMP and reports to the Fund’s Board.
Rule 18f-4 provides an exception from the DRMP, VaR limit and certain other requirements if a Fund’s “derivatives exposure” is limited to 10% of its net assets (as calculated in accordance with Rule 18f-4) and the Fund adopts and implements written policies and procedures reasonably designed to manage its derivatives risks (the “Limited Derivatives User Exception”).
Dodd-Frank Regulations . The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, includes provisions that comprehensively regulate the over-the-counter (“OTC”) derivatives markets for the first time. While the Commodity Futures Trading Commission (“CFTC”) and other U.S. regulators have adopted many of the required Dodd-Frank regulations, certain regulations have only recently become effective and other regulations remain to be adopted. The full impact of Dodd-Frank on the Funds remains uncertain.
Many OTC derivatives dealers are required to register with the CFTC as “swap dealers” and/or with the SEC as “security-based swap dealers”. Registered swap dealers and security-based swap dealers are
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subject to various regulatory requirements, including, but not limited to, margin, recordkeeping, reporting, transparency, position limits, limitations on conflicts of interest, business conduct standards, minimum capital requirements and other regulatory requirements, which indirectly impact the Funds that enter into transactions with them.
The CFTC requires that certain interest rate swaps and certain credit default swaps must be executed in regulated markets and be submitted for clearing to regulated clearinghouses. The SEC is also expected to impose similar requirements on certain security-based derivatives in the future. OTC derivatives trades submitted for clearing are subject to minimum initial and variation margin requirements set by the relevant clearinghouse, as well as margin requirements mandated by the CFTC, SEC and/or federal prudential regulators. In addition, futures commission merchants (“FCMs”), who act as clearing members on behalf of customers for cleared OTC derivatives and futures contracts, also have discretion to increase a Fund’s margin requirements for these transactions beyond any regulatory and clearinghouse minimums subject to any restrictions on such discretion in the documentation between the FCM and the customer. These regulatory requirements may make it more difficult and costly for the Funds to enter into highly tailored or customized transactions, potentially rendering certain investment strategies impossible or not economically feasible. If a Fund decides to execute and clear cleared OTC derivatives and/or futures contracts through execution facilities, exchanges or clearinghouses, either indirectly through an executing broker, clearing member FCM or as a direct member, a Fund would be required to comply with the rules of the execution facility, exchange or clearinghouse and other applicable law.
With respect to cleared OTC derivatives and futures contracts and options on futures, a Fund will not face a clearinghouse directly but rather will do so through a FCM that is registered with the CFTC and/ or SEC and that acts as a clearing member. A Fund may face the indirect risk of the failure of another clearing member customer to meet its obligations to its clearing member. Such scenario could arise due to a default by the clearing member on its obligations to the clearinghouse simultaneously with a customer’s failure to meet its obligations to the clearing member.
Clearing member FCMs are required to post initial margin to the clearinghouses through which they clear their customers’ cleared OTC derivatives and futures contracts, instead of using such initial margin in their businesses, as was widely permitted for OTC derivatives before Dodd-Frank. While an FCM may require its customer to post initial margin in excess of clearinghouse requirements, and certain clearinghouses may share a portion of their earnings on initial margin with their clearing members, some portion of the initial margin that is passed through to the clearinghouse does not generate earnings for the FCM. The inability of FCMs to earn the same levels of returns on initial margin for cleared OTC derivatives as they could earn with respect to non-cleared OTC derivatives may cause FCMs to charge higher fees, or provide less favorable pricing on cleared OTC derivatives than swap dealers will provide for non-cleared OTC derivatives. Furthermore, customers, including the Funds, are subject to additional fees payable to FCMs with respect to cleared OTC derivatives, which may raise the cost to Funds of clearing as compared to trading non-cleared OTC derivatives bilaterally.
With respect to uncleared swaps, registered swap dealers and security-based swap dealers are required to exchange variation margin with a Fund and may be required by applicable regulations to collect (and in some cases exchange) initial margin with a Fund. Both initial and variation margin may be comprised of cash and/or securities, subject to applicable regulatory haircuts and other restrictions. Shares of investment companies (other than certain money market funds) may not be posted as collateral under applicable regulations.
