2011 PROSPECTUSES. AllianceBernstein VPS Balanced Wealth Strategy Portfolio. BlackRock Global Allocation V.I. Fund

Transcription

1 2011 PROSPECTUSES AllianceBernstein VPS Balanced Wealth Strategy Portfolio BlackRock Global Allocation V.I. Fund Franklin Templeton VIP Founding Funds Allocation Fund GE Investments Total Return Fund Invesco V.I. Balanced-Risk Allocation Fund MFS Total Return Series PIMCO Global Multi-Asset Portfolio These funds are available as underlying investments for certain variable annuity contracts issued by Pacific Life Insurance Company and Pacific Life & Annuity Company.

2

3 TABLE OF CONTENTS AllianceBernstein VPS Balanced Wealth Strategy Portfolio Class B (Statutory)... 1 BlackRock Global Allocation V.I. Fund Class III (Statutory) Franklin Templeton VIP Founding Funds Allocation Fund Class 4 (Summary) GE Investments Total Return Fund Class 3 (Summary) Invesco V.I. Balanced-Risk Allocation Fund Series II (Summary) MFS Total Return Series Service Class (Summary) PIMCO Global Multi-Asset Portfolio Advisor Class (Summary)... 89

4

5 PROSPECTUS MAY 2, 2011 AllianceBernstein Variable Products Series Fund, Inc. Class B Prospectus AllianceBernstein VPS Balanced Wealth Strategy Portfolio VARIABLE PRODUCTS SERIES FUND This Prospectus describes the Portfolio that is available as an underlying investment through your variable contract. For information about your variable contract, including information about insurance-related expenses, see the prospectus for your variable contract which accompanies this Prospectus. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. 1

6 Investment Products Offered Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed 2

7 TABLE OF CONTENTS Page SUMMARY INFORMATION... 4 ADDITIONAL INFORMATION ABOUT THE PORTFOLIO S RISKS AND INVESTMENTS... 9 INVESTING IN THE PORTFOLIO MANAGEMENT OF THE PORTFOLIO DIVIDENDS, DISTRIBUTIONS AND TAXES GLOSSARY FINANCIAL HIGHLIGHTS APPENDIX A HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION...A-1 3

8 SUMMARY INFORMATION AllianceBernstein VPS Balanced Wealth Strategy Portfolio INVESTMENT OBJECTIVE The Portfolio s investment objective is to maximize total return consistent with the Adviser s determination of reasonable risk. FEES AND EXPENSES OF THE PORTFOLIO This table describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio. The operating expenses information below is designed to assist Contractholders of variable products that invest in the Portfolio in understanding the fees and expenses that they may pay as an investor. Because the information does not reflect deductions at the separate account level or contract level for any charges that may be incurred under a contract, Contractholders that invest in the Portfolio should refer to the variable contract prospectus for a description of fees and expenses that apply to Contractholders. Inclusion of these charges would increase the fees and expenses provided below. Shareholder Fees (fees paid directly from your investment) N/A Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Management Fees.55% Distribution (12b-1) Fees.25% Other Expenses.13% Total Portfolio Operating Expenses.93% Examples The Examples are intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. The Examples assume that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year and that the Portfolio s operating expenses stay the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: After 1 Year $ 95 After 3 Years $ 296 After 5 Years $ 515 After 10 Years $1,143 Portfolio Turnover The Portfolio pays transaction costs, such as commissions, when it buys or sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These transaction costs, which are not reflected in the Annual Portfolio Operating Expenses or in the Examples, affect the Portfolio s performance. During the most recent fiscal year, the Portfolio s portfolio turnover rate was 101% of the average value of its portfolio. PRINCIPAL STRATEGIES The Portfolio invests in a portfolio of equity and debt securities that is designed as a solution for investors who seek a moderate tilt toward equity returns but also want the risk diversification offered by debt securities and the broad diversification of their equity risk across styles, capitalization ranges and geographic regions. The Portfolio targets a weighting of 60% equity securities and 40% debt securities with a goal of providing moderate upside potential without excessive volatility. In managing the Portfolio, the Adviser efficiently diversifies between the debt and equity components to produce the desired risk/return profile. Investments in real estate investment trusts, or REITs, are deemed to be 50% equity and 50% fixed-income for purposes of the overall target blend of the Portfolio. The Portfolio s equity component is diversified between growth and value equity investment styles, and between U.S. and non-u.s. markets. The Adviser selects growth and value equity securities by drawing from a variety of its fundamental growth and value investment disciplines to produce a blended equity component. Within each equity investment discipline, the Adviser may 4 4

9 draw on the capabilities of separate investment teams specializing in different capitalization ranges and geographic regions (U.S. and non-u.s.). Accordingly, in selecting equity investments for the Portfolio, the Adviser is able to draw on the resources and expertise of multiple growth and value equity investment teams, which are supported by more than 50 equity research analysts specializing in growth research, and more than 50 equity research analysts specializing in value research. The Adviser s targeted blend for the non-reit portion of the Portfolio s equity component is an equal weighting of growth and value stocks (50% each). In addition to blending growth and value styles, the Adviser blends each style-based portion of the Portfolio s equity component across U.S. and non-u.s. issuers and various capitalization ranges. Within each of the value and growth portions of the Portfolio, the Adviser normally targets a blend of approximately 70% in equities of U.S. companies and the remaining 30% in equities of companies outside the U.S. The Adviser will allow the relative weightings of the Portfolio s investments in equity and debt, growth and value, and U.S. and non-u.s. component to vary in response to market conditions, but ordinarily, only by ±5% of the Portfolio s net assets. Beyond those ranges, the Adviser will rebalance the Portfolio toward the targeted blend. However, under extraordinary circumstances, such as when market conditions favoring one investment style are compelling, the range may expand to ±10% of the Portfolio s net assets. The Portfolio s targeted blend may change from time to time without notice to shareholders based on the Adviser s assessment of underlying market conditions. The Adviser selects the Portfolio s growth stocks using its growth investment discipline. Each growth investment team selects stocks using a process that seeks to identify companies with strong management, superior industry positions, excellent balance sheets and superior earnings growth prospects. This discipline relies heavily upon the fundamental analysis and research of the Adviser s large internal growth research staff, which follows over 1,500 U.S. and non-u.s. companies. The Adviser s growth analysts prepare their own earnings estimates and financial models for each company followed. Research emphasis is placed on identifying companies whose substantially above-average prospective earnings growth is not fully reflected in current market valuations. Each growth investment team constructs a portfolio that emphasizes equity securities of a limited number of carefully selected, highquality companies that are judged likely to achieve superior earnings growth. Each value investment team seeks to identify companies whose long-term earnings power and dividend paying capability are not reflected in the current market price of their securities. This fundamental value discipline relies heavily upon the Adviser s large internal value research staff, which follows over 1,500 U.S. and non-u.s. companies. Teams within the value research staff cover a given industry worldwide, to better understand each company s competitive position in a global context. The Adviser s staff of company and industry analysts prepares its own earnings estimates and financial models for each company analyzed. The Adviser identifies and quantifies the critical variables that control a business s performance and analyzes the results in order to forecast each company s long-term prospects and expected returns. Through application of this value investment process, each value investment team constructs a portfolio that emphasizes equity securities of a limited number of value companies. In selecting fixed-income investments, the Adviser may draw on the capabilities of separate investment teams that specialize in different areas that are generally defined by the maturity of the debt securities and/or their ratings, and which may include subspecialties (such as inflation-protected securities). These fixed-income teams draw on the resources and expertise of the Adviser s large internal fixed-income research staff, which includes over 50 dedicated fixed-income research analysts and economists. The Portfolio s fixed-income securities will primarily be investment grade debt securities, but are expected to include lower-rated securities ( junk bonds ) and preferred stock. The Portfolio will not invest more than 25% of its total assets in securities rated, at the time of purchase, below investment grade. PRINCIPAL RISKS: Market Risk: The value of the Portfolio s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations. Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations. Below Investment Grade Security Risk: Investments in fixed-income securities with lower ratings ( junk bonds ) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to 5 5

10 greater price volatility due to such factors as specific corporate developments, interest rate sensitivity, negative perceptions of the junk bond market generally and less secondary market liquidity. Foreign (Non-U.S.) Risk: Investments in securities of non-u.s. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors. Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio s investments or reduce its returns. Allocation Risk: The allocation of investments among the different investment styles, such as growth or value, equity or debt securities, or U.S. or non-u.s. securities may have a more significant effect on the Portfolio s net asset value, or NAV, when one of these investment strategies is performing more poorly than others. Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-cap companies. Investments in small-cap companies may have additional risks because these companies have limited product lines, markets or financial resources. Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments. Real Estate Risk: The Portfolio s investments in the real estate market have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in REITs may have additional risks. REITs are dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in tax laws. Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results. As with all investments, you may lose money by investing in the Portfolio. BAR CHART AND PERFORMANCE INFORMATION The bar chart and performance information provide an indication of the historical risk of an investment in the Portfolio by showing: how the Portfolio s performance changed from year to year over the life of the Portfolio; and how the Portfolio s average annual returns for one and five years and over the life of the Portfolio compare to those of a broadbased securities market index. An additional index is included in the performance table to show how the Portfolio s performance compares with an index of fixed-income securities similar to those in which the Portfolio invests. You may obtain updated performance information on the Portfolio s website at (click on Pricing & Performance ). The performance information does not take into account separate account charges. If separate account charges were included, an investor s return would be lower. The Portfolio s past performance, of course, does not necessarily indicate how it will perform in the future. Bar Chart n/a n/a n/a n/a During the period shown in the bar chart, the Portfolio s: Calendar Year End (%) 08 Best Quarter was up 15.06%, 3rd quarter, 2009; and Worst Quarter was down %, 4th quarter,

11 Performance Table Average Annual Total Returns (For the periods ended December 31, 2010) 1 Year 5 Years Since Inception Portfolio (Inception Date: July 1, 2004) 10.30% 2.78% 4.24% S&P 500 Stock Index (reflects no deduction for fees, expenses, or taxes) 15.06% 2.29% 3.76% Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses, or taxes) 6.54% 5.80% 5.42% 60% S&P 500 Stock Index/40% Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses, or taxes) 12.13% 4.08% 4.75% INVESTMENT ADVISER AllianceBernstein L.P. is the investment adviser for the Portfolio. PORTFOLIO MANAGERS The following table lists the persons responsible for day-to-day management of the Portfolio s portfolio: Employee Length of Service Title Thomas J. Fontaine Since 2008 Senior Vice President of the Adviser Dokyoung Lee Since 2008 Senior Vice President of the Adviser Seth J. Masters Since 2004 Senior Vice President of the Adviser Christopher H. Nikolich Since 2004 Senior Vice President of the Adviser Patrick J. Rudden Since 2009 Senior Vice President of the Adviser 7 7

12 PURCHASE AND SALE OF PORTFOLIO SHARES The Portfolio offers its shares through the separate accounts of life insurance companies ( Insurers ). You may only purchase and sell shares through these separate accounts. See the prospectus of the separate account of the participating insurance company for information on the purchase and sale of the Portfolio s shares. TAX INFORMATION The Portfolio may make income dividends or capital gains distribution. The income and capital gains distribution are expected to be made in shares of the Portfolio. See the prospectus of the separate account of the participating insurance company for federal income tax information. PAYMENTS TO INSURERS AND OTHER FINANCIAL INTERMEDIARIES If you purchase shares of the Portfolio through an Insurer or other financial intermediary, the Portfolio and its related companies may pay the intermediary for the sale of Portfolio shares and related services. These payments may create a conflict of interest by influencing the Insurer or other financial intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your financial intermediary s website for more information. 8 8

13 ADDITIONAL INFORMATION ABOUT THE PORTFOLIO S RISKS AND INVESTMENTS This section of the Prospectus provides additional information about the Portfolio s investment practices and risks. Most of these investment practices are discretionary, which means that the Adviser may or may not decide to use them. This Prospectus does not describe all of the Portfolio s investment practices and additional descriptions of the Portfolio s strategies, investments, and risks can be found in the Portfolio s Statement of Additional Information ( SAI ). DERIVATIVES The Portfolio may, but is not required to, use derivatives for risk management purposes or as part of its investment strategies. Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The Portfolio may use derivatives to earn income and enhance returns, to hedge or adjust the risk profile of a portfolio, to replace more traditional direct investments and to obtain exposure to otherwise inaccessible markets. There are four principal types of derivatives, including options, futures, forwards and swaps, which are described below. Derivatives may be (i) standardized, exchange-traded contracts or (ii) customized, privately negotiated contracts. Exchangetraded derivatives tend to be more liquid and subject to less credit risk than those that are privately negotiated. The Portfolio s use of derivatives may involve risks that are different from, or possibly greater than, the risks associated with investing directly in securities or other more traditional instruments. These risks include the risk that the value of a derivative instrument may not correlate perfectly, or at all, with the value of the assets, reference rates, or indices that they are designed to track. Other risks include: the possible absence of a liquid secondary market for a particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out a position when desired; and the risk that the counterparty will not perform its obligations. Certain derivatives may have a leverage component and involve leverage risk. Adverse changes in the value or level of the underlying asset, note or index can result in a loss substantially greater than the Portfolio s investment (in some cases, the potential loss is unlimited). The Portfolio s investments in derivatives may include, but are not limited to, the following: Forward Contracts. A forward contract is an agreement that obligates one party to buy, and the other party to sell, a specific quantity of an underlying commodity or other tangible asset for an agreed-upon price at a future date. A forward contract is either settled by physical delivery of the commodity or tangible asset to an agreed-upon location at a future date, rolled forward into a new forward contract or, in the case of a non-deliverable forward, by a cash payment at maturity. The Portfolio s investments in forward contracts may include the following: Forward Currency Exchange Contracts. The Portfolio may purchase or sell forward currency exchange contracts for hedging purposes to minimize the risk from adverse changes in the relationship between the U.S. Dollar and other currencies or for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under Other Derivatives and Strategies Currency Transactions. The Portfolio, for example, may enter into a forward contract as a transaction hedge (to lock in the U.S. Dollar price of a non-u.s. Dollar security), as a position hedge (to protect the value of securities the Portfolio owns that are denominated in a foreign currency against substantial changes in the value of the foreign currency) or as a cross-hedge (to protect the value of securities the Portfolio owns that are denominated in a foreign currency against substantial changes in the value of that foreign currency by entering into a forward contract for a different foreign currency that is expected to change in the same direction as the currency in which the securities are denominated). Futures Contracts and Options on Futures Contracts. A futures contract is an agreement that obligates the buyer to buy and the seller to sell a specified quantity of an underlying asset (or settle for cash the value of a contract based on an underlying asset, rate or index) at a specific price on the contract maturity date. Options on futures contracts are options that call for the delivery of futures contracts upon exercise. The Portfolio may purchase or sell futures contracts and options thereon to hedge against changes in interest rates, securities (through index futures or options) or currencies. The Portfolio may also purchase or sell futures contracts for foreign currencies or options thereon for nonhedging purposes as a means of making direct investments in foreign currencies, as described below under Other Derivatives and Strategies Currency Transactions. Options. An option is an agreement that, for a premium payment or fee, gives the option holder (the buyer) the right but not the obligation to buy (a call option ) or sell (a put option ) the underlying asset (or settle for cash an amount based on an underlying asset, rate or index) at a specified price (the exercise price) during a period of time or on a specified date. Investments in options are considered speculative. The Portfolio may lose the premium paid for them if the price of the underlying security or other asset decreased or remained the same (in the case of a call option) or increased or remained the same (in the case of a put option). If a put or call option purchased by the Portfolio were permitted to expire without being sold or exercised, its premium would represent a loss to the Portfolio. The Portfolio s investments in options include the following: Options on Foreign Currencies. The Portfolio may invest in options on foreign currencies that are privately negotiated or traded on U.S. or foreign exchanges for hedging purposes to protect against declines in the U.S. Dollar value of foreign currency denominated 9 9

14 securities held by the Portfolio and against increases in the U.S. Dollar cost of securities to be acquired. The purchase of an option on a foreign currency may constitute an effective hedge against fluctuations in exchange rates, although if rates move adversely, the Portfolio may forfeit the entire amount of the premium plus related transaction costs. The Portfolio may also invest in options on foreign currencies for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under Other Derivatives and Strategies Currency Transactions. Options on Securities. The Portfolio may purchase or write a put or call option on securities. The Portfolio will only exercise an option it purchased if the price of the security was less (in the case of a put option) or more (in the case of a call option) than the exercise price. If the Portfolio does not exercise an option, the premium it paid for the option will be lost. The Portfolio may write covered options, which means writing an option for securities the Portfolio owns, and uncovered options. Options on Securities Indices. An option on a securities index is similar to an option on a security except that, rather than taking or making delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the chosen index is greater than (in the case of a call) or less than (in the case of a put) the exercise price of the option. Swap Transactions. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals (payment dates) based upon, or calculated by, reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) for a specified amount of an underlying asset (the notional principal amount). Except for currency swaps, the notional principal amount is used solely to calculate the payment stream, but is not exchanged. Swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments). The Portfolio s investments in swap transactions include the following: Interest Rate Swaps, Swaption, Caps, and Floors. Interest rate swaps involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments). Unless there is a counterparty default, the risk of loss to the Portfolio from interest rate swap transactions is limited to the net amount of interest payments that the Portfolio is contractually obligated to make. If the counterparty to an interest rate transaction defaults, the Portfolio s risk of loss consists of the net amount of interest payments that the Portfolio contractually is entitled to receive. An option on a swap agreement, also called a swaption, is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based premium. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. Swaption also include options that allow an existing swap to be terminated or extended by one of the counterparties. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually-based principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on an agreed principal amount from the party selling the interest rate floor. Caps and floors may be less liquid than swaps. Interest rate swap, cap, and floor transactions may be used to preserve a return or spread on a particular investment or a portion of the Portfolio s portfolio or to protect against an increase in the price of securities the Portfolio anticipates purchasing at a later date. The Portfolio may enter into interest rate swaps, caps, and floors on either an asset-based or liability-based basis, depending on whether it is hedging its assets or liabilities. Credit Default Swap Agreements. The buyer in a credit default swap contract is obligated to pay the seller a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. The Portfolio may be either the buyer or seller in the transaction. If the Portfolio is a seller, the Portfolio receives a fixed rate of income throughout the term of the contract, which typically is between one month and five years, provided that no credit event occurs. If a credit event occurs, the Portfolio typically must pay the contingent payment to the buyer, which is typically the par value (full notional value) of the reference obligation. The contingent payment may be a cash settlement or by physical delivery of the face amount of the reference obligation in return for payment of the obligation. The value of the reference obligation received by the Portfolio coupled with the periodic payments previously received may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Portfolio. If the reference obligation is a defaulted security, physical delivery of the security will cause the Portfolio to hold a defaulted security. If the Portfolio is a buyer and no credit event occurs, the Portfolio will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the buyer typically receives full notional value for a reference obligation that may have little or no value. Credit default swaps may 10 10

15 involve greater risks than if the Portfolio had invested in the reference obligation directly. Credit default swaps are subject to general market risk, liquidity risk and credit risk. Currency Swaps. The Portfolio may invest in currency swaps for hedging purposes to protect against adverse changes in exchange rates between the U.S. Dollar and other currencies or for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under Other Derivatives and Strategies Currency Transactions. Currency swaps involve the individually negotiated exchange by the Portfolio with another party of a series of payments in specified currencies. Actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination, of the transaction. Therefore, the entire principal value of a currency swap is subject to the risk that the swap counterparty will default on its contractual delivery obligations. If there is a default by the counterparty to the transaction, the Portfolio will have contractual remedies under the transaction agreements. Other Derivatives and Strategies. Currency Transactions. The Portfolio may invest in non- U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Adviser may actively manage the Portfolio s currency exposures and may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps and options. The Adviser may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies). CONVERTIBLE SECURITIES Prior to conversion, convertible securities have the same general characteristics as non-convertible debt securities which generally provide a stable stream of income with generally higher yields than those of equity securities of the same or similar issuers. The price of a convertible security will normally vary with changes in the price of the underlying equity security, although the higher yield tends to make the convertible security less volatile than the underlying equity security. As with debt securities, the market value of convertible securities tends to decrease as interest rates rise and increase as interest rates decline. While convertible securities generally offer lower interest or dividend yields than non-convertible debt securities of similar quality, they offer investors the potential to benefit from increases in the market prices of the underlying common stock. Convertible debt securities that are rated Baa3 or lower by Moody s or BBB- or lower by S&P or Fitch and comparable unrated securities may share some or all of the risks of debt securities with those ratings. FORWARD COMMITMENTS Forward commitments for the purchase or sale of securities may include purchases on a when-issued basis or purchases or sales on a delayed delivery basis. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring or approval of a proposed financing by appropriate authorities (i.e., a when, as and if issued trade). The Portfolio may invest in TBA mortgage-backed securities. A TBA or To Be Announced trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agreed-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed rate or variable rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions. When forward commitments with respect to fixed-income securities are negotiated, the price, which is generally expressed in yield terms, is fixed at the time the commitment is made, but payment for and delivery of the securities take place at a later date. Securities purchased or sold under a forward commitment are subject to market fluctuation and no interest or dividends accrue to the purchaser prior to the settlement date. There is a risk of loss if the value of either a purchased security declines before the settlement date or the security sold increases before the settlement date. The use of forward commitments helps the Portfolio to protect against anticipated changes in interest rates and prices. ILLIQUID SECURITIES Under current Securities and Exchange Commission ( Commission ) guidelines, the Portfolio limits its investments in illiquid securities to 15% of its net assets. The term illiquid securities for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount the Portfolio has valued the securities. The Portfolio may not be able to sell illiquid securities and may not be able to realize their full value upon sale. Restricted securities (securities subject to legal or contractual restrictions on resale) may be illiquid. Some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 (the Securities Act ) or certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets

16 INVESTMENT IN OTHER INVESTMENT COMPANIES The Portfolio may invest in other investment companies as permitted by the Investment Company Act of 1940, as amended (the 1940 Act ) or the rules and regulations thereunder. The Portfolio intends to invest uninvested cash balances in an affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act. If the Portfolio acquires shares in investment companies, shareholders would bear, indirectly, the expenses of such investment companies (which may include management and advisory fees), which are in addition to the Portfolio s expenses. The Portfolio may also invest in exchange-traded funds, subject to the restrictions and limitations of the 1940 Act or any applicable rules, exemptive orders or regulatory guidance. LOANS OF PORTFOLIO SECURITIES For the purposes of achieving income, the Portfolio may make secured loans of portfolio securities to brokers, dealers and financial institutions, provided a number of conditions are satisfied, including that the loan is fully collateralized. Securities lending involves the possible loss of rights in the collateral or delay in the recovery of collateral if the borrower fails to return the securities loaned or becomes insolvent. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the Portfolio will also receive a fee or interest on the collateral. The Portfolio may pay reasonable finders, administrative, and custodial fees in connection with a loan. MORTGAGE-BACKED SECURITIES Mortgage-backed securities may be issued by the U.S. government or one of its sponsored entities or may be issued by private organizations. Interest and principal payments (including prepayments) on the mortgages underlying mortgage-backed securities are passed through to the holders of the securities. As a result of the pass-through of prepayments of principal on the underlying securities, mortgage-backed securities are often subject to more rapid prepayment of principal than their stated maturity would indicate. Prepayments occur when the mortgagor on a mortgage prepays the remaining principal before the mortgage s scheduled maturity date. Because the prepayment characteristics of the underlying mortgages vary, it is impossible to predict accurately the realized yield or average life of a particular issue of pass-through certificates. Prepayments are important because of their effect on the yield and price of the mortgage-backed securities. During periods of declining interest rates, prepayments can be expected to accelerate and the Portfolio that invests in these securities would be required to reinvest the proceeds at the lower interest rates then available. Conversely, during periods of rising interest rates, a reduction in prepayments may increase the effective maturity of the securities, subjecting them to a greater risk of decline in market value in response to rising interest rates. In addition, prepayments of mortgages underlying securities purchased at a premium could result in capital losses. Mortgage-backed securities include mortgage pass-through certificates and multiple-class pass-through securities, such as real estate mortgage investment conduit certificates, or REMIC pass-through certificates, collateralized mortgage obligations, or CMOs, and stripped mortgage-backed securities, and other types of mortgage-backed securities that may be available in the future. Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations. Mortgage-backed securities also include CMOs and REMIC pass-through or participation certificates that may be issued by, among others, U.S. government agencies and instrumentalities as well as private lenders. CMOs and REMICs are issued in multiple classes and the principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMICs in various ways. Each class of CMOs or REMICs, often referred to as a tranche, is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Generally, interest is paid or accrued on all classes of CMOs or REMICs on a monthly basis. Typically, CMOs are collateralized by GNMA or FHLMC certificates but also may be collateralized by other mortgage assets such as whole loans or private mortgage pass-through securities. Debt service on CMOs is provided from payments of principal and interest on collateral of mortgage assets and any reinvestment income. A REMIC is a CMO that qualifies for special tax treatment under the Internal Revenue Code of 1986 as amended, or the Code, and invests in certain mortgages primarily secured by interests in real property and other permitted investments. Investors may purchase regular and residual interest shares of beneficial interest in REMIC trusts. OTHER ASSET-BACKED SECURITIES The Portfolio may invest in other asset-backed securities. The securitization techniques used to develop mortgage-related securities are being applied to a broad range of financial assets. Through the use of trusts and special purposes corporations, various types of assets, including automobile loans and leases, credit card receivables, home equity loans, equipment leases and trade receivables, are being securitized in structures similar to the structures used in mortgage securitizations. PREFERRED STOCK The Portfolio may invest in preferred stock. Preferred stock is subordinated to any debt the issuer has outstanding. Accordingly, preferred stock dividends are not paid until all debt obligations are first met. Preferred stock may be subject to more fluctuations in market value, due to changes in market participants perceptions of the issuer s ability to continue to pay dividends, than debt of the same issuer. These investments include convertible preferred stocks, which includes an option for the holder to convert the preferred stock into the issuer s common stock under certain conditions, among which may be the specification of a future date when the conversion may begin, a certain number of common shares per preferred shares, or a certain price per share for the common stock. Convertible preferred stock tends to be more volatile than non-convertible 12 12

17 preferred stock, because its value is related to the price of the issuer s common stock as well as the dividends payable on the preferred stock. REAL ESTATE INVESTMENT TRUSTS (REITS) REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Similar to investment companies such as the Portfolio, REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Code. The Portfolio will indirectly bear its proportionate share of expenses incurred by REITs in which it invests in addition to the expenses incurred directly by the Portfolio. REPURCHASE AGREEMENTS AND BUY/SELL BACK TRANSACTIONS The Portfolio may enter into repurchase agreements in which the Portfolio purchases a security from a bank or broker-dealer, which agrees to repurchase the security from the Portfolio at an agreed-upon future date, normally a day or a few days later. The purchase and repurchase transactions are transacted under one agreement. The resale price is greater than the purchase price, reflecting an agreed-upon interest rate for the period the buyer s money is invested in the security. Such agreements permit the Portfolio to keep all of its assets at work while retaining overnight flexibility in pursuit of investments of a longer-term nature. If the bank or broker-dealer defaults on its repurchase obligation, the Portfolio would suffer a loss to the extent that the proceeds from the sale of the security were less than the repurchase price. The Portfolio may enter into buy/sell back transactions, which are similar to repurchase agreements. In this type of transaction, the Portfolio enters a trade to buy securities at one price and simultaneously enters a trade to sell the same securities at another price on a specified date. Similar to a repurchase agreement, the repurchase price is higher than the sale price and reflects current interest rates. Unlike a repurchase agreement, however, the buy/sell back transaction is considered two separate transactions. RIGHTS AND WARRANTS Rights and warrants are option securities permitting their holders to subscribe for other securities. Rights are similar to warrants except that they have a substantially shorter duration. Rights and warrants do not carry with them dividend or voting rights with respect to the underlying securities, or any rights in the assets of the issuer. As a result, an investment in rights and warrants may be considered more speculative than certain other types of investments. In addition, the value of a right or a warrant does not necessarily change with the value of the underlying securities, and a right or a warrant ceases to have value if it is not exercised prior to its expiration date. SHORT SALES The Portfolio may make short sales as a part of overall portfolio management or to offset a potential decline in the value of a security. A short sale involves the sale of a security that the Portfolio does not own, or if the Portfolio owns the security, is not to be delivered upon consummation of the sale. When the Portfolio makes a short sale of a security that it does not own, it must borrow from a broker-dealer the security sold short and deliver the security to the broker-dealer upon conclusion of the short sale. If the price of the security sold short increases between the time of the short sale and the time the Portfolio replaces the borrowed security, the Portfolio will incur a loss; conversely, if the price declines, the Portfolio will realize a short-term capital gain. Although the Portfolio s gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited. ADDITIONAL RISK AND OTHER CONSIDERATIONS Investments in the Portfolio involve the special risk considerations described below. Certain of these risks may be heightened when investing in emerging markets. FOREIGN (NON-U.S.) SECURITIES Investing in foreign securities involves special risks and considerations not typically associated with investing in U.S. securities. The securities markets of many foreign countries are relatively small, with the majority of market capitalization and trading volume concentrated in a limited number of companies representing a small number of industries. The Portfolio s investments in foreign securities may experience greater price volatility and significantly lower liquidity than a portfolio invested solely in securities of U.S. companies. These markets may be subject to greater influence by adverse events generally affecting the market, and by large investors trading significant blocks of securities, than is usual in the United States. Securities registration, custody, and settlement may in some instances be subject to delays and legal and administrative uncertainties. Foreign investment in the securities markets of certain foreign countries is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude investment in certain securities and may increase the cost and expenses of the Portfolio. In addition, the repatriation of investment income, capital or the proceeds of sales of securities from certain countries is controlled under regulations, including in some cases the need for certain advance government notification or authority, and if a deterioration occurs in a country s balance of payments, the country could impose temporary restrictions on foreign capital remittances. The Portfolio also could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation, as well as by the application to it of other restrictions 13 13

18 on investment. Investing in local markets may require the Portfolio to adopt special procedures or seek local governmental approvals or other actions, any of which may involve additional costs to the Portfolio. These factors may affect the liquidity of the Portfolio s investments in any country and the Adviser will monitor the effect of any such factor or factors on the Portfolio s investments. Transaction costs, including brokerage commissions for transactions both on and off the securities exchanges, in many foreign countries are generally higher than in the U.S. Issuers of securities in foreign jurisdictions are generally not subject to the same degree of regulation as are U.S. issuers with respect to such matters as insider trading rules, restrictions on market manipulation, shareholder proxy requirements, and timely disclosure of information. The reporting, accounting, and auditing standards of foreign countries may differ, in some cases significantly, from U.S. standards in important respects, and less information may be available to investors in foreign securities than to investors in U.S. securities. Substantially less information is publicly available about certain non-u.s. issuers than is available about most U.S. issuers. The economies of individual foreign countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product or gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes, government regulation, political or social instability, revolutions, wars or diplomatic developments could affect adversely the economy of a foreign country. In the event of nationalization, expropriation, or other confiscation, the Portfolio could lose its entire investment in securities in the country involved. In addition, laws in foreign countries governing business organizations, bankruptcy and insolvency may provide less protection to security holders such as the Portfolio than that provided by U.S. laws. FOREIGN (NON-U.S.) CURRENCIES The Portfolio invests some portion of its assets in securities denominated in, and receives revenues in, foreign currencies and will be adversely affected by reductions in the value of those currencies relative to the U.S. Dollar. Foreign currency exchange rates may fluctuate significantly. They are determined by supply and demand in the foreign exchange markets, the relative merits of investments in different countries, actual or perceived changes in interest rates, and other complex factors. Currency exchange rates also can be affected unpredictably by intervention (or the failure to intervene) by U.S. or non-u.s. governments or central banks or by currency controls or political developments. In light of these risks, the Portfolio may engage in certain currency hedging transactions, as described above, which involve certain special risks. The Portfolio may also invest directly in foreign currencies for non-hedging purposes directly on a spot basis (i.e., cash) or through derivative transactions, such as forward currency exchange contracts, futures and options thereon, swaps and options as described above. These investments will be subject to the same risks. In addition, currency exchange rates may fluctuate significantly over short periods of time, causing the Portfolio s NAV to fluctuate. INVESTMENT IN BELOW INVESTMENT GRADE FIXED- INCOME SECURITIES Investments in securities rated below investment grade (commonly referred to as junk bonds ) may be subject to greater risk of loss of principal and interest than higher-rated securities. These securities are also generally considered to be subject to greater market risk than higher-rated securities. The capacity of issuers of these securities to pay interest and repay principal is more likely to weaken than is that of issuers of higher-rated securities in times of deteriorating economic conditions or rising interest rates. In addition, below investment grade securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities. The market for these securities may be thinner and less active than that for higher-rated securities, which can adversely affect the prices at which these securities can be sold. To the extent that there is no established secondary market for these securities, the Portfolio may experience difficulty in valuing such securities and, in turn, the Portfolio s assets. UNRATED SECURITIES The Portfolio may invest in unrated fixed-income securities when the Adviser believes that the financial condition of the issuers of such securities, or the protection afforded by the terms of the securities themselves, limits the risk to the Portfolio to a degree comparable to that of rated securities that are consistent with the Portfolio s objective and policies. FUTURE DEVELOPMENTS The Portfolio may take advantage of other investment practices that are not currently contemplated for use by the Portfolio, or are not available but may yet be developed, to the extent such investment practices are consistent with the Portfolio s investment objective and legally permissible for the Portfolio. Such investment practices, if they arise, may involve risks that are different from or exceed those involved in the practices described above. CHANGES IN INVESTMENT OBJECTIVES AND POLICIES The AllianceBernstein Variable Products Series (VPS) Fund s (the Fund ) Board of Directors (the Board ) may change the Portfolio s investment objective without shareholder approval. The Portfolio will provide shareholders with 60 days prior written notice of any change to the Portfolio s investment objective. Unless otherwise noted, all other investment policies of the Portfolio may be changed without shareholder approval. TEMPORARY DEFENSIVE POSITION For temporary defensive purposes to attempt to respond to adverse market, economic, political or other conditions, the Portfolio may invest in certain types of short-term, liquid, 14 14

19 investment grade or high quality debt securities. While the Portfolio is investing for temporary defensive purposes, it may not meet its investment objectives. PORTFOLIO HOLDINGS The Portfolio s SAI includes a description of the policies and procedures that apply to disclosure of the Portfolio s portfolio holdings

20 INVESTING IN THE PORTFOLIO HOW TO BUY AND SELL SHARES The Portfolio offers its shares through the separate accounts of life insurance companies (the Insurers ). You may only purchase and sell shares through these separate accounts. See the prospectus of the separate account of the participating insurance company for information on the purchase and sale of the Portfolio s shares. AllianceBernstein Investments, Inc. ( ABI ) may from time to time receive payments from Insurers in connection with the sale of the Portfolio s shares through the Insurer s separate accounts. The purchase or sale of the Portfolio s shares is priced at the next determined NAV after the order is received in proper form. The Insurers maintain omnibus account arrangements with the Fund in respect of the Portfolio and place aggregate purchase, redemption and exchange orders for shares of the Portfolio corresponding to orders placed by the Insurer s customers ( Contractholders ) who have purchased contracts from the Insurers, in each case, in accordance with the terms and conditions of the relevant contract. Omnibus account arrangements maintained by the Insurers are discussed below under Limitations on Ability to Detect and Curtail Excessive Trading Practices. ABI may refuse any order to purchase shares. The Portfolio reserves the right to suspend the sale of its shares to the public in response to conditions in the securities markets or for other reasons. DISTRIBUTION ARRANGEMENTS The Portfolio has adopted a plan under Commission Rule 12b-1 that allows the Portfolio to pay asset-based sales charges or distribution and/or service fees for the distribution and sale of its shares. The amount of this fee for the Class B shares of the Portfolio is.25% of the aggregate average daily net assets. Because these fees are paid out of the Portfolio s assets on an ongoing basis, over time these fees will increase the costs of your investment and may cost you more than paying other types of sales charges. PAYMENTS TO FINANCIAL INTERMEDIARIES Financial intermediaries, such as the Insurers, market and sell shares of the Portfolio and typically receive compensation for selling shares of the Portfolio. This compensation is paid from various sources. Insurers or your financial intermediary receive compensation from ABI and/or the Adviser in several ways from various sources, which include some or all of the following: - Rule 12b-1 fees; - defrayal of costs for educational seminars and training; - additional distribution support; and - payments related to providing Contractholder recordkeeping and/or administrative services. In the case of Class B shares, up to 100% of the Rule 12b-1 fees applicable to Class B shares each year may be paid to the financial intermediary that sells Class B shares. ABI and/or the Adviser may pay Insurers or other financial intermediaries to perform record-keeping and administrative services in connection with the Portfolio. Such payments will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the Insurer. Other Payments for Educational Support and Distribution Assistance In addition to the fees described above, ABI, at its expense, currently provides additional payments to the Insurers that sell shares of the Portfolio. These sums include payments to reimburse directly or indirectly the costs incurred by the Insurers and their employees in connection with educational seminars and training efforts about the Portfolio for the Insurers employees and/or their clients and potential clients. The costs and expenses associated with these efforts may include travel, lodging, entertainment and meals. For 2011, ABI s additional payments to these firms for educational support and distribution assistance related to the Portfolios are expected to be approximately $400,000. In 2010, ABI paid additional payments of approximately $400,000 for the Portfolios. If one mutual fund sponsor that offers shares to separate accounts of an Insurer makes greater distribution assistance payments than another, the Insurer may have an incentive to recommend or offer the shares of funds of one fund sponsor over another. Please speak with your financial intermediary to learn more about the total amounts paid to your financial intermediary by the Adviser, ABI and by other mutual fund sponsors that offer shares to Insurers that may be recommended to you. You should also consult disclosures made by your financial intermediary at the time of purchase. As of the date of this Prospectus, ABI anticipates that the Insurers or their affiliates that will receive additional payments for educational support include: AIG SunAmerica Genworth Financial Lincoln Financial Distributors Pacific Life Insurance Co. Prudential RiverSource Distributors SunLife Financial The Hartford Transamerica Capital 16 16

21 Although the Portfolio may use brokers and dealers who sell shares of the Portfolio to effect portfolio transactions, the Portfolio does not consider the sale of AllianceBernstein Mutual Fund shares as a factor when selecting brokers or dealers to effect portfolio transactions. FREQUENT PURCHASES AND REDEMPTIONS OF PORTFOLIO SHARES The Fund s Board has adopted policies and procedures designed to detect and deter frequent purchases and redemptions of Portfolio shares or excessive or short-term trading that may disadvantage long-term Contractholders. These policies are described below. There is no guarantee that the Portfolio will be able to detect excessive or short-term trading or to identify Contractholders engaged in such practices, particularly with respect to transactions in omnibus accounts. Contractholders should be aware that application of these policies may have adverse consequences, as described below, and avoid frequent trading in Portfolio shares through purchases, sales and exchanges of shares. The Portfolio reserves the right to restrict, reject, or cancel, without any prior notice, any purchase or exchange order for any reason, including any purchase or exchange order accepted by any Insurer or a Contractholder s financial intermediary. Risks Associated With Excessive Or Short-Term Trading Generally. While the Fund will try to prevent market timing by utilizing the procedures described below, these procedures may not be successful in identifying or stopping excessive or short-term trading in all circumstances. By realizing profits through short-term trading, Contractholders that engage in rapid purchases and sales or exchanges of the Portfolio s shares dilute the value of shares held by long-term Contractholders. Volatility resulting from excessive purchases and sales or exchanges of shares of the Portfolio, especially involving large dollar amounts, may disrupt efficient portfolio management and cause the Portfolio to sell portfolio securities at inopportune times to raise cash to accommodate redemptions relating to short-term trading activity. In particular, the Portfolio may have difficulty implementing its long-term investment strategies if it is forced to maintain a higher level of its assets in cash to accommodate significant short-term trading activity. In addition, the Portfolio may incur increased administrative and other expenses due to excessive or short-term trading and increased brokerage costs. Investments in securities of foreign issuers may be particularly susceptible to short-term trading strategies. This is because securities of foreign issuers are typically traded on markets that close well before the time a Portfolio calculates its NAV at 4:00 p.m., Eastern Time, which gives rise to the possibility that developments may have occurred in the interim that would affect the value of these securities. The time zone differences among international stock markets can allow a Contractholder engaging in a short-term trading strategy to exploit differences in share prices that are based on closing prices of securities of foreign issuers established some time before the Portfolio calculates its own share price (referred to as time zone arbitrage ). The Portfolio has procedures, referred to as fair value pricing, designed to adjust closing market prices of securities of foreign issuers to reflect what is believed to be fair value of those securities at the time the Portfolio calculates its NAV. While there is no assurance, the Portfolio expects that the use of fair value pricing, in addition to the short-term trading policies discussed below, will significantly reduce a Contractholder s ability to engage in time zone arbitrage to the detriment of other Contractholders. Contractholders engaging in a short-term trading strategy may also target a Portfolio that does not invest primarily in securities of foreign issuers. If the Portfolio invests in securities that are, among other things, thinly traded, traded infrequently, or relatively illiquid, it has the risk that the current market price for the securities may not accurately reflect current market values. Contractholders may seek to engage in short-term trading to take advantage of these pricing differences (referred to as price arbitrage ). A Portfolio may be adversely affected by price arbitrage. Policy Regarding Short-Term Trading. Purchases and exchanges of shares of the Portfolio should be made for investment purposes only. The Fund seeks to prevent patterns of excessive purchases and sales or exchanges of shares of the Portfolio. The Fund seeks to prevent such practices to the extent they are detected by the procedures described below, subject to the Fund s ability to monitor purchase, sale and exchange activity. Insurers utilizing omnibus account arrangements may not identify to the Fund, ABI or AllianceBernstein Investor Services, Inc. ( ABIS ) Contractholders transaction activity relating to shares of the Portfolio on an individual basis. Consequently, the Fund, ABI and ABIS may not be able to detect excessive or short-term trading in shares of the Portfolio attributable to a particular Contractholder who effects purchase and redemption and/or exchange activity in shares of the Portfolio through an Insurer acting in an omnibus capacity. In seeking to prevent excessive or short-term trading in shares of the Portfolio, including the maintenance of any transaction surveillance or account blocking procedures, the Fund, ABI and ABIS consider the information actually available to them at the time. The Fund reserves the right to modify this policy, including any surveillance or account blocking procedures established from time to time to effectuate this policy, at any time without notice. Transaction Surveillance Procedures. The Fund, through its agents, ABI and ABIS, maintains surveillance procedures to detect excessive or short-term trading in Portfolio shares. This surveillance process involves several factors, which include scrutinizing individual Insurer s omnibus transaction activity in Portfolio shares in order to seek to ascertain whether any such activity attributable to one or more Contractholders might constitute excessive or shortterm trading. Insurer s omnibus transaction activity identified by these surveillance procedures, or as a result of any other information actually available at the time, will be evaluated to determine whether such activity might indicate excessive or short-term trading activity attributable to one or more Contractholders. These surveillance procedures may be modified from time to time, as necessary or appropriate to 17 17

22 improve the detection of excessive or short-term trading or to address specific circumstances. Account Blocking Procedures. If the Fund determines, in its sole discretion, that a particular transaction or pattern of transactions identified by the transaction surveillance procedures described above is excessive or short-term trading in nature, the relevant Insurer s omnibus account(s) will be immediately blocked and no future purchase or exchange activity will be permitted, except to the extent the Fund, ABI or ABIS has been informed in writing that the terms and conditions of a particular contract may limit the Fund s ability to apply its short-term trading policy to Contractholder activity as discussed below. As a result, any Contractholder seeking to engage through an Insurer in purchase or exchange activity in shares of the Portfolio under a particular contract will be prevented from doing so. However, sales of Portfolio shares back to the Portfolio or redemptions will continue to be permitted in accordance with the terms of the Portfolio s current Prospectus. In the event an account is blocked, certain account-related privileges, such as the ability to place purchase, sale and exchange orders over the internet or by phone, may also be suspended. As a result, unless the Contractholder redeems his or her shares, the Contractholder effectively may be locked into an investment in shares of one or more of the Portfolio that the Contractholder did not intend to hold on a long-term basis or that may not be appropriate for the Contractholder s risk profile. To rectify this situation, a Contractholder with a blocked account may be forced to redeem Portfolio shares, which could be costly if, for example, these shares have declined in value. To avoid this risk, a Contractholder should carefully monitor the purchases, sales, and exchanges of Portfolio shares and avoid frequent trading in Portfolio shares. An Insurer s omnibus account that is blocked will generally remain blocked unless and until the Insurer provides evidence or assurance acceptable to the Fund that one or more Contractholders did not or will not in the future engage in excessive or short-term trading. Applications of Surveillance Procedures and Restrictions to Omnibus Accounts. The Portfolio applies its surveillance procedures to Insurers. As required by Commission rules, the Portfolio has entered into agreements with all of its financial intermediaries that require the financial intermediaries to provide the Portfolio, upon the request of the Portfolio or its agents, with individual account level information about their transactions. If the Portfolio detects excessive trading through its monitoring of omnibus accounts, including trading at the individual account level, Insurers will also execute instructions from the Portfolio to take actions to curtail the activity, which may include applying blocks to account to prohibit future purchases and exchanges of Portfolio shares. HOW THE PORTFOLIO VALUES ITS SHARES The Portfolio s NAV is calculated at the close of regular trading on the New York Stock Exchange (the Exchange ) (ordinarily, 4:00 p.m., Eastern Time), only on days when the Exchange is open for business. To calculate NAV, the Portfolio s assets are valued and totaled, liabilities are subtracted, and the balance, called net assets, is divided by the number of shares outstanding. If the Portfolio invests in securities that are primarily traded on foreign exchanges that trade on weekends or other days when the Portfolio does not price its shares, the NAV of the Portfolio s shares may change on days when shareholders will not be able to purchase or redeem their shares in the Portfolio. The Portfolio values its securities at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are unreliable, at fair value as determined in accordance with procedures established by and under the general supervision of the Board. When the Portfolio uses fair value pricing, it may take into account any factors it deems appropriate. The Portfolio may determine fair value based upon developments related to a specific security, current valuations of foreign stock indices (as reflected in U.S. futures markets) and/or U.S. sector or broader stock market indices. The prices of securities used by the Portfolio to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. The Portfolio expects to use fair value pricing for securities primarily traded on U.S. exchanges only under very limited circumstances, such as the early closing of the exchange on which a security is traded or suspension of trading in the security. The Portfolio may use fair value pricing more frequently for securities primarily traded in foreign markets because, among other things, most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. For example, the Portfolio believes that foreign security values may be affected by events that occur after the close of foreign securities markets. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available. Subject to its, the Board has delegated responsibility for valuing the Portfolio s assets to the Adviser. The Adviser has established a Valuation Committee, which operates under the policies and procedures approved by the Board, to value the Portfolio s assets on behalf of the Portfolio. The Valuation Committee values Portfolio assets as described above

23 MANAGEMENT OF THE PORTFOLIO INVESTMENT ADVISER The Portfolio s adviser is AllianceBernstein L.P., 1345 Avenue of the Americas, New York, New York The Adviser is a leading international investment adviser managing client accounts with assets as of December 31, 2010, totaling more than $478 billion (of which over $84 billion represented assets of registered investment companies sponsored by the Adviser). As of December 31, 2010, the Adviser managed retirement assets for many of the largest public and private employee benefit plans (including 31 of the nation s FORTUNE 100 companies), for public employee retirement funds in 35 states, for investment companies, and for foundations, endowments, banks and insurance companies worldwide. Currently, there are 35 registered investment companies managed by the Adviser, comprising 115 separate investment portfolios, with approximately 3.3 million retail accounts. The Adviser provides investment advisory services and order placement facilities for the Portfolio. For these advisory services, for the fiscal year ended December 31, 2010, the Portfolio paid the Adviser as a percentage of average daily net assets.55%. A discussion regarding the basis for the Board s approval of the Portfolio s investment advisory agreement is available in the Portfolio s annual report to shareholders for the fiscal year ended indicated above. The Adviser may act as an investment adviser to other persons, firms, or corporations, including investment companies, hedge funds, pension funds, and other institutional investors. The Adviser may receive management fees, including performance fees, that may be higher or lower than the advisory fees it receives from the Portfolio. Certain other clients of the Adviser may have investment objectives and policies similar to those of the Portfolio. The Adviser may, from time to time, make recommendations that result in the purchase or sale of a particular security by its other clients simultaneously with the Portfolio. If transactions on behalf of more than one client during the same period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or quantity. It is the policy of the Adviser to allocate advisory recommendations and the placing of orders in a manner that is deemed equitable by the Adviser to the accounts involved, including the Portfolio. When two or more of the clients of the Adviser (including the Portfolio) are purchasing or selling the same security on a given day from the same brokerdealer, such transactions may be averaged as to price. PORTFOLIO MANAGERS The day-to-day management of, and investment decisions for, the Portfolio are made by the Adviser s Multi-Asset Solutions Team. The Multi-Asset Solutions Team relies heavily on the fundamental analysis and research of the Adviser s large internal research staff. No one person is principally responsible for making recommendations for the Portfolio s portfolio. The following table lists the persons within the Multi-Asset Solutions Team with the most significant responsibility for the day-to-day management of the Portfolio s portfolio, the length of time that each person has been jointly and primarily responsible for the Portfolio, and each person s principal occupation during the past five years: Employee; Year; Title Thomas J. Fontaine; since 2008; Senior Vice President of the Adviser and Head of Defined Contribution Dokyoung Lee; since 2008; Senior Vice President of the Adviser and Director of Research Blend Strategies Seth J. Masters; since 2004; Senior Vice President of the Adviser and Chief Investment Officer of Blend Strategies and Defined Contribution Christopher H. Nikolich; since 2004; Senior Vice President of the Adviser and Head of Research and Investment Design Defined Contribution Patrick J. Rudden; since 2009; Senior Vice President of the Adviser and Head of Blend Strategies Principal Occupation During the Past Five (5) Years Senior Vice President of the Adviser and Head of Defined Contribution. Previously, Director of Research Defined Contribution. Prior thereto, he was a Director of Research for the Adviser s Blend Strategies team and served as a senior quantitative analyst since prior to Senior Vice President of the Adviser, with which he has been associated since prior to 2006 and Director of Research Blend Strategies since Senior Vice President of the Adviser, with which he has been associated since prior to 2006 and Chief Investment Officer of Blend Strategies and Defined Contribution. Senior Vice President of the Adviser, with which he has been associated since prior to 2006, and Head of Research and Investment Design Defined Contribution. Senior Vice President of the Adviser, with which he has been associated since prior to 2006, and Head of Blend Strategies. Prior thereto, he was Head of Institutional Investment Solutions within the Blend Team. Additional information about the portfolio managers may be found in the Portfolio s SAI. PERFORMANCE OF EQUITY AND FIXED-INCOME INVESTMENT TEAMS Although the Portfolio itself has limited performance history under its current investment policies, certain of the investment teams employed by the Adviser in managing the Portfolio have experience in managing discretionary accounts of institutional clients and/or other registered investment companies and portions thereof (the Equity and Fixed-Income Historical Accounts ) that have substantially the same investment objectives and policies and are managed in accordance with essentially the same investment strategies as those applicable to the portions of the Portfolio they manage. The Equity and Fixed- Income Historical Accounts that are not registered investment companies or portions thereof are not subject to certain limitations, diversification requirements and other restrictions imposed under the 1940 Act and the Code to which the Portfolio, as a registered investment company, is subject and which, if applicable to the Equity and Fixed Income Historical Accounts, 19 19

24 may have adversely affected the performance of the Equity and Fixed-Income Historical Accounts. Set forth below is performance data provided by the Adviser relating to the Equity and Fixed-Income Historical Accounts managed by investment teams that manage the Portfolio s assets. Performance data is shown for the period during which the relevant investment team of the Adviser or Bernstein managed the Equity and Fixed-Income Historical Accounts through December 31, The aggregate assets for the Equity and Fixed-Income Historical Accounts managed by each investment team as of December 31, 2010 are also shown. Each of an investment team s Equity and Fixed-Income Historical Accounts has a nearly identical composition of investment holdings and related percentage weightings. The performance data is net of all fees (including brokerage commissions) charged to the Equity and Fixed-Income Historical Accounts, calculated on a monthly basis. The data has not been adjusted to reflect any fees that will be payable by the Portfolio, which may be higher than the fees imposed on the Equity and Fixed-Income Historical Accounts, and will reduce the returns of the Portfolio. Expenses associated with the distribution of Class B shares of the Portfolio in accordance with the plan adopted by the Board under SEC Rule 12b-1 are also excluded. The data has not been adjusted to reflect the fees imposed by insurance company separate accounts in connection with variable products that invest in the Portfolio. Except as noted, the performance data has also not been adjusted for corporate or individual taxes, if any, payable by account owners. The Adviser has calculated the investment performance of the Equity and Fixed-Income Historical Accounts on a trade-date basis. Dividends have been accrued at the end of the month and cash flows weighted daily. Composite investment performance for US Large Cap Value, International Large Cap Value and International Large Cap Growth accounts has been determined on an equal weighted basis for periods prior to January 1, 2003 and on an asset weighted basis for periods subsequent thereto. Composite investment performance for all other accounts has been determined on an asset weighted basis. New accounts are included in the composite investment performance computations at the beginning of the quarter following the initial contribution. The total returns set forth below are calculated using a method that links the monthly return amounts for the disclosed periods, resulting in a time-weighted rate of return. Other methods of computing the investment performance of the Equity and Fixed-Income Historical Accounts may produce different results, and the results for different periods may vary. The Russell 1000 universe of securities is compiled by Frank Russell Company and is segmented into two style indices, based on a non-linear probability method to assign stocks to the growth and value style indices. The term probability is used to indicate the degree of certainty that a stock is value or growth based on its relative book-to-price ratio and I/B/E/S forecast long-term growth mean. The Russell 1000 Growth Index ( Russell 1000 Growth ) is designed to include those Russell 1000 securities with higher price-to-book ratios and higher forecasted growth values. In contrast, the Russell 1000 Value Index ( Russell 1000 Value ) is designed to include those Russell 1000 securities with lower price-to-book ratios and lower forecasted growth values. The Morgan Stanley Capital International Europe, Australasia, Far East Index (the MSCI EAFE Index ) is an international, unmanaged, weighted stock market index that includes over 1,000 securities listed on the stock exchanges of 21 developed market countries from Europe, Australia and the Far East. The unmanaged Barclays Capital U.S. Aggregate Index ( Barclays Capital U.S. Aggregate ) is composed of the Mortgage-Backed Securities Index, the Asset-Backed Securities Index and the Government/Corporate Bond Index. It is a broad measure of the performance of taxable bonds in the U.S. market, with maturities of at least one year. The FTSE EPRA/NAREIT Global Real Estate Index ( FTSE EPRA/NAREIT Index ) is a free-floating, market capitalization weighted index structured in such a way that it can be considered to represent general trends in all eligible real estate stocks worldwide. The index is designed to reflect the stock performance of companies engaged in specific aspects of the North American, European and Asian real estate markets. To the extent an investment team utilizes investment techniques such as futures or options, the indices shown may not be substantially comparable to the performance of the investment team s Equity and Fixed-Income Historical Accounts. The indices shown are included to illustrate material economic and market factors that existed during the time period shown. None of the indices reflects the deduction of any fees. If an investment team were to purchase a portfolio of securities substantially identical to the securities comprising the relevant index, the performance of the portion of the Portfolio managed by that investment team relative to the index would be reduced by the Portfolio s expenses, including brokerage commissions, advisory fees, distribution fees, custodial fees, transfer agency costs and other administrative expenses, as well as by the impact on the Portfolio s shareholders of sales charges and income taxes. The following performance data is provided solely to illustrate each investment team s performance in managing the Equity and Fixed-Income Historical Accounts as measured against certain broad-based market indices. The performance of the Portfolio will be affected both by the performance of each investment team managing a portion of the Portfolio s assets and by the Adviser s allocation of the Portfolio s portfolio among its various investment teams. If some or all of the investment teams employed by the Adviser in managing the Portfolio were to perform relatively poorly, and/or if the Adviser were to allocate more of the Portfolio s portfolio to relatively poorly performing investment teams, the performance of the Portfolio would suffer. Investors should not rely on the performance data of the Equity and Fixed-Income Historical Accounts as an indication of future performance of all or any portion of the Portfolio

25 The investment performance for the periods presented may not be indicative of future rates of return. The performance was not calculated pursuant to the methodology established by the Commission that will be used to calculate the Portfolio s performance. The use of methodology different from that used to calculate performance could result in different performance data. Equity and Fixed-Income Historical Accounts Net of fees performance For periods ended December 31, 2010, with their Aggregate Assets as of December 31, 2010 Investment Teams and Benchmarks Equity Assets (in millions) 1 Year 3 Years 5 Years 10 Years Since Inception Inception Dates US Large Cap Growth $7, % -3.42% 0.82% -0.70% 12.81%* 12/31/77 Russell 1000 Growth 16.71% -0.47% 3.75% 0.02% N/A US Large Cap Value $3, % -7.06% -1.06% 3.20% 3.99% 3/31/99 Russell 1000 Value 15.51% -4.42% 1.28% 3.26% 3.88% International Large Cap Growth $2, % % -1.02% 1.71% 5.44% 12/31/90 MSCI EAFE 7.75% -7.02% 2.46% 3.50% 5.85% International Large Cap Value $2,756, % % -1.07% N/A 7.05% 3/31/01 MSCI EAFE 7.75% -7.02% 2.46% N/A 5.17% Global Real Estate $2, % -3.75% 4.04% N/A 10.82% 9/30/03 FTSE EPRA/NAREIT Developed Index 20.40% -4.53% 2.88% N/A 10.42% Fixed Income Intermediate Duration Bonds $ % 6.61% 5.91% 5.77% 6.94% 12/31/86 Barclays Capital U.S. Aggregate 6.54% 5.90% 5.80% 5.84% 7.15% * The inception date for the Russell 1000 Growth Index was December 31, 1978; the total returns for the US Large Cap Growth Strategy and that benchmark for that date through 12/31/10 were 12.80% and 10.66%, respectively

26 DIVIDENDS, DISTRIBUTIONS AND TAXES The Portfolio declares dividends on its shares at least annually. The income and capital gains distribution are expected to be made in shares of the Portfolio. See the prospectus of the separate account of the participating insurance company for federal income tax information. Investment income received by the Portfolio from sources within foreign countries may be subject to foreign income taxes withheld at the source. Provided that certain requirements are met, the Portfolio may pass-through to its shareholders credits or deductions to foreign income taxes paid. Non-U.S. investors may not be able to credit or deduct such foreign taxes

27 GLOSSARY Fixed-income securities are investments, such as bonds or other debt securities or preferred stocks that pay a fixed rate of return. Barclays Capital U.S. Aggregate Index provides a measure of the performance of the U.S. Dollar-denominated, investment grade bond market, which includes U.S. government bonds, corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities, and asset-backed securities that are publicly for sale in the U.S. S&P 500 Index is a stock market index containing the stocks of 500 large-cap corporations. Widely regarded as the best single gauge of the U.S. equities market, the S&P 500 Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy

28 FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Portfolio s financial performance for the period of the Portfolio s operations. Certain information reflects financial results for a single share of a class of the Portfolio. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Portfolio (assuming reinvestment of all dividends and distributions). The total returns in the table do not take into account separate account charges. If separate account charges were included, an investor s returns would have been lower. This information has been audited by Ernst & Young LLP, the independent registered public accounting firm for the Portfolio, whose report, along with the Portfolio s financial statements, are included in the Portfolio s annual report, which is available upon request. AllianceBernstein Balanced Wealth Strategy Portfolio Year Ended December 31, Net asset value, beginning of period $ $ 8.58 $ $ $ Income From Investment Operations Net investment income(a) (b).27(b).22(b) Net realized and unrealized gain (loss) on investment and foreign currency transactions (4.02) Contributions from Adviser (c) Net increase (decrease) in net asset value from operations (3.76) Less: Dividends and Distributions Dividends from net investment income (.27) (.08) (.35) (.30) (.08) Distributions from net realized gain on investment and foreign currency transactions (.28) (.22) 0.00 Total dividends and distributions (.27) (.08) (.63) (.52) (.08) Net asset value, end of period $ $ $ 8.58 $ $ Total Return Total investment return based on net asset value(d) 10.30%* 24.45%* (30.20)%* 5.26% 13.75% Ratios/Supplemental Data Net assets, end of period (000 s omitted) $518,572 $458,669 $285,962 $211,440 $124,992 Ratio to average net assets of: Expenses, net of waivers and reimbursements.93%(e).95% 1.00%(e) 1.01% 1.23%(e) Expenses, before waivers and reimbursements.93%(e).95% 1.02%(e) 1.07% 1.31%(e) Net investment income 1.89%(e) 2.36% 2.48%(b)(e) 2.11%(b) 1.84%(b)(e) Portfolio turnover rate 101% 85% 93% 77% 203% Footnotes: (a) Based on average shares outstanding. (b) Net of expenses reimbursed or waived by the Adviser and/or the Distributor. (c) Amount is less than $ (d) Total investment return is calculated assuming an initial investment made at the NAV at the beginning of the period, reinvestment of all dividends and distributions at NAV during the period, and redemption on the last day of the period. Total return does not reflect (i) insurance company s separate account related expense charges and (ii) the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. (e) The ratio includes expenses attributable to costs of proxy solicitation. * Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance as follows: Year Ended December 31, AllianceBernstein Balanced Wealth Strategy Portfolio 0.03% 0.06% 0.10% 24 24

29 APPENDIX A Hypothetical Investment and Expense Information The settlement agreement between the Adviser and the New York Attorney General requires the Fund to include the following supplemental hypothetical investment information that provides additional information calculated and presented in a manner different from expense information found under Fees and Expenses of the Portfolio in this Prospectus about the effect of the Portfolio s expenses, including investment advisory fees and other Portfolio costs, on the Portfolio s returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in Class B shares of the Portfolio assuming a 5% return each year. Except as otherwise indicated, the chart also assumes that the current annual expense ratio stays the same throughout the 10-year period. The current annual expense ratio for the Portfolio is the same as stated under Fees and Expenses of the Portfolio. There are additional fees and expenses associated with variable products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly affect expenses. These fees and expenses are not reflected in the following expense information. Your actual expenses may be higher or lower. AllianceBernstein Balanced Wealth Strategy Portfolio Year Hypothetical Investment Hypothetical Performance Earnings Investment After Returns Hypothetical Expenses Hypothetical Ending Investment 1 $10, $ $10, $ $10, , , , , , , , , , , , , , , , , , , , , , , , , , , , Cumulative $6, $1, A-1

30 (This page intentionally left blank.) 26

31 27

32 For more information about the Portfolio, the following documents are available upon request: ANNUAL/SEMI-ANNUAL REPORTS TO CONTRACTHOLDERS The Portfolio s annual and semi-annual reports to Contractholders contain additional information on the Portfolio s investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Portfolio s performance during its last fiscal year. STATEMENT OF ADDITIONAL INFORMATION (SAI) The Fund has an SAI, which contains more detailed information about the Portfolio, including its operations and investment policies. The Fund s SAI and the independent registered public accounting firm s report and financial statements in the Portfolio s most recent annual report to Contractholders are incorporated by reference into (and are legally part of) this Prospectus. You may request a free copy of the current annual/semi-annual report or the SAI, or make inquiries concerning the Portfolio, by contacting your broker or other financial intermediary, or by contacting the Adviser: By Mail: AllianceBernstein Investor Services, Inc. P.O. Box San Antonio, TX By Phone: For Information: (800) For Literature: (800) Or you may view or obtain these documents from the Securities and Exchange Commission ( Commission ): Call the Commission at for information on the operation of the Public Reference Room. Reports and other information about the Fund are available on the EDGAR Database on the Commission s Internet site at Copies of the information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing to the Commission s Public Reference Section, Washington, DC You also may find these documents and more information about the Adviser and the Portfolios on the Internet at: AllianceBernstein and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P. SEC File No Printed on recycled paper containing post consumer waste. 28

33 May 1, 2011 Prospectus BlackRock Variable Series Funds, Inc. BlackRock Global Allocation V.I. Fund (Class III) This prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. Not FDIC Insured No Bank Guarantee May Lose Value 29

34 Table of Contents Fund Overview BlackRock Global Allocation V.I. Fund Key facts and details about the Fund listed in this prospectus including investment objectives, fee and expense information, principal investment strategies, principal risks and historical performance information Investment Objective Fees and Expenses of the Fund Principal Investment Strategies of the Fund Principal Risks of Investing in the Fund Performance Information Investment Manager Portfolio Managers Purchase and Sale of Fund Shares Tax Information Payments to Broker/Dealers and Other Financial Intermediaries Details about the Fund How the Fund Invests Investment Risks Financial Highlights Account Information Management of the Fund General Information Glossary For More Information The Insurance Companies III-2 How to Buy and Sell Shares III-2 Rule 12b-1 Fees for Class III Shares III-3 Information about BlackRock and the Portfolio Managers BlackRock III-5 Portfolio Manager Information III-7 Conflicts of Interest III-10 Valuation of Fund Investments III-11 Dividends and Taxes III-12 Shareholder Documents III-13 Certain Fund Policies III-13 Statement of Additional Information III-13 Glossary III-14 Fund and Service Providers Inside Back Cover Additional Information Back Cover 30

35 Fund Overview Key Facts about BlackRock Global Allocation V.I. Fund Investment Objective The investment objective of BlackRock Global Allocation V.I. Fund (the Fund ) is to seek high total investment return. Fees and Expenses of the Fund This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. The expenses below do not include separate account fees and expenses, and would be higher if these fees and expenses were included. Please refer to your variable annuity or insurance contract (the Contract ) prospectus for information on the separate account fees and expenses associated with your Contract. Shareholder Fees (fees paid directly from your investment) The Fund is not subject to any shareholder fees. Annual Fund Operating Expenses (expenses that you pay each year as a Class I Class II Class III percentage of the value of your investment) Shares Shares Shares Management Fees 0.65% 0.65% 0.65% Distribution and/or Service (12b-1) Fees None 0.15% 0.25% Other Expenses 0.06% 0.06% 0.06% Other Expenses of the Fund 0.06% 0.06% 0.06% Other Expenses of the Subsidiary % % % Acquired Fund Fees and Expenses % 0.02% 0.02% Total Annual Fund Operating Expenses % 0.88% 0.98% 1 The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to average net assets given in the Fund s most recent annual report, which does not include Acquired Fund Fees and Expenses. Example: This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. The Example does not reflect charges imposed by the Contract. See the Contract prospectus for information on such charges. Although your actual costs may be higher or lower, based on these assumptions and the net expenses shown in the fee table, your costs would be: 1 Year 3 Years 5 Years 10 Years Class I Shares $ 75 $233 $406 $ 906 Class II Shares $ 90 $281 $488 $1,084 Class III Shares $100 $312 $542 $1,

36 Portfolio Turnover: The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund s performance. During the most recent fiscal year, the Fund s portfolio turnover rate was 28% of the average value of its portfolio. Principal Investment Strategies of the Fund The Fund invests in a portfolio of equity, debt and money market securities. Generally, the Fund s portfolio will include both equity and debt securities. Equity securities include common stock, preferred stock, securities convertible into common stock, or securities or other instruments whose price is linked to the value of common stock. At any given time, however, the Fund may emphasize either debt securities or equity securities. In selecting equity investments, the Fund mainly seeks securities that Fund management believes are undervalued. The Fund may buy debt securities of varying maturities, debt securities paying a fixed or fluctuating rate of interest, and debt securities of any kind, including by way of example, securities issued or guaranteed by the U.S. Government or its agencies or its instrumentalities, by foreign governments or international agencies or supranational entities, or by domestic or foreign private issuers, mortgage-backed or other asset-backed securities, debt securities convertible into equity securities, inflation-indexed bonds, structured notes, loan assignments and loan participations. The Fund may invest up to 35% of its total assets in junk bonds, corporate loans and distressed securities. The Fund may also invest in real estate investment trusts ( REITs ). When choosing investments, Fund management considers various factors, including opportunities for equity or debt investments to increase in value, expected dividends and interest rates. The Fund generally seeks diversification across markets, industries and issuers as one of its strategies to reduce volatility. The Fund has no geographic limits on where it may invest. This flexibility allows the Fund management to look for investments in markets around the world, including emerging markets, that it believes will provide the best asset allocation to meet the Fund s objective. The Fund may invest in the securities of companies of any market capitalization. Generally, the Fund may invest in the securities of corporate and governmental issuers located anywhere in the world. The Fund may emphasize foreign securities when Fund management expects these investments to outperform U.S. securities. When choosing investment markets, Fund management considers various factors, including economic and political conditions, potential for economic growth and possible changes in currency exchange rates. In addition to investing in foreign securities, the Fund actively manages its exposure to foreign currencies through the use of forward currency contracts and other currency derivatives. The Fund may own foreign cash equivalents or foreign bank deposits as part of the Fund s investment strategy. The Fund will also invest in non-u.s. currencies. The Fund may underweight or overweight a currency based on the Fund management team s outlook. The Fund s composite Reference Benchmark has at all times since the Fund s formation included a 40% weighting in non-u.s. securities. The Reference Benchmark is an unmanaged weighted index comprised as follows: 36% of the Standard & Poor s ( S&P ) 500 Index; 24% FTSE World Index (Ex-U.S.); 24% BofA Merrill Lynch Current 5-Year U.S. Treasury Index; and 16% Citigroup Non-US Dollar World Government Bond Index. Throughout its history, the Fund has maintained a weighting in non-u.s. securities, often exceeding the 40% Reference Benchmark weighting and rarely falling below this allocation. Under normal circumstances, the Fund will continue to allocate a substantial amount (approximately 40% or more unless market conditions are not deemed favorable by Fund management, in which case the Fund would invest at least 30%) of its total assets in securities of (i) foreign government issuers, (ii) issuers organized or located outside the United States, (iii) issuers which primarily trade in a market located outside the United States, or (iv) issuers doing a substantial amount of business outside the United States, which the Fund considers to be companies that derive at least 50% of their revenue or profits from business outside the United States, or have at least 50% of their sales or assets outside the United States. The Fund will allocate its assets among various regions and countries, including the United States (but in no less than three different countries). For temporary defensive purposes the Fund may deviate very substantially from the allocation described above. The Fund may seek to provide exposure to the investment returns of real assets that trade in the commodity markets through investment in commodity-linked derivative instruments and investment vehicles that exclusively invest in commodities such as exchange traded funds, which are designed to provide this exposure without direct investment in physical commodities or commodities futures contracts. The Fund may also gain exposure to commodity markets by investing up to 25% of its total assets in BlackRock Cayman Global Allocation V.I. Fund I, Ltd. (the Subsidiary ), a wholly owned subsidiary of the Fund formed in the Cayman Islands, which invests primarily in commodity-related 4 32

37 instruments. The Subsidiary (unlike the Fund) may invest without limitation in commodity-related instruments. However, the Subsidiary is otherwise subject to the same fundamental, non-fundamental and certain other investment restrictions as the Fund. Principal Risks of Investing in the Fund Risk is inherent in all investing. The value of your investment in the Fund, as well as the amount of return you receive on your investment, may fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your investment may not perform as well as other similar investments. The following is a summary description of certain risks of investing in the Fund. Commodities Related Investments Risk Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or sectors affecting a particular industry or commodity, such as drought, floods, weather, embargoes, tariffs and international economic, political and regulatory developments. Convertible Securities Risk The market value of a convertible security performs like that of a regular debt security; that is, if market interest rates rise, the value of a convertible security usually falls. In addition, convertible securities are subject to the risk that the issuer will not be able to pay interest or dividends when due, and their market value may change based on changes in the issuer s credit rating or the market s perception of the issuer s creditworthiness. Since it derives a portion of its value from the common stock into which it may be converted, a convertible security is also subject to the same types of market and issuer risks that apply to the underlying common stock. Credit Risk Credit risk refers to the possibility that the issuer of a security will not be able to make payments of interest and principal when due. Changes in an issuer s credit rating or the market s perception of an issuer s creditworthiness may also affect the value of the Fund s investment in that issuer. Derivatives Risk The Fund s use of derivatives may reduce the Fund s returns and/or increase volatility. Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. A risk of the Fund s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. The possible lack of a liquid secondary market for derivatives and the resulting inability of the Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. Derivatives may give rise to a form of economic leverage and may expose the Fund to greater risk and increase its costs. Distressed Securities Risk Distressed securities are speculative and involve substantial risks in addition to the risks of investing in junk bonds. The Fund will generally not receive interest payments on the distressed securities and may incur costs to protect its investment. In addition, distressed securities involve the substantial risk that principal will not be repaid. These securities may present a substantial risk of default or may be in default at the time of investment. The Fund may incur additional expenses to the extent it is required to seek recovery upon a default in the payment of principal of or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating to a portfolio company, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Distressed securities and any securities received in an exchange for such securities may be subject to restrictions on resale. Emerging Markets Risk Emerging markets are riskier than more developed markets because they tend to develop unevenly and may never fully develop. Investments in emerging markets may be considered speculative. Emerging markets are more likely to experience hyperinflation and currency devaluations, which adversely affect returns to U.S. investors. In addition, many emerging securities markets have far lower trading volumes and less liquidity than developed markets. Equity Securities Risk Stock markets are volatile. The price of equity securities fluctuates based on changes in a company s financial condition and overall market and economic conditions. Foreign Securities Risk Foreign investments often involve special risks not present in U.S. investments that can increase the chances that the Fund will lose money. These risks include: The Fund generally holds its foreign securities and cash in foreign banks and securities depositories, which may be recently organized or new to the foreign custody business and may be subject to only limited or no regulatory oversight. Changes in foreign currency exchange rates can affect the value of the Fund s portfolio. 33 5

38 The economies of certain foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position. The governments of certain countries may prohibit or impose substantial restrictions on foreign investments in their capital markets or in certain industries. Many foreign governments do not supervise and regulate stock exchanges, brokers and the sale of securities to the same extent as does the United States and may not have laws to protect investors that are comparable to U.S. securities laws. Settlement and clearance procedures in certain foreign markets may result in delays in payment for or delivery of securities not typically associated with settlement and clearance of U.S. investments. Interest Rate Risk Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall, and decrease as interest rates rise. Junk Bond Risks Although junk bonds generally pay higher rates of interest than investment grade bonds, junk bonds are high risk investments that may cause income and principal losses for the Fund. Market Risk and Selection Risk Market risk is the risk that one or more markets in which the Fund invests will go down in value, including the possibility that the markets will go down sharply and unpredictably. Selection risk is the risk that the securities selected by Fund management will underperform the markets, the relevant indices or the securities selected by other funds with similar investment objectives and investment strategies. This means you may lose money. Mid Cap Securities Risk The securities of mid cap companies generally trade in lower volumes and are generally subject to greater and less predictable price changes than the securities of larger capitalization companies. REIT Investment Risk Investments in REITs involve unique risks. REITs may have limited financial resources, may trade less frequently and in limited volume and may be more volatile than other securities. Small Cap and Emerging Growth Securities Risk Small cap or emerging growth companies may have limited product lines or markets. They may be less financially secure than larger, more established companies. They may depend on a more limited management group than larger capitalized companies. Sovereign Debt Risk Sovereign debt instruments are subject to the risk that a governmental entity may delay or refuse to pay interest or repay principal on its sovereign debt, due, for example, to cash flow problems, insufficient foreign currency reserves, political considerations, the relative size of the governmental entity s debt position in relation to the economy or the failure to put in place economic reforms required by the International Monetary Fund or other multilateral agencies. Subsidiary Risk By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary s investments. The commodity-related instruments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund (see Commodities Related Investment Risks above). There can be no assurance that the investment objective of the Subsidiary will be achieved. The Subsidiary is not registered under the Investment Company Act of 1940, as amended (the Investment Company Act ), and, unless otherwise noted in this prospectus, is not subject to all the investor protections of the Investment Company Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the Subsidiary are both managed by BlackRock, making it unlikely that the Subsidiary will take action contrary to the interests of the Fund and its shareholders. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in this prospectus and the Statement of Additional Information ( SAI ) and could adversely affect the Fund. 6 34

39 Performance Information The information shows you how the Fund s performance has varied year by year and provides some indication of the risks of investing in the Fund. The table compares the Fund s performance to that of the Financial Times Stock Exchange ( FTSE ) World Index, the S&P 500 Index, the FTSE World Index (EX-US), the BofA Merrill Lynch Current 5-Year U.S. Treasury Index, the Citigroup Non-U.S. Dollar World Government Bond Index and the Reference Benchmark, which are relevant to the Fund because they have characteristics similar to the Fund s investment strategies. As with all such investments, past performance is not an indication of future results. The bar chart and table do not reflect separate account fees and expenses. If they were, returns would be less than those shown. Updated information on the Fund s performance can be obtained by phone at % 30% 20% 10% 0% Class I Shares ANNUAL TOTAL RETURNS BlackRock Global Allocation V.I. Fund As of 12/ % 14.57% 10.43% 16.53% 17.01% 21.30% 10.05% -10% -20% -30% -8.86% % During the ten-year period shown in the bar chart, the highest return for a quarter was 17.20% (quarter ended June 30, 2003) and the lowest return for a quarter was 13.56% (quarter ended September 30, 2002) As of 12/31/10 Average Annual Total Returns 1 Year 5 Years 10 Years BlackRock Global Allocation V.I. Fund: Class I Shares 10.05% 7.95% 7.65% BlackRock Global Allocation V.I. Fund: Class II Shares 9.88% 7.78% 7.52% 1 BlackRock Global Allocation V.I. Fund: Class III Shares 9.76% 7.70% 7.38% 1 FTSE World Index (Reflects no deduction for fees, expenses or taxes) 12.73% 3.89% 3.58% S&P 500 Index (Reflects no deduction for fees, expenses or taxes) 15.06% 2.29% 1.41% FTSE World Index (EX-US) (Reflects no deduction for fees, expenses or taxes) 10.91% 5.10% 5.76% BofA Merrill Lynch Current 5-Year U.S. Treasury Index (Reflects no deduction for fees, expenses or taxes) 6.76% 6.23% 5.54% Citigroup Non-U.S. Dollar World Government Bond Index (Reflects no deduction for fees, expenses or taxes) 5.21% 7.59% 7.42% Reference Benchmark (Reflects no deduction for fees, expenses or taxes) 11.06% 5.35% 4.91% 1 The returns for Class II and Class III Shares prior to November 24, 2003 and November 18, 2003, the commencement of offering of Class II and Class III Shares respectively, are based upon performance of the Fund s Class I Shares. The returns for Class II and Class III Shares, however, are adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class II and Class III Shares. This information may be considered when assessing the performance of Class II and Class III Shares, but does not represent the actual performance of Class II and Class III Shares % Investment Manager The Fund s investment manager is BlackRock Advisors, LLC ( BlackRock ). The Fund s sub-advisers are BlackRock Investment Management, LLC and BlackRock International Limited. Where applicable, the use of the term BlackRock also refers to the Fund s sub-advisers. 35 7

40 Portfolio Managers Portfolio Manager Name of the Fund Since Title Dennis Stattman, CFA 2001 Managing Director of BlackRock, Inc. Dan Chamby, CFA 2003 Managing Director of BlackRock, Inc. Aldo Roldan, PhD 2006 Managing Director of BlackRock, Inc. Purchase and Sale of Fund Shares Shares of the Fund currently are sold only to separate accounts of insurance companies (the Insurance Companies ) and certain accounts administered by the Insurance Companies (the Accounts ) to fund benefits under the Contracts issued by the Insurance Companies. Shares of the Fund may be purchased or sold each day the New York Stock Exchange ( NYSE ) is open. The Fund does not have any initial or subsequent investment minimums. However, your Contract may require certain investment minimums. See your Contract prospectus for more information. Tax Information Distributions made by the Fund to an Account, and exchanges and redemptions of Fund shares made by an Account, ordinarily do not cause the corresponding Contract holder to recognize income or gain for federal income tax purposes. See the Contract prospectus for information regarding the federal income tax treatment of the distributions to Accounts and the holders of the Contracts. Payments to Broker/Dealers and Other Financial Intermediaries BlackRock and its affiliates may make payments relating to distribution and sales support activities to the Insurance Companies and other financial intermediaries for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the Insurance Company or other financial intermediary and your individual financial professional to recommend the Fund over another investment. Visit your Insurance Company s website, which may have more information. 8 36

41 Details about the Fund Included in this prospectus are sections that tell you about buying and selling shares, management information, shareholder features of the Fund and your rights as a shareholder. How the Fund Invests Investment Objective The investment objective of the Fund is to seek high total investment return. Should the Board of Directors determine that the investment objective of the Fund should be changed, shareholders of the Fund will be given notice before any such change is effective. However, such change can be effected without shareholder approval. Investment Process In making investment decisions, Fund management tries to identify the long term trends and changes that could benefit particular markets and/or industries relative to other markets and industries. Fund management will consider a variety of factors when selecting the markets, such as the rate of economic growth, natural resources, capital reinvestment and the social and political environment. In deciding between equity and debt investments, Fund management looks at a number of factors, such as the relative opportunity for capital appreciation, capital recovery risk, dividend yields and the level of interest rates paid on debt securities of different maturities. Dividend yield is a common stock s annualized dividend stream divided by the stock s current price, which represents the stock s current expected rate of current income. Fund management will invest in junk bonds, corporate loans and distressed securities only when it believes that they will provide an attractive total return, relative to their risk, as compared to higher quality debt securities. Fund management will invest in distressed securities when Fund management believes they offer significant potential for higher returns or can be exchanged for other securities that offer this potential. However, there can be no assurance that the Fund will generally achieve these returns or that the issuer will make an exchange offer or adopt a plan of reorganization. Principal Investment Strategies The Fund seeks to achieve its objective by investing in both equity and debt securities, including money market securities and other short-term securities or instruments, of issuers located around the world. There is no limit on the percentage of assets the Fund can invest in a particular type of security. Generally, the Fund seeks diversification across markets, industries and issuers as one of its strategies to reduce volatility. Except as described below, the Fund has no geographic limits on where its investments may be located. This flexibility allows Fund management to look for investments in markets around the world that it believes will provide the best relative asset allocation to meet the Fund s objective. The Fund may invest in securities of any market capitalization. The Fund may also invest in REITs. Fund management uses the Fund s investment flexibility to create a portfolio of assets that, over time, tends to be relatively balanced between equity and debt securities and that is widely diversified among many individual investments. The Fund may invest in both developed and emerging markets. As of December 31, 2010, the Fund was invested in 46 different countries with approximately 59% of its net assets invested outside the United States. In addition to investing in foreign securities, the Fund actively manages its exposure to foreign currencies through the use of forward currency contracts and other currency derivatives. From time to time, the Fund may own foreign cash equivalents or foreign bank deposits as part of the Fund s investment strategy. The Fund will also invest in non-u.s. currencies. The Fund may underweight or overweight a currency based on the Fund management team s outlook. The Fund s composite Reference Benchmark has at all times since the Fund s formation included a 40% weighting in non-u.s. securities. Throughout its history, the Fund has maintained a weighting in non-u.s. securities, often exceeding the 40% Reference Benchmark weighting and rarely falling below this allocation. Under normal circumstances, the Fund will continue to allocate a substantial amount (approximately 40% or more unless market conditions are not deemed favorable by Fund management, in which case the Fund would invest at least 30%) of its total assets in securities of (i) foreign government issuers, (ii) issuers organized or located outside the United 37 9

42 States, (iii) issuers which primarily trade in a market located outside the United States, or (iv) issuers doing a substantial amount of business outside the United States, which the Fund considers to be companies that derive at least 50% of their revenue or profits from business outside the United States, or have at least 50% of their sales or assets outside the United States. The Fund will allocate its assets among various regions and countries, including the United States (but in no less than three different countries). For temporary defensive purposes the Fund may deviate very substantially from the allocation described above. The Fund may invest a portion of its assets in securities related to real assets (like real estate or precious metalsrelated securities) such as stock, bonds or convertible bonds issued by real estate investment trusts or companies that mine precious metals. The Fund may seek to provide exposure to the investment returns of real assets that trade in the commodity markets through investment in commodity-linked derivative instruments and investment vehicles that exclusively invest in precious metals, which are designed to provide this exposure without direct investment in physical commodities or commodities futures contracts. The Fund may also gain exposure to commodity markets by investing in the Subsidiary. The Subsidiary invests primarily in commodity-related instruments. BlackRock is the manager of the Subsidiary. The Subsidiary (unlike the Fund) may invest without limitation in commodity-related instruments. However, the Subsidiary is otherwise subject to the same fundamental, non-fundamental and certain other investment restrictions as the Fund. The Fund will limit its investments in the Subsidiary to 25% of its net assets. 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, BlackRock, in managing the Subsidiary s portfolio, is subject to the same investment policies and restrictions that apply to the management of the Fund, 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 in detail in the SAI. The Fund s Chief Compliance Officer oversees implementation of the Subsidiary s policies and procedures, and makes periodic reports to the Board of Directors regarding the Subsidiary s compliance with its policies and procedures. The Fund and Subsidiary test for compliance with certain investment restrictions on a consolidated basis, except that with respect to its investments in certain securities that may involve leverage, the Subsidiary complies with asset segregation requirements to the same extent as the Fund. BlackRock provides investment management and other services to the Subsidiary. BlackRock does not receive separate compensation from the Subsidiary for providing it with investment management or administrative services. However, the Fund pays BlackRock based on the Fund s assets, including the assets invested in the Subsidiary. The Subsidiary will also enter into separate contracts for the provision of custody, transfer agency, and audit services with the same or with affiliates of the same service providers that provide those services to the Fund. The financial statements of the Subsidiary will be consolidated with the Fund s financial statements in the Fund s Annual and Semi-Annual Reports. The Fund s Annual and Semi-Annual Reports are distributed to shareholders, and copies of the reports are provided without charge upon request as indicated on the back cover of this prospectus. Please refer to the SAI for additional information about the organization and management of the Subsidiary. Equity Securities The Fund can invest in all types of equity securities, including common stock, preferred stock, warrants and stock purchase rights of companies of any market capitalization. A warrant gives the Fund the right to buy stock. The warrant specifies the amount of underlying stock, the purchase (or exercise ) price, and the date the warrant expires. The Fund has no obligation to exercise the warrant and buy the stock. Fund management may seek to invest in the stock of smaller or emerging growth companies that it expects will provide a higher total return than other equity investments. Investing in smaller or emerging growth companies involves greater risk than investing in more established companies. Debt Securities The Fund can invest in all types of debt securities, including U.S. and foreign government bonds, corporate bonds and convertible bonds, mortgage- and asset-backed securities, and securities issued or guaranteed by certain international organizations such as the World Bank. The Fund may invest up to 35% of its total assets in junk bonds, corporate loans and distressed securities. Junk bonds are bonds that are rated below investment grade by independent rating agencies or are bonds that are not rated but which Fund management considers to be of comparable quality. Corporate loans are direct obligations of U.S. or foreign companies, which may include corporations, partnerships, trusts or other corporate-like entities. Distressed securities are securities, including loans purchased in the secondary market, that are the subject of bankruptcy proceedings or otherwise in default or in risk of being in default as to the repayment of principal and/or interest at the time of acquisition by the Fund or that are rated in the lower rating categories by one or more nationally recognized statistical rating organizations (for example, Ca or lower by Moody s and CC or lower by S&P or Fitch or, if unrated, are in the judgment of the Manager of equivalent quality ( Distressed Securities ). These securities offer the possibility of relatively higher returns but are significantly riskier than higher rated debt securities

43 Derivatives The Fund may use derivatives, including options, futures, indexed securities, inverse securities, swaps and forward contracts both to seek to increase the return of the Fund and to hedge (or protect) the value of its assets against adverse movements in currency exchange rates, interest rates and movements in the securities markets. Derivatives are financial instruments whose value is derived from another security, a commodity (such as oil or gas), a currency or an index such as the S&P 500 Index. The use of options, futures, indexed securities, inverse securities, swaps and forward contracts can be effective in protecting or enhancing the value of the Fund s assets. Other Strategies In addition to the main strategies discussed above, the Fund may use certain other investment strategies. The Fund may also invest or engage in the following investments/strategies: Borrowing The Fund may borrow for temporary or emergency purposes, including to meet redemptions, for the payment of dividends, for share repurchases or for the clearance of transactions. Depositary Receipts The Fund may invest in securities of foreign issuers in the form of depositary receipts or other securities that are convertible into securities of foreign issuers. American Depositary Receipts are receipts typically issued by an American bank or trust company that evidence underlying securities issued by a foreign corporation. European Depositary Receipts (issued in Europe) and Global Depositary Receipts (issued throughout the world) each evidence a similar ownership arrangement. The Fund may invest in unsponsored Depositary Receipts. Illiquid/Restricted Securities The Fund may invest up to 15% of its net assets in illiquid securities that it cannot sell within seven days at approximately current value. The Subsidiary will also limit its investment in illiquid securities to 15% of its net assets. In applying the illiquid securities restriction to the Fund, the Fund s investment in the Subsidiary is considered to be liquid. Restricted securities are securities that cannot be offered for public resale unless registered under the applicable securities laws or that have a contractual restriction that prohibits or limits their resale (i.e., certain Rule 144A securities). They may include private placement securities that have not been registered under the applicable securities laws. Restricted securities may not be listed on an exchange and may have no active trading market. Rule 144A securities are restricted securities that can be resold to qualified institutional buyers but not to the general public. Indexed and Inverse Securities The Fund may invest in securities that provide a return based on fluctuations in a stock or other financial index. For example, the Fund may invest in a security that increases in value with the price of a particular securities index. In some cases, the return of the security may be inversely related to the price of the index. This means that the value of the security will rise as the price of the index falls and vice versa. Although these types of securities can make it easier for the Fund to access certain markets or hedge risks of other assets held by the Fund, these securities are subject to the risks related to the underlying index or other assets. Investment Companies The Fund has the ability to invest in other investment companies, such as exchangetraded funds, money market funds, unit investment trusts, and open-end and closed-end funds. The Fund may invest in affiliated investment companies, including affiliated money market funds and affiliated exchange-traded funds. Non-U.S. Dollar Cash Investments The Fund may hold non-u.s. dollar cash investments. Repurchase Agreements, Purchase and Sale Contracts The Fund may enter into certain types of repurchase agreements or purchase and sale contracts. Under a repurchase agreement, the seller agrees to repurchase a security at a mutually agreed-upon time and price. A purchase and sale contract is similar to a repurchase agreement, but purchase and sale contracts also provide that the purchaser receives any interest on the security paid during the period. Securities Lending The Fund may lend securities with a value up to % of its total assets to financial institutions that provide cash or securities issued or guaranteed by the U.S. Government as collateral. Short Sales The Fund may engage in short sales. The Fund may make short sales of securities, either as a hedge against potential declines in value of a portfolio security or to realize appreciation when a security that the Fund does not own declines in value. The Fund will not make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 20% of the value of its total assets. However, the Fund may make short sales against the box without being subject to this limitation. In this type of short sale, at the time of the sale, the Fund owns or has the immediate and unconditional right to acquire the identical securities at no additional cost

44 Short-Term Securities or Instruments The Fund can invest in high quality short-term U.S. dollar or non-u.s. dollar denominated fixed-income securities or other instruments, such as U.S. or foreign government securities, commercial paper and money market instruments issued by U.S. or foreign commercial banks or depository institutions. Fund management may increase the Fund s investment in these instruments in times of market volatility or when it believes that it is prudent or timely to be invested in lower yielding but less risky securities. Large investments in such securities or instruments may prevent the Fund from achieving its investment objective. Standby Commitment Agreements Standby commitment agreements commit the Fund, for a stated period of time, to purchase a stated amount of securities that may be issued and sold to the Fund at the option of the issuer. Temporary Defensive Strategies For temporary defensive purposes, the Fund may restrict the markets in which it invests and may invest without limitation in cash, cash equivalents, money market securities (including affiliated and unaffiliated money market funds), U.S. Treasury and agency obligations, other U.S. Government securities, short-term debt obligations of corporate issuers, certificates of deposit, bankers acceptances, commercial paper (short term, unsecured, negotiable promissory notes of a domestic or foreign issuer) or other high quality fixedincome securities. Temporary defensive positions may affect the Fund s ability to achieve its investment objective. Warrants Risk If the price of the underlying stock does not rise above the exercise price before the warrant expires, the warrant generally expires without any value and the Fund loses any amount it paid for the warrant. Thus, investments in warrants may involve substantially more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock. When-Issued and Delayed Delivery Securities and Forward Commitments The purchase or sale of securities on a when-issued basis or on a delayed delivery basis or through a forward commitment involves the purchase or sale of securities by the Fund at an established price with payment and delivery taking place in the future. The Fund enters into these transactions to obtain what is considered an advantageous price to the Fund at the time of entering into the transaction. ABOUT THE PORTFOLIO MANAGEMENT OF THE FUND The Fund is managed by a team of financial professionals. Dennis Stattman, CFA, Dan Chamby, CFA, and Aldo Roldan, PhD are the Fund s portfolio managers, and are jointly and primarily responsible for the management of the Fund. Please see Management of the Funds Portfolio Manager Information for additional information on the portfolio management team. Investment Risks This section contains a summary discussion of the general risks of investing in the Fund. The Statement of Additional Information (the SAI ) also includes more information about the Fund, its investments and the related risks. As with any fund, there can be no guarantee that the Fund will meet its objective or that the Fund s performance will be positive for any period of time. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any bank or governmental agency. Principal Risks of Investing in the Fund: Commodities Related Investments Risk Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or sectors affecting a particular industry or commodity, such as drought, floods, weather, embargoes, tariffs and international economic, political and regulatory developments. Convertible Securities Risk The market value of a convertible security generally performs like that of a regular debt security; that is, if market interest rates rise, the value of a convertible security usually falls. In addition, convertible securities are subject to the risk that the issuer will not be able to pay interest or dividends when due, and their market value may change based on changes in the issuer s credit rating or the market s perception of the issuer s creditworthiness. Since it derives a portion of its value from the common stock into which it may be converted, a convertible security is also subject to the same types of market and issuer risk as apply to the underlying common stock

45 Credit Risk Credit risk refers to the possibility that the issuer of a security will not be able to make principal and interest payments when due. Changes in an issuer s credit rating or the market s perception of an issuer s creditworthiness may also affect the value of the Fund s investment in that issuer. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. Derivatives Risk The Fund s use of derivatives may reduce the Fund s returns and/or increase volatility. Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. A risk of the Fund s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. In addition, some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. The Fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, BlackRock may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the Fund s derivatives positions to lose value. When a derivative is used as a hedge against a position that the Fund holds, any loss generated by the derivative generally should be substantially offset by gains on the hedged investment, and vice versa. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. Hedges are sometimes subject to imperfect matching between the derivative and the underlying security, and there can be no assurance that the Fund s hedging transactions will be effective. The income from certain derivatives may be subject to Federal income tax. Swap agreements involve the risk that the party with whom the Fund has entered into the swap will default on its obligation to pay the Fund and the risk that the Fund will not be able to meet its obligations to pay the other party to the agreement. Credit default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). Forward foreign currency exchange contracts do not eliminate fluctuations in the value of non-u.s. securities but rather allow the Fund to establish a fixed rate of exchange for a future point in time. This strategy can have the effect of reducing returns and minimizing opportunities for gain. Distressed Securities Risk Distressed securities are speculative and involve substantial risks in addition to the risks of investing in junk bonds. The Fund will generally not receive interest payments on the distressed securities and may incur costs to protect its investment. In addition, distressed securities involve the substantial risk that principal will not be repaid. These securities may present a substantial risk of default or may be in default at the time of investment. The Fund may incur additional expenses to the extent it is required to seek recovery upon a default in the payment of principal of or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating to a portfolio company, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Distressed securities and any securities received in an exchange for such securities may be subject to restrictions on resale. Emerging Markets Risk The risks of foreign investments are usually much greater for emerging markets. Investments in emerging markets may be considered speculative. Emerging markets include those in countries defined as emerging or developing by the World Bank, the International Finance Corporation or the United Nations. Emerging markets are riskier than more developed markets because they tend to develop unevenly and may never fully develop. They are more likely to experience hyperinflation and currency devaluations, which adversely affect returns to U.S. investors. In addition, many emerging markets have far lower trading volumes and less liquidity than developed markets. Since these markets are often small, they may be more likely to suffer sharp and frequent price changes or long-term price depression because of adverse publicity, investor perceptions or the actions of a few large investors. In addition, traditional measures of investment value used in the United States, such as price to earnings ratios, may not apply to certain small markets. Also, there may be less publicly available information about issuers in emerging markets than would be available about issuers in more developed capital markets, and such issuers may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. companies are subject. Many emerging markets have histories of political instability and abrupt changes in policies. As a result, their governments are more likely to take actions that are hostile or detrimental to private enterprise or foreign investment than those of more developed countries, including expropriation of assets, confiscatory taxation, high rates of inflation or unfavorable diplomatic developments. In the past, governments of such nations have expropriated substantial amounts of private property, and most claims of the property owners have never been fully settled. There is no assurance that such expropriations will not reoccur. In such an event, it is possible that the Fund could lose the entire value of its investments in the affected market. Some countries have pervasiveness of corruption and crime that may 41 13

46 hinder investments. Certain emerging markets may also face other significant internal or external risks, including the risk of war, and ethnic, religious and racial conflicts. In addition, governments in many emerging market countries participate to a significant degree in their economies and securities markets, which may impair investment and economic growth. National policies that may limit the Fund s investment opportunities include restrictions on investment in issuers or industries deemed sensitive to national interests. Emerging markets may also have differing legal systems and the existence or possible imposition of exchange controls, custodial restrictions or other foreign or U.S. governmental laws or restrictions applicable to such investments. Sometimes, they may lack or be in the relatively early development of legal structures governing private and foreign investments and private property. In addition to withholding taxes on investment income, some countries with emerging markets may impose differential capital gains taxes on foreign investors. Practices in relation to settlement of securities transactions in emerging markets involve higher risks than those in developed markets, in part because the Fund will need to use brokers and counterparties that are less well capitalized, and custody and registration of assets in some countries may be unreliable. The possibility of fraud, negligence, undue influence being exerted by the issuer or refusal to recognize ownership exists in some emerging markets, and, along with other factors, could result in ownership registration being completely lost. The Fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation. In addition, communications between the United States and emerging market countries may be unreliable, increasing the risk of delayed settlements or losses of security certificates. Equity Securities Risk Common and preferred stocks represent equity ownership in a company. Stock markets are volatile. The price of equity securities will fluctuate and can decline and reduce the value of a portfolio investing in equities. The value of equity securities purchased by the Fund could decline if the financial condition of the companies the Fund invests in decline or if overall market and economic conditions deteriorate. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or an increase in production costs and competitive conditions within an industry. In addition, they may decline due to general market conditions that are not specifically related to a company or industry, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or generally adverse investor sentiment. Foreign Securities Risk Securities traded in foreign markets have often (though not always) performed differently from securities traded in the United States. However, such investments often involve special risks not present in U.S. investments that can increase the chances that the Fund will lose money. In particular, the Fund is subject to the risk that because there may be fewer investors on foreign exchanges and a smaller number of securities traded each day, it may be more difficult for the Fund to buy and sell securities on those exchanges. In addition, prices of foreign securities may go up and down more than prices of securities traded in the United States. Certain Risks of Holding Fund Assets Outside the United States The Fund generally holds its foreign securities and cash in foreign banks and securities depositories. Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. In addition, there may be limited or no regulatory oversight of their operations. Also, the laws of certain countries limit the Fund s ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for investment companies invested only in the United States. Currency Risk Securities and other instruments in which the Fund invests may be denominated or quoted in currencies other than the U.S. dollar. For this reason, changes in foreign currency exchange rates can affect the value of the Fund s portfolio. Generally, when the U.S. dollar rises in value against a foreign currency, a security denominated in that currency loses value because the currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against a foreign currency, a security denominated in that currency gains value because the currency is worth more U.S. dollars. This risk, generally known as currency risk, means that a strong U.S. dollar will reduce returns for U.S. investors while a weak U.S. dollar will increase those returns. Foreign Economy Risk The economies of certain foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position. Certain foreign economies may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, changes in international trading patterns, trade barriers and other protectionist or retaliatory measures. Investments in foreign markets may also be adversely affected by governmental actions such 14 42

47 as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. In addition, the governments of certain countries may prohibit or impose substantial restrictions on foreign investments in their capital markets or in certain industries. Any of these actions could severely affect securities prices or impair the Fund s ability to purchase or sell foreign securities or transfer the Fund s assets or income back into the United States, or otherwise adversely affect the Fund s operations. Other potential foreign market risks include foreign exchange controls, difficulties in pricing securities, defaults on foreign government securities, difficulties in enforcing legal judgments in foreign courts and political and social instability. Diplomatic and political developments, including rapid and adverse political changes, social instability, regional conflicts, terrorism and war, could affect the economies, industries and securities and currency markets, and the value of the Fund s investments, in non-u.s. countries. These factors are extremely difficult, if not impossible, to predict and take into account with respect to the Fund s investments. Governmental Supervision and Regulation/Accounting Standards Many foreign governments do not supervise and regulate stock exchanges, brokers and the sale of securities to the same extent as such regulations exist in the United States. They also may not have laws to protect investors that are comparable to U.S. securities laws. For example, some foreign countries may have no laws or rules against insider trading. Insider trading occurs when a person buys or sells a company s securities based on material non-public information about that company. In addition, some countries may have legal systems that may make it difficult for the Fund to vote proxies, exercise shareholder rights, and pursue legal remedies with respect to its foreign investments. Accounting standards in other countries are not necessarily the same as in the United States. If the accounting standards in another country do not require as much detail as U.S. accounting standards, it may be harder for Fund management to completely and accurately determine a company s financial condition. Settlement Risk Settlement and clearance procedures in certain foreign markets differ significantly from those in the United States. Foreign settlement and clearance procedures and trade regulations also may involve certain risks (such as delays in payment for or delivery of securities) not typically associated with the settlement of U.S. investments. At times, settlements in certain foreign countries have not kept pace with the number of securities transactions. These problems may make it difficult for the Fund to carry out transactions. If the Fund cannot settle or is delayed in settling a purchase of securities, it may miss attractive investment opportunities and certain of its assets may be uninvested with no return earned thereon for some period. If the Fund cannot settle or is delayed in settling a sale of securities, it may lose money if the value of the security then declines or, if it has contracted to sell the security to another party, the Fund could be liable for any losses incurred. Interest Rate Risk Interest rate risk is the risk that prices of fixed-income securities generally increase when interest rates decline and decrease when interest rates increase. Prices of longer-term securities generally change more in response to interest rate changes than prices of shorter-term securities. The Fund may lose money if shortterm or long-term interest rates rise sharply or otherwise change in a manner not anticipated by Fund management. Junk Bond Risks Although junk bonds generally pay higher rates of interest than investment grade bonds, junk bonds are high risk investments that may cause income and principal losses for the Fund. The major risks of junk bond investments include: Junk bonds may be issued by less creditworthy issuers. Issuers of junk bonds may have larger amount of outstanding debt relative to their assets than issuers of investment grade bonds. In the event of an issuer s bankruptcy, claims of other creditors may have priority over the claims of junk bond holders, leaving few or no assets available to repay junk bond holders. Prices of junk bonds are subject to extreme price fluctuations. Adverse changes in an issuer s industry and general economic conditions may have a greater impact on the prices of junk bonds than on other higher rated fixedincome securities. 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. Junk bonds frequently have redemption features that permit an issuer to repurchase the security from the Fund before it matures. If the issuer redeems junk bonds, the Fund may have to invest the proceeds in bonds with lower yields and may lose income. Junk bonds may be less liquid than higher rated fixed-income securities, even under normal economic conditions. 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. Because they are less liquid, judgment may play a greater role in valuing certain of the Fund s securities than is the case with securities trading in a more liquid market. The Fund may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting issuer

48 The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer. Market Risk and Selection Risk Market risk is the risk that one or more markets in which the Fund invests will go down in value, including the possibility that the markets will go down sharply and unpredictably. Selection risk is the risk that the securities selected by Fund management will underperform the markets, the relevant indices or the securities selected by other funds with similar investment objectives and investment strategies. This means you may lose money. Mid Cap Securities Risk The securities of mid cap companies generally trade in lower volumes and are generally subject to greater and less predictable price changes than the securities of larger capitalization companies. REIT Investment Risk In addition to the risks facing real estate-related securities, such as a decline in property values due to increasing vacancies, a decline in rents resulting from unanticipated economic, legal or technological developments or a decline in the price of securities of real estate companies due to a failure of borrowers to pay their loans or poor management, investments in REITs involve unique risks. REITs may have limited financial resources, may trade less frequently and in limited volume and may be more volatile than other securities. Small Cap and Emerging Growth Securities Risk Small cap or emerging growth companies may have limited product lines or markets. They may be less financially secure than larger, more established companies. They may depend on a small number of key personnel. If a product fails or there are other adverse developments, or if management changes, the Fund s investment in a small cap company may lose substantial value. In addition, it is more difficult to get information on smaller companies, which tend to be less well known, have shorter operating histories, do not have significant ownership by large investors and are followed by relatively few securities analysts. The securities of small cap or emerging growth companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than larger cap securities or the market as a whole. In addition, small cap securities may be particularly sensitive to changes in interest rates, borrowing costs and earnings. Investing in small cap securities requires a longer term view. Sovereign Debt Risk Sovereign debt instruments are subject to the risk that a governmental entity may delay or refuse to pay interest or repay principal on its sovereign debt, due, for example, to cash flow problems, insufficient foreign currency reserves, political considerations, the relative size of the governmental entity s debt position in relation to the economy or the failure to put in place economic reforms required by the International Monetary Fund or other multilateral agencies. If a governmental entity defaults, it may ask for more time in which to pay or for further loans. There is no legal process for collecting sovereign debt that a government does not pay nor are there bankruptcy proceedings through which all or part of the sovereign debt that a governmental entity has not repaid may be collected. Subsidiary Risk By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary s investments. The commodity-related instruments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund (see Commodities Related Investment Risks above). These risks are described elsewhere in this prospectus. There can be no assurance that the investment objective of the Subsidiary will be achieved. The Subsidiary is not registered under the Investment Company Act, and, unless otherwise noted in this prospectus, is not subject to all the investor protections of the Investment Company Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the Subsidiary are both managed by BlackRock, making it unlikely that the Subsidiary will take action contrary to the interests of the Fund and its shareholders. The Board has oversight responsibility for the investment activities of the Fund, including its investment in the Subsidiary, and the Fund s role as sole shareholder of the Subsidiary. The Subsidiary will be subject to the same investment restrictions and limitations, and follow the same compliance policies and procedures, as the Fund. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in this prospectus and the SAI and could adversely affect the Fund. 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, Fund shareholders would likely suffer decreased investment returns. The Fund may also be subject to certain other risks associated with its investments and investment strategies, including: Borrowing Risk Borrowing may exaggerate changes in the net asset value of Fund shares and in the return on the Fund s portfolio. Borrowing will cost the Fund interest expense and other fees. The costs of borrowing may reduce the Fund s return. Borrowing may cause the Fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations

49 Corporate Loans Risk Commercial banks and other financial institutions or institutional investors make corporate loans to companies that need capital to grow or restructure. Borrowers generally pay interest on corporate loans at rates that change in response to changes in market interest rates such as the London Interbank Offered Rate ( LIBOR ) or the prime rates of U.S. banks. As a result, the value of corporate loan investments is generally less exposed to the adverse effects of shifts in market interest rates than investments that pay a fixed rate of interest. However, because the trading market for certain corporate loans may be less developed than the secondary market for bonds and notes, the Fund may experience difficulties in selling its corporate loans. 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 corporate loans, holds collateral and accepts payments of principal and interest. If the agent develops financial problems, the Fund may not recover its investment or recovery may be delayed. By investing in a corporate loan, the Fund may become a member of the syndicate. The corporate loans in which the Fund invests 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 the 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 corporate loan may not recover its principal, may experience a long delay in recovering its investment and may not receive interest during the delay. Depositary Receipts Risk The issuers of unsponsored depositary receipts are not obligated to disclose information that is, in the United States, considered material. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Expense Risk Fund expenses are subject to a variety of factors, including fluctuations in the Fund s net assets. Accordingly, actual expenses may be greater or less than those indicated. For example, to the extent that the Fund s net assets decrease due to market declines or redemptions, the Fund s expenses will increase as a percentage of Fund net assets. During periods of high market volatility, these increases in the Fund s expense ratio could be significant. Extension Risk When interest rates rise, certain obligations will be paid off by the obligor more slowly than anticipated, causing the value of these securities to fall. Rising interest rates tend to extend the duration of securities, making them more sensitive to changes in interest rates. The value of longer-term securities generally changes more in response to changes in interest rates than shorter-term securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value. Indexed and Inverse Securities Risk Certain indexed and inverse securities have greater sensitivity to changes in interest rates or index levels than other securities, and the Fund s investment in such instruments may decline significantly in value if interest rates or index levels move in a way Fund management does not anticipate. Investment in Other Investment Companies Risk As with other investments, investments in other investment companies are subject to market and selection risk. In addition, if the Fund acquires shares of investment companies, including ones affiliated with the Fund, shareholders bear both their proportionate share of expenses in the Fund (including management and advisory fees) and, indirectly, the expenses of the investment companies. To the extent the Fund is held by an affiliated fund, the ability of the Fund itself to hold other investment companies may be limited. Leverage Risk Some transactions may give rise to a form of economic leverage. These transactions may include, among others, derivatives, and may expose the Fund to greater risk and increase its costs. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet any required asset segregation requirements. Increases and decreases in the value of the Fund s portfolio will be magnified when the Fund uses leverage. As an open-end investment company registered with the SEC, the Fund is subject to the federal securities laws, including the Investment Company Act, the rules thereunder, and various SEC and SEC staff interpretive positions. In accordance with these laws, rules and positions, the Fund must set aside (often referred to as asset segregation ) liquid assets, or engage in other SEC- or staff-approved measures, to cover open positions with respect to certain kinds of instruments. Liquidity Risk Liquidity risk exists when particular investments are difficult to purchase or sell. The Fund s investments in illiquid securities may reduce the returns of the Fund because it may be difficult to sell the illiquid securities at an advantageous time or price. To the extent that the Fund s principal investment strategies involve derivatives or securities with substantial market and/or credit risk, the Fund will tend to have the greatest exposure to liquidity risk. Liquid investments may become illiquid after purchase by the Fund, particularly during periods of market turmoil. Illiquid investments may be harder to value, especially in changing markets, and if the Fund is forced 45 17

50 to sell these investments to meet redemption requests or for other cash needs, the Fund may suffer a loss. In addition, when there is illiquidity in the market for certain securities, the Fund, due to limitations on illiquid investments, may be subject to purchase and sale restrictions. Mortgage- and Asset-Backed Securities Risks Mortgage-backed securities (residential and commercial) and assetbacked securities represent interests in pools of mortgages or other assets, including consumer loans or receivables held in trust. Although asset-backed and commercial mortgage-backed securities ( CMBS ) generally experience less prepayment than residential mortgage-backed securities, mortgage-backed and asset-backed securities, like traditional fixed-income securities, are subject to credit, interest rate, prepayment and extension risks. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage-backed securities. The Fund s investments in asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets. These securities also are subject to the risk of default on the underlying mortgage or assets, particularly during periods of economic downturn. Certain CMBS are issued in several classes with different levels of yield and credit protection. The Fund s investments in CMBS with several classes may be in the lower classes that have greater risks than the higher classes, including greater interest rate, credit and prepayment risks. Mortgage-backed securities may be either pass-through securities or collateralized mortgage obligations ( CMOs ). Pass-through securities represent a right to receive principal and interest payments collected on a pool of mortgages, which are passed through to security holders. CMOs are created by dividing the principal and interest payments collected on a pool of mortgages into several revenue streams (tranches) with different priority rights to portions of the underlying mortgage payments. Certain CMO tranches may represent a right to receive interest only ( IOs ), principal only ( POs ) or an amount that remains after floating-rate tranches are paid (an inverse floater). These securities are frequently referred to as mortgage derivatives and may be extremely sensitive to changes in interest rates. Interest rates on inverse floaters, for example, vary inversely with a short-term floating rate (which may be reset periodically). Interest rates on inverse floaters will decrease when short-term rates increase, and will increase when short-term rates decrease. These securities have the effect of providing a degree of investment leverage. In response to changes in market interest rates or other market conditions, the value of an inverse floater may increase or decrease at a multiple of the increase or decrease in the value of the underlying securities. If the Fund invests in CMO tranches (including CMO tranches issued by government agencies) and interest rates move in a manner not anticipated by Fund management, it is possible that the Fund could lose all or substantially all of its investment. The mortgage market in the United States recently has experienced difficulties that may adversely affect the performance and market value of certain of the Fund s mortgage-related investments. Delinquencies and losses on mortgage loans (including subprime and second-lien mortgage loans) generally have increased recently and may continue to increase, and a decline in or flattening of real-estate values (as has recently been experienced and may continue to be experienced in many housing markets) may exacerbate such delinquencies and losses. Also, a number of mortgage loan originators have recently experienced serious financial difficulties or bankruptcy. Reduced investor demand for mortgage loans and mortgage-related securities and increased investor yield requirements have caused limited liquidity in the secondary market for mortgage-related securities, which can adversely affect the market value of mortgage-related securities. It is possible that such limited liquidity in such secondary markets could continue or worsen. Asset-backed securities entail certain risks not presented by mortgage-backed securities, including the risk that in certain states it may be difficult to perfect the liens securing the collateral backing certain asset-backed securities. In addition, certain asset-backed securities are based on loans that are unsecured, which means that there is no collateral to seize if the underlying borrower defaults. Certain mortgage-backed securities in which the Fund may invest may also provide a degree of investment leverage, which could cause the Fund to lose all or substantially all of its investment. Precious Metal Related Securities Risk Prices of precious metals and of precious metal related securities historically have been very volatile. The high volatility of precious metal prices may adversely affect the financial condition of companies involved with precious metals. The production and sale of precious metals by governments or central banks or other larger holders can be affected by various economic, financial, social and political factors, which may be unpredictable and may have a significant impact on the prices of precious metals. Other factors that may affect the prices of precious metals and securities related to them include changes in inflation, the outlook for inflation and changes in industrial and commercial demand for precious metals. Prepayment Risk When interest rates fall, certain obligations will be paid off by the obligor more quickly than originally anticipated, and the Fund may have to invest the proceeds in securities with lower yields. In periods of falling interest rates, the rate of prepayments tends to increase (as does price fluctuation) as borrowers are 18 46

51 motivated to pay off debt and refinance at new lower rates. During such periods, reinvestment of the prepayment proceeds by the management team will generally be at lower rates of return than the return on the assets that were prepaid. Prepayment reduces the yield to maturity and the average life of the security. Real Estate Related Securities Risk The main risk of real estate related securities is that the value of the underlying real estate may go down. Many factors may affect real estate values. These factors include both the general and local economies, the amount of new construction in a particular area, the laws and regulations (including zoning and tax laws) affecting real estate and the costs of owning, maintaining and improving real estate. The availability of mortgages and changes in interest rates may also affect real estate values. If the Fund s real estate related investments are concentrated in one geographic area or in one property type, the Fund will be particularly subject to the risks associated with that area or property type. Repurchase Agreements, Purchase and Sale Contracts Risks If the other party to a repurchase agreement or purchase and sale contract defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security in either situation and the market value of the security declines, the Fund may lose money. Securities Lending Risk Securities lending involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, the Fund may lose money and there may be a delay in recovering the loaned securities. The Fund could also lose money if it does not recover the securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could trigger adverse tax consequences for the Fund. Short Sales Risk Because making short sales in securities that it does not own exposes the Fund to the risks associated with those securities, such short sales involve speculative exposure risk. The Fund will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the security sold short. The Fund will realize a gain if the security declines in price between those dates. As a result, if the Fund makes short sales in securities that increase in value, it will likely underperform similar funds that do not make short sales in securities they do not own. There can be no assurance that the Fund will be able to close out a short sale position at any particular time or at an acceptable price. Although the Fund s gain is limited to the amount at which it sold a security short, its potential loss is limited only by the maximum attainable price of the security, less the price at which the security was sold. The Fund may also pay transaction costs and borrowing fees in connection with short sales. Standby Commitment Agreements Risk Standby commitment agreements involve the risk that the security the Fund buys will lose value prior to its delivery to the Fund and will no longer be worth what the Fund has agreed to pay for it. These agreements also involve the risk that if the security goes up in value, the counterparty will decide not to issue the security. In this case, the Fund loses both the investment opportunity for the assets it set aside to pay for the security and any gain in the security s price. Warrants Risk If the price of the underlying stock does not rise above the exercise price before the warrant expires, the warrant generally expires without any value and the Fund loses any amount it paid for the warrant. Thus, investments in warrants may involve substantially more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock. When-Issued and Delayed Delivery Securities and Forward Commitments Risks When-issued and delayed delivery securities and forward commitments involve the risk that the security the Fund buys will lose value prior to its delivery. There also is the risk that the security will not be issued or that the other party to the transaction will not meet its obligation. If this occurs, the Fund loses both the investment opportunity for the assets it set aside to pay for the security and any gain in the security s price

52 Financial Highlights The Financial Highlights table is intended to help you understand the Fund s financial performance for the periods shown. Certain information reflects the financial results for a single Fund share. The total returns in the table represent the rate an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, whose report, along with the Fund s consolidated financial statements, is included in the Fund s Annual Report, which is available upon request. Class I Year Ended December 31, Per Share Operating Performance: Net asset value, beginning of year $ $ $ $ $ Net investment income Net realized and unrealized gain (loss) (3.39) Net increase (decrease) from investment operations (3.12) Dividends and distributions from: Net investment income (0.19) (0.24) (0.33) (0.47) (0.41) Net realized gain (0.08) (0.06) (0.79) (0.59) Tax return of capital (0.02) Total dividends and distributions (0.27) (0.26) (0.39) (1.26) (1.00) Net asset value, end of year $ $ $ $ $ Total Investment Return: 3 Based on net asset value 10.05% 21.30% (19.48)% 17.01% 16.53% 4 Ratios to Average Net Assets: Total expenses 0.71% 0.74% 0.80% 0.78% 0.79% Total expenses after fees waived 0.71% 0.74% 0.80% 0.78% 0.79% Total expenses after fees waived and excluding dividend expense 0.71% 0.74% 0.80% 0.78% 0.79% Net investment income 1.75% 1.99% 1.81% 2.03% 2.18% Supplemental Data: Net assets, end of year (000) $1,403,484 $855,977 $589,326 $755,675 $717,928 Portfolio turnover 28% 26% 31% 34% 55% 1 Consolidated Financial Highlights. 2 Based on average shares outstanding. 3 Where applicable, total investment returns exclude insurance-related fees and expenses and include the reinvestment of dividends and distributions. 4 The previous investment advisor fully reimbursed the Fund in order to resolve a regulatory issue relating to an investment, which had a minimal impact on total investment return

53 Financial Highlights (continued) Per Share Operating Performance: Class II Year Ended December 31, Net asset value, beginning of year $ $12.53 $ $14.78 $13.54 Net investment income Net realized and unrealized gain (loss) (3.39) Net increase (decrease) from investment operations (3.14) Dividends and distributions from: Net investment income (0.17) (0.22) (0.30) (0.45) (0.38) Net realized gain (0.08) (0.06) (0.79) (0.59) Tax return of capital (0.03) Total dividends and distributions (0.25) (0.25) (0.36) (1.24) (0.97) Net asset value, end of year $ $14.91 $ $16.03 $14.78 Total Investment Return: 3 Based on net asset value 9.88% 21.05% (19.57)% 16.82% 16.36% 4 Ratios to Average Net Assets: Total expenses 0.86% 0.89% 0.95% 0.93% 0.94% Total expenses after fees waived 0.86% 0.89% 0.95% 0.93% 0.94% Total expenses after fees waived and excluding dividend expense 0.86% 0.89% 0.95% 0.93% 0.94% Net investment income 1.60% 1.76% 1.69% 1.90% 2.03% Supplemental Data: Net assets, end of year (000) $19,019 $7,843 $1,544 $1,521 $1,771 Portfolio turnover 28% 26% 31% 34% 55% 1 Consolidated Financial Highlights. 2 Based on average shares outstanding. 3 Where applicable, total investment returns exclude insurance-related fees and expenses and include the reinvestment of dividends and distributions. 4 The previous investment advisor fully reimbursed the Fund in order to resolve a regulatory issue relating to an investment, which had a minimal impact on total investment return

54 Financial Highlights (concluded) Per Share Operating Performance: Class III Year Ended December 31, Net asset value, beginning of year $ $ $ $ $ Net investment income Net realized and unrealized gain (loss) (3.07) Net increase (decrease) from investment operations (2.86) Dividends and distributions from: Net investment income (0.15) (0.22) (0.31) (0.45) (0.39) Net realized gain (0.08) (0.06) (0.79) (0.59) Tax return of capital (0.02) Total dividends and distributions (0.23) (0.24) (0.37) (1.24) (0.98) Net asset value, end of year $ $ $ $ $ Total Investment Return: 3 Based on net asset value 9.76% 20.92% (19.67)% 16.75% 16.40% 4 Ratios to Average Net Assets: Total expenses 0.96% 0.99% 1.03% 1.04% 1.04% Total expenses after fees waived 0.96% 0.99% 1.03% 1.04% 1.04% Total expenses after fees waived and excluding dividend expense 0.96% 0.99% 1.03% 1.04% 1.04% Net investment income 1.50% 1.75% 1.66% 1.67% 1.88% Supplemental Data: Net assets, end of year (000) $6,483,920 $4,547,181 $1,820,988 $333,475 $71,208 Portfolio turnover 28% 26% 31% 34% 55% 1 Consolidated Financial Highlights. 2 Based on average shares outstanding. 3 Where applicable, total investment returns exclude insurance-related fees and expenses and include the reinvestment of dividends and distributions. 4 The previous investment advisor fully reimbursed the Fund in order to resolve a regulatory issue relating to an investment, which had a minimal impact on total investment return

55 Other Important Information Account Information Management of the Funds General Information Glossary For More Information BlackRock Variable Series Funds Class III Shares The Insurance Companies III-2 How to Buy and Sell Shares III-2 Rule 12b-1 Fees for Class III Shares III-3 Information about BlackRock and the Portfolio Managers BlackRock III-5 Portfolio Manager Information III-7 Conflicts of Interest III-10 Valuation of Fund Investments III-11 Dividends and Taxes III-12 Shareholder Documents III-13 Certain Fund Policies III-13 Statement of Additional Information III-13 Glossary III-14 Funds and Service Providers Inside Back Cover Additional Information Back Cover 51

56 Your Account The Insurance Companies Shares of the BlackRock Basic Value V.I. Fund, the BlackRock Capital Appreciation V.I. Fund, the BlackRock Equity Dividend V.I. Fund, the BlackRock Global Allocation V.I. Fund, the BlackRock Global Opportunities V.I. Fund, the BlackRock Large Cap Core V.I. Fund, the BlackRock Large Cap Growth V.I. Fund, the BlackRock Large Cap Value V.I. Fund, the BlackRock Total Return V.I. Fund, and the BlackRock Value Opportunities V.I. Fund (each a Fund and collectively the Funds ) are sold to separate accounts of insurance companies (the Insurance Companies ) to fund certain variable life insurance contracts and/or variable annuities (the Contracts ) issued by the Insurance Companies. Shares of the Funds are owned by the Insurance Companies, not Contract owners. A Contract owner has no direct interest in the shares of a Fund, but only in the Contract. A Contract is described in the prospectus for that Contract. That prospectus describes the relationship between changes in the value of shares of a Fund, and the benefits provided under a Contract. The prospectus for a Contract also describes various fees payable to the Insurance Company and charges to the separate account made by the Insurance Company with respect to the Contract. Because shares of the Funds will be sold only to the Insurance Companies for the separate accounts, the terms you, your, shareholder and shareholders in this prospectus refer to the Insurance Companies. More than one Insurance Company may invest in each Fund. It is possible that a difference may arise among the interests of Insurance Companies that invest in a Fund or the holders of different types of Contracts for example, if applicable state insurance law or Contract owner instructions prevent an Insurance Company from continuing to invest in a Fund following a change in the Fund s investment policies, or if different tax laws apply to variable life insurance contracts and variable annuities. The Funds and the Insurance Companies will attempt to monitor events to prevent such differences from arising. If a conflict between Insurance Companies occurs, or between life insurance policies and annuity contracts, however, a Fund may be required to take actions that are adverse to the interests of a particular Insurance Company and its Contract owners, or to the interests of holders of a particular type of Contract. How to Buy and Sell Shares The BlackRock Variable Series Funds, Inc. (the Company ) is offering through this prospectus Class III Shares in certain Funds to the Insurance Companies. The price of shares purchased by the Insurance Companies is based on the next calculation of the per share net asset value of a Fund after an order is placed. The Company may reject any order to buy shares and may suspend the sale of shares at any time. The Company will redeem all full and fractional shares of the Funds for cash. The price of redeemed shares is based on the next calculation of net asset value after a redemption order is placed. The value of shares at the time of redemption may be more or less than the shareholder s cost, depending in part on the net asset value of such shares at such time. Short-Term Trading Policy The Company s Board of Directors (the Board ) has determined that the interests of long-term shareholders and a Fund s ability to manage its investments may be adversely affected when shares are repeatedly bought, sold or exchanged in response to short-term market fluctuations also known as market timing. The Funds are not designed for market timing organizations or other entities using programmed or frequent purchases and sales or exchanges. The exchange privilege is not intended as a vehicle for short-term trading. Excessive purchase and sale or exchange activity may interfere with portfolio management, increase expenses and taxes and may have an adverse effect on the performance of a Fund and its shareholders. For example, large flows of cash into and out of a Fund may require the management team to allocate a significant amount of assets to cash or other short-term investments or sell securities, rather than maintaining such assets in securities selected to achieve a Fund s investment objective. Frequent trading may cause a Fund to sell securities at less favorable prices, and transaction costs, such as brokerage commissions, can reduce a Fund s performance. A Fund that invests in non-u.s. securities is subject to the risk that an investor may seek to take advantage of a delay between the change in value of such Fund s portfolio securities and the determination of the Fund s net asset value as a result of different closing times of U.S. and non-u.s. markets by buying or selling Fund shares at a price that III-2 52

57 does not reflect their true value. A similar risk exists for Funds that invest in securities of small capitalization companies, securities of issuers located in emerging markets or high yield securities ( junk bonds ) that are thinly traded and therefore may have actual values that differ from their market prices. This short-term arbitrage activity can reduce the return received by long-term shareholders. Each Fund will seek to eliminate these opportunities by using fair value pricing, as described in Valuation of Fund Investments below. The Funds discourage market timing and seeks to prevent frequent purchases and sales or exchanges of Fund shares that it determines may be detrimental to the Fund or long-term shareholders. The Board has approved the policies discussed below to seek to deter market timing activity. The Board has not adopted any specific numerical restrictions on purchases, sales and exchanges of Fund shares because certain legitimate strategies will not result in harm to a Fund or shareholders. If as a result of its own investigation, information provided by a financial intermediary or other third party, or otherwise, a Fund believes, in its sole discretion, that your short-term trading is excessive or that you are engaging in market timing activity, it reserves the right to reject any specific purchase or exchange order. If a Fund rejects your purchase or exchange order, you will not be able to execute that transaction, and such Fund will not be responsible for any losses you therefore may suffer. For transactions placed directly with a Fund, such Fund may consider the trading history of accounts under common ownership or control for the purpose of enforcing these policies. Transactions placed through the same financial intermediary on an omnibus basis may be deemed part of a group for the purpose of this policy and may be rejected in whole or in part by a Fund. Certain accounts, such as omnibus accounts and accounts at financial intermediaries, however, include multiple investors and such accounts typically provide a Fund with net purchase or redemption and exchange requests on any given day where purchases, redemptions and exchanges of shares are netted against one another and the identity of individual purchasers, redeemers and exchangers whose orders are aggregated may not be known by a Fund. While the Funds monitor for market timing activity, the Funds may be unable to identify such activities because the netting effect in omnibus accounts often makes it more difficult to locate and eliminate market timers from the Funds. The Distributor has entered into agreements with respect to financial professionals, and other financial intermediaries that maintain omnibus accounts with the transfer agent pursuant to which such financial professionals and other financial intermediaries undertake to cooperate with the Distributor in monitoring purchase, exchange and redemption orders by their customers in order to detect and prevent short-term or excessive trading in the Funds shares through such accounts. Identification of market timers may also be limited by operational systems and technical limitations. In the event that a financial intermediary is determined by a Fund to be engaged in market timing or other improper trading activity, the Funds Distributor may terminate such financial intermediary s agreement with the Distributor, suspend such financial intermediary s trading privileges or take other appropriate actions. There is no assurance that the methods described above will prevent market timing or other trading that may be deemed abusive. The Funds may from time to time use other methods that they believe are appropriate to deter market timing or other trading activity that may be detrimental to a fund or long-term shareholders. Rule 12b-1 Fees for Class III Shares The Company has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended (the Plan ) that allows a Fund to pay distribution fees to each of the participating Insurance Companies for the sale and distribution of its Class III Shares. Because these fees are paid out of a Fund s assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Class III shareholders have no other purchase option. The amount of the distribution fee payable under the plan equals 0.25% of the average daily net asset value of the Class III Shares of a Fund held by the participating Insurance Company. The distribution fee may be used to pay the participating Insurance Companies for distribution services provided in connection with the sale of Class III Shares. The distribution fee may also be used to pay Insurance Companies and other financial intermediaries ( Service Organizations ) for sales support services and related expenses. In addition to, rather than in lieu of, distribution fees that a Fund may pay to a Service Organization pursuant to a Plan and fees the Fund pays to its transfer agent, if approved by the Board, BlackRock, on behalf of the Funds, may enter into non-plan agreements with a Service Organization pursuant to which a Fund will pay a Service Organization for administrative, networking, recordkeeping, subtransfer agency and shareholder services. These non-plan payments are based on a percentage of the average daily net assets of Fund shareholders serviced by a Service Organization. The aggregate amount of these payments may be substantial. 53 III-3

58 BlackRock, BlackRock Investments, LLC (the Distributor ) and their affiliates may make payments relating to distribution and sales support activities to Service Organizations out of their past profits or other sources available to them (and not as an additional charge to the Funds). From time to time, BlackRock, the Distributor and their affiliates may compensate affiliated and unaffiliated Service Organizations for the sale and distribution of shares of the Funds. These payments would be in addition to the Fund payments described above, if approved by the Board, and may be a fixed dollar amount, may be based on the number of customer accounts maintained by the Service Organization, or may be based on a percentage of the value of shares sold to, or held by, customers of the Service Organization. The aggregate amount of these payments by BlackRock, the Distributors and their affiliates may be substantial. Payments by BlackRock may include amounts that are sometimes referred to as revenue sharing payments. In some circumstances, these revenue sharing payments may create an incentive for a Service Organization, its employees or associated persons to recommend or sell shares of the Funds to you. Please contact your Service Organization for details about payments it may receive from the Funds or from BlackRock, the Distributor or their affiliates. For more information, see the Statement of Additional Information (the SAI ). III-4 54

59 Management of the Funds BlackRock BlackRock, each Fund s investment adviser, manages each Fund s investments and its business operations subject to the oversight of the Board of each of the Funds. While BlackRock is ultimately responsible for the management of the Funds, it is able to draw upon the trading, research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities. BlackRock is an indirect, wholly owned subsidiary of BlackRock, Inc. BlackRock, a registered investment adviser, was organized in 1994 to perform advisory services for investment companies. BlackRock and its affiliates had approximately $3.561 trillion in investment company and other portfolio assets under management as of December 31, Each Fund has entered into a management agreement (the Management Agreement ) with BlackRock under which BlackRock receives for its services to the Funds a fee at an annual rate described below. The fee is computed daily on a Fund-by-Fund basis and payable monthly. Name of Fund Management Fee BlackRock Basic Value V.I. Fund 0.60% BlackRock Capital Appreciation V.I. Fund 0.65% BlackRock Equity Dividend V.I. Fund 0.60% BlackRock Global Allocation V.I. Fund 0.65% BlackRock Global Opportunities V.I. Fund 0.75% BlackRock Large Cap Growth V.I. Fund 0.65% BlackRock Large Cap Value V.I. Fund 0.75% BlackRock Value Opportunities V.I. Fund 0.75% BlackRock Large Cap Core V.I. Fund Portion of Average Daily Value of Net Assets Management Fee Not exceeding $250 million 0.500% In excess of $250 million but not exceeding $300 million 0.450% In excess of $300 million but not exceeding $400 million 0.425% In excess of $400 million 0.400% BlackRock Total Return V.I. Fund Management Fee Portion of Aggregate Average Daily Value of BlackRock Net Assets of BlackRock Total Return V.I. Total Return Fund and BlackRock High Income V.I. Fund: V.I. Fund Not exceeding $250 million 0.50% In excess of $250 million but not exceeding $500 million 0.45% In excess of $500 million but not exceeding $750 million 0.40% In excess of $750 million 0.35% 55 III-5

60 The fee rate for BlackRock Total Return V.I. Fund is applied to the average daily net assets of the Fund, with the reduced rates shown above applicable to portions of the assets of the Fund to the extent that the aggregate average daily net assets of the Fund and BlackRock High Income V.I. Fund combined exceed $250 million, $500 million and $750 million (each such amount being a breakpoint level ). The portion of the assets of a Fund 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 combined Funds that falls within that breakpoint level by the aggregate average daily net assets of the combined Funds. The amount of the fee for a Fund at each breakpoint level is determined by multiplying the average daily net assets of that Fund by the uniform percentage applicable to that breakpoint level and multiplying the product by the advisory fee rate. For S&P 500 Index V.I. Fund, the management fee applicable to portions of the assets of the Fund to the extent that the average daily net assets of the Fund exceed $500 million and $1 billion may be voluntarily reduced to the rates shown below. Any voluntary management fee reductions may be terminated by the Manager without notice at any time. Portion of Average Daily Value of Net Assets Management Fee Not exceeding $500 million 0.300% In excess of $500 million but not exceeding $1 billion 0.275% In excess of $1 billion 0.250% BlackRock has voluntarily agreed to cap net expenses (excluding (i) interest, taxes, dividends tied to short sales, brokerage commissions, and other expenditures which are capitalized in accordance with generally accepted accounting principles; (ii) expenses incurred directly or indirectly by a Fund as a result of investments in other investment companies and pooled investment vehicles; (iii) other expenses attributable to, and incurred as a result of, a Fund s investments; and (iv) other extraordinary expenses (including litigation expenses) not incurred in the ordinary course of a Fund s business, if any), of each share class of certain Funds at the levels shown below. (Items (i), (ii), (iii) and (iv) in the preceding sentence are referred to in this prospectus as Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Fund expenses. ) To achieve these expense caps, BlackRock has agreed to waive or reimburse fees or expenses if these operating expenses exceed a certain limit. With respect to Class III shares of the Funds, BlackRock has agreed to voluntarily waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses (excluding Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Fund expenses, and excluding Distribution Fees) to 1.25% of average net assets. Voluntary waivers or reimbursements may be reduced or discontinued at any time without notice. For the fiscal year ended December 31, 2010, BlackRock received a fee, net of applicable waivers, at the annual rate of each Fund s average daily net assets as described below. Fund Name Management Fee Basic Value V.I. Fund 0.60% Capital Appreciation V.I. Fund 0.65% Equity Dividend V.I. Fund 0.56% Global Allocation V.I. Fund 0.65% Global Opportunities V.I. Fund 0.75% Large Cap Core V.I. Fund 0.50% Large Cap Growth V.I. Fund 0.65% Large Cap Value V.I. Fund 0.75% Total Return V.I. Fund 0.49% Value Opportunities V.I. Fund 0.75% BlackRock has entered in a sub-advisory agreement with BlackRock Financial Management, Inc. ( BFM ), an affiliate of BlackRock, under which BlackRock pays BFM a monthly fee for services it provides at an annual rate equal to a percentage of the management fee paid to BlackRock under the Management Agreement. BFM is responsible for the day-to-day management of Total Return V.I. Fund. III-6 56

61 BlackRock has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ( BIM ), an affiliate of BlackRock, under which BlackRock pays BIM a monthly fee for services it provides at an annual rate equal to a percentage of the management fee paid to BlackRock under the Management Agreement. BIM is responsible for the day-to-day management of the Basic Value V.I. Fund, Capital Appreciation V.I. Fund, Global Opportunities V.I. Fund, Large Cap Core V.I. Fund, Large Cap Growth V.I. Fund, Large Cap Value V.I. Fund, Value Opportunities V.I. Fund and Equity Dividend V.I. Fund. BIM is responsible for the day-to-day management of a portion of the Global Allocation V.I. Fund. BlackRock has entered into a sub-advisory agreement with BlackRock International Limited ( BIL ), an affiliate of BlackRock, under which BlackRock pays BIL a monthly fee for services it provides at an annual rate equal to a percentage of the management fee paid to BlackRock under the Management Agreement. BIL is responsible for the day-to-day management of a portion of the Global Allocation V.I. Fund. A discussion of the basis for the Board s approval of the Management Agreement with BlackRock and each subadvisory agreement between BlackRock and each sub-adviser is included in each Fund s semi-annual shareholder report for the fiscal period ended June 30, From time to time, a manager, analyst, or other employee of BlackRock or its affiliates may express views regarding a particular asset class, company, security, industry, or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of BlackRock or any other person within the BlackRock organization. Any such views are subject to change at any time based upon market or other conditions and BlackRock disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of a Fund. Portfolio Manager Information Information regarding the portfolio managers of each Fund is set forth below. Further information regarding the portfolio managers, including other accounts managed, compensation, ownership of Fund shares, and possible conflicts of interest, is available in the Funds SAI. BlackRock Basic Value V.I. Fund The Fund is managed by Kevin Rendino and Carrie King, who are jointly and primarily responsible for the day-to-day management of the Fund. Mr. Rendino is the senior portfolio manager and Ms. King is the associate portfolio manager. Portfolio Manager Primary Role Since Title and Recent Biography Kevin Rendino Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. and Head of BlackRock s Basic Value Equity Team since 2006; Managing Director of Merrill Lynch Investment Managers, L.P. ( MLIM ) from 2000 to Carrie King Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2007 to 2010; Vice President of BlackRock, Inc. in 2006; Vice President of MLIM from 1993 to BlackRock Capital Appreciation V.I. Fund The Fund is managed by Jeffrey Lindsey, CFA and Edward Dowd, who are jointly and primarily responsible for the dayto-day management of the Fund. Portfolio Manager Primary Role Since Title and Recent Biography Jeffrey Lindsey, CFA Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2005; Head of BlackRock s Large Cap Growth Equity Team; Managing Director of State Street Research & Management Company ( SSRM ) from 2002 to Edward Dowd Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2006; Director of BlackRock, Inc. in 2005; Vice President of SSRM from 2002 to III-7

62 BlackRock Global Allocation V.I. Fund The Fund is managed by a team of financial professionals. Dennis Stattman, CFA, Dan Chamby, CFA and Aldo Roldan, PhD are jointly and primarily responsible for the management of the Fund. Portfolio Manager Primary Role Since Title and Recent Biography Dennis Stattman, CFA Jointly responsible for the management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2006 and Head of BlackRock Global Allocation Team; Managing Director of Merrill Lynch Investment Managers, L.P. ( MLIM ) from 2000 to 2006; Director of MLIM from 1989 to Dan Chamby, CFA Aldo Roldan, PhD Jointly responsible for the management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund. Jointly responsible for the management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Director of MLIM from 2000 to 2006; Vice President of MLIM from 1993 to Managing Director of BlackRock, Inc. since 2008; Director of BlackRock, Inc. from 2006 to 2007; Director of MLIM from 1998 to BlackRock Global Opportunities V.I. Fund The Fund is managed by Thomas Callan, CFA and Michael Carey, CFA, who are jointly and primarily responsible for the day-to-day management of the Fund. Portfolio Manager Primary Role Since Title and Recent Biography Thomas Callan, CFA Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 1998; Head of BlackRock s Global Opportunities Equity Team. Michael Carey, CFA Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. from 2004 to III-8 58

63 BlackRock Large Cap Core V.I. Fund, BlackRock Large Cap Growth V.I. Fund and BlackRock Large Cap Value V.I. Fund Each Fund is managed by Robert Doll, CFA, CPA, Daniel Hanson, CFA, and Peter Stournaras, CFA, who are jointly and primarily responsible for the day-to-day management of each Fund s portfolio. Mr. Doll is each Fund s senior portfolio manager and Mr. Hanson is each Fund s associate portfolio manager. Portfolio Manager Primary Role Since Title and Recent Biography Robert Doll, CFA, CPA, Senior Portfolio Manager Jointly and primarily responsible for the day-to-day management of each Fund s portfolio, including setting each Fund s overall investment strategy and overseeing the management of the Funds (Large Cap Core V.I. Fund and Large Cap Value V.I. Fund) 1999 (Large Cap Growth V.I. Fund) Senior Managing Director and Chief Equity Strategist of BlackRock, Inc.; Vice Chairman of BlackRock, Inc. and Global Chief Investment Officer for Equities of BlackRock, Inc. from 2006 to 2010; President and Chief Investment Officer of Merrill Lynch Investment Managers, L.P. ( MLIM ) and its affiliate, Fund Asset Management, L.P., from 2001 to 2006; President and member of the Board of the funds advised by MLIM and its affiliates from 2005 to Daniel Hanson, CFA, Portfolio Manager Jointly and primarily responsible for the day-to-day management of each Fund s portfolio, including setting each Fund s overall investment strategy and overseeing the management of the Funds (Large Cap Growth V.I. Fund) and 2004 (Large Cap Core V.I. Fund and Large Cap Value V.I. Fund) Managing Director of BlackRock, Inc. since 2009; Director of BlackRock, Inc. from 2007 to 2008; Vice President of BlackRock, Inc. in 2006; Vice President of MLIM from 2003 to Peter Stournaras, CFA, Portfolio Manager Jointly and primarily responsible for the day-to-day management of each Fund s portfolio including setting each Fund s overall investment strategy and overseeing the management of the Funds Managing Director of BlackRock, Inc. since 2010; Director at Northern Trust Company from 2006 to 2010; Portfolio Manager at Smith Barney/Legg Mason from 2005 to 2006; Director at Citigroup Asset Management from 1998 to BlackRock Total Return V.I. Fund The Fund is managed by a team of financial professionals. Rick Rieder, Matthew Marra and Eric Pellicciaro are the portfolio managers and are jointly and primarily responsible for the day-to-day management of the Fund. Portfolio Manager Primary Role Since Title and Recent Biography Rick Rieder Responsible for the day-to-day management of the Fund s portfolio including setting the Fund s overall investment strategy and overseeing the management of the Fund 2010 Chief Investment Officer of Fixed Income, Fundamental Portfolios of BlackRock, Inc., and Head of its Global Credit Business and Credit Strategies and Multi-Sector and Mortgage Groups since 2010; Managing Director of BlackRock, Inc. since 2009; President and Chief Executive Officer of R3 Capital Partners from 2008 to 2009; Managing Director of Lehman Brothers from 1994 to Matthew Marra Eric Pellicciaro Responsible for the day-to-day management of the Fund s portfolio including setting the Fund s overall investment strategy and overseeing the management of the Fund Responsible for the day-to-day management of the Fund s portfolio including setting the Fund s overall investment strategy and overseeing the management of the Fund 2006 Deputy Head of Retail and Mutual Fund Products of BlackRock, Inc. and Co-Head of Mutual Fund Multi Sector Portfolios since 2010; Managing Director of Black Rock, Inc. since 2006; Director of BlackRock, Inc. from 2002 to Managing Director of BlackRock, Inc. since 2005; Head of the Global Rates Investment Team within BlackRock s Fundamental Fixed Income Portfolio Management Group. 59 III-9

64 BlackRock Value Opportunities V.I. Fund The Fund is managed by John Coyle, CFA and Murali Balaraman, CFA, who are jointly and primarily responsible for the day-to-day management of the Fund. Portfolio Manager Primary Role Since Title and Recent Biography John Coyle, CFA Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2009; Director of BlackRock, Inc. from 2006 to 2008; Director of Merrill Lynch Investment Managers, L.P. ( MLIM ) in 2006; Vice President of MLIM from 2004 to Murali Balaraman, CFA Responsible for the day-to-day management of the Fund s portfolio, including setting the Fund s overall investment strategy and overseeing the management of the Fund Managing Director of BlackRock, Inc. since 2009; Director of BlackRock, Inc. from 2006 to 2008; Director of MLIM in 2006; Vice President of MLIM from 1998 to Conflicts of Interest The investment activities of BlackRock and its affiliates (including BlackRock, Inc. and PNC Financial Services Group, Inc. and their affiliates, directors, partners, trustees, managing members, officers and employees (collectively, the Affiliates )) and of BlackRock, Inc. s significant shareholders, Merrill Lynch & Co., Inc., and its affiliates, including Bank of America Corporation (each a BAC Entity ), and Barclays Bank PLC and its affiliates, including Barclays PLC (each a Barclays Entity ) (for convenience the BAC Entities and Barclays Entities are collectively referred to in this section as the Entities and each separately is referred to as an Entity ) in the management of, or their interest in, their own accounts and other accounts they manage, may present conflicts of interest that could disadvantage the Funds and their shareholders. BlackRock and its Affiliates or the Entities provide investment management services to other funds and discretionary managed accounts that follow an investment program similar to that of the Funds. BlackRock and its Affiliates or the Entities are involved worldwide with a broad spectrum of financial services and asset management activities and may engage in the ordinary course of business in activities in which their interests or the interests of their clients may conflict with those of a Fund. One or more Affiliates or Entities act or may act as an investor, investment banker, research provider, investment manager, financier, advisor, market maker, trader, prime broker, lender, agent and principal, and have other direct and indirect interests, in securities, currencies and other instruments in which a Fund directly and indirectly invests. Thus, it is likely that a Fund will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which an Affiliate or an Entity performs or seeks to perform investment banking or other services. One or more Affiliates or Entities may engage in proprietary trading and advise accounts and funds that have investment objectives similar