The CFTC, certain foreign regulators, and many futures exchanges have established (and continue to evaluate and monitor) speculative position limits (“position limits”) on the maximum speculative position which any person, or group of persons acting in concert, may hold or control in particular contracts. In
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addition, U.S. federal position limits apply to swaps that are economically equivalent to futures contracts on certain agricultural, metals and energy commodities. All positions owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of complying with the speculative limits. Thus, even if a Fund does not intend to exceed applicable position limits, it is possible that different clients managed by the Manager and its affiliates may be aggregated for this purpose. Therefore, the trading decisions of the Manager may have to be modified and positions held by a Fund liquidated in order to avoid exceeding such limits. The modification of investment decisions or the elimination of open positions, if it occurs, may adversely affect the profitability of a Fund. A violation of position limits could also lead to regulatory action materially adverse to a Fund’s investment strategy. A Fund may also be affected by other regimes, including those of the European Union and United Kingdom, and trading venues that impose position limits on commodity derivative contracts.
Additional Regulation of Derivatives. Regulatory bodies outside the U.S. have also passed, proposed, or may propose in the future, legislation similar to Dodd-Frank or other legislation that could increase the costs of participating in, or otherwise adversely impact the liquidity of, participating in the commodities markets. For example, the European Market Infrastructure Regulation (Regulation (EU) No 648/2012) (“EMIR”) introduced certain requirements in respect of OTC derivatives including:(i) the mandatory clearing of OTC derivative contracts declared subject to the clearing obligation; (ii) risk mitigation techniques in respect of uncleared OTC derivative contracts, including the mandatory margining of uncleared OTC derivative contracts; and (iii) reporting and recordkeeping requirements in respect of all derivatives contracts. By way of further example, the European Union Markets in Financial Instruments Directive (Directive 2014/65/EU) and Markets in Financial Instruments Regulation (Regulation (EU) No 600/2014) (together “MiFID II”), which have applied since January 3, 2018, govern the provision of investment services and activities in relation to, as well as the organized trading of, financial instruments such as shares, bonds, units in collective investment schemes and derivatives. In particular, MiFID II requires European Union Member States to apply position limits to the size of a net position a person can hold at any time in commodity derivatives traded on European Union trading venues and in “economically equivalent” OTC contracts. If the requirements of EMIR and MiFID II apply, the cost of derivatives transactions is expected to increase.
In addition, regulations adopted by global prudential regulators that are now in effect require certain prudentially regulated entities and certain of their affiliates and subsidiaries (including swap dealers) to include in their derivatives contracts and certain other financial contracts, terms that delay or restrict the rights of counterparties (such as the Funds) to terminate such contracts, foreclose upon collateral, exercise other default rights or restrict transfers of credit support in the event that the prudentially regulated entity and/or its affiliates are subject to certain types of resolution or insolvency proceedings. Similar regulations and laws have been adopted in non-U.S. jurisdictions that may apply to a Fund’s counterparties located in those jurisdictions. In particular, in the United Kingdom and the European Union, governmental authorities could reduce, eliminate or convert to equity the liabilities to a Fund of a counterparty experiencing financial difficulties (sometimes referred to as a “bail in”). It is possible that these requirements, as well as potential additional related government regulation, could adversely affect a Fund’s ability to terminate existing derivatives contracts, exercise default rights or satisfy obligations owed to it with collateral received under such contracts.
Risk Factors in Derivatives.
There are significant risks that apply generally to derivatives transactions, including:
Correlation Risk — — the risk that changes in the value of a derivative will not match the changes in the value of the portfolio holdings that are being hedged or of the particular market or security to which the Fund seeks exposure. There are a number of factors which may prevent a derivative instrument from achieving the desired correlation (or inverse correlation) with an underlying asset, rate or index, such
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as the impact of fees, expenses and transaction costs, the timing of pricing, and disruptions or illiquidity in the markets for such derivative instrument.
Counterparty Risk — — the risk that a derivatives transaction counterparty will be unable or unwilling to make payments or otherwise honor its obligations to a Fund and the related risks of having concentrated exposure to such a counterparty. In particular, derivatives traded in OTC markets often are not guaranteed by an exchange or clearing corporation and often do not require payment of margin, and to the extent that the Fund has unrealized gains in such instruments or has deposited collateral with its counterparties the Fund is at risk that its counterparties will become bankrupt or otherwise fail to honor their obligations. A Fund will typically attempt to minimize counterparty risk by engaging in OTC derivatives transactions only with creditworthy entities that have substantial capital or that have provided the Fund with a third-party guaranty or other credit support. When a Fund enters into a derivatives transaction that is centrally cleared (whether mandatorily or voluntarily), the Fund is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses and increasingly fewer clearing members. It is not clear how an insolvency proceeding of a clearing house would be conducted and what impact an insolvency of a clearing house would have on the financial system. Also, a Fund will not be fully protected in the event of the bankruptcy of a Fund’s clearing member because the Fund would be limited to recovering only a pro rata share of the funds held by the clearing member on behalf of customers by account class for cleared derivatives. Although a clearing member is required to segregate assets from customers with respect to cleared derivatives positions from the clearing member’s proprietary assets, if a clearing member does not comply with the applicable regulations, or in the event of fraud or misappropriation of customer assets by a clearing member, a Fund could have only an unsecured creditor claim in an insolvency of the clearing member with respect to the assets held by the clearing member.
Credit Risk — — the risk that the reference entity in a credit default swap or similar derivative will not be able to honor its financial obligations.
Currency Risk — — the risk that changes in the exchange rate between two currencies will adversely affect the value (in U.S. dollar terms) of a derivative.
Illiquidity Risk — — the risk that certain securities or instruments may be difficult or impossible to sell at the time or at the price desired by a Fund in connection with payments of margin, collateral, or settlement payments. There can be no assurance that a Fund will be able to unwind or offset a derivative at its desired price, in a secondary market or otherwise. It may, therefore, not be possible for the Fund to unwind its position in a derivative without incurring substantial losses (if at all). Certain OTC derivatives, including swaps and OTC options, involve substantial illiquidity risk. Illiquidity may also make it more difficult for a Fund to ascertain a market value for such derivatives. A Fund will, therefore, acquire illiquid OTC derivatives (i) if the agreement pursuant to which the instrument is purchased contains a formula price at which the instrument may be terminated or sold, or (ii) for which the Manager anticipates the Fund can receive on each business day at least two independent bids or offers, unless a quotation from only one dealer is available, in which case that dealer’s quotation may be used. The illiquidity of the derivatives markets may be due to various factors, including congestion, disorderly markets, limitations on deliverable supplies, the participation of speculators, government regulation and intervention, and technical and operational or system failures. In addition, the liquidity of a market in an exchange-traded derivative contract may be adversely affected by “daily price fluctuation limits” established by the exchanges which limit the amount of fluctuation in an exchange traded contract price during a single trading day. Once the daily limit has been reached in the contract, no trades may be entered into at a price beyond the limit, thus preventing the liquidation of open positions. Prices have in the past moved to the daily limit on a number of consecutive trading days with little to no trading. If it is not possible to close an open derivative position entered into by the Fund, the
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Fund would continue to be required to make daily cash payments of variation margin in the event of adverse price movements. In such a situation, if the Fund has insufficient cash, it may have to sell portfolio securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so.
Index Risk — — if the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Fund could receive lower interest payments or experience a reduction in the value of the derivative to below the price that the Fund paid for such derivative.
Legal Risk k — the risk of insufficient documentation, insufficient capacity or authority of counterparty, or legality or enforceability of a contract.
Leverage Risk — — the risk that a Fund’s derivatives transactions can magnify the Fund’s gains and losses. Relatively small market movements may result in large changes in the value of a derivatives position and can result in losses that greatly exceed the amount originally invested.
Truncated: This annotation is too large to fit.
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"text": "to the Statement of Additional Information (\u201cSAI\u201d) of each of the funds listed"
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"text": "Organizations Receiving Additional Payments\u201d in Part II, or in the section entitled \u201cMiscellaneous -"
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"text": "Additional Payments by BlackRock - D. Service Organizations Receiving Additional Payments,\u201d"
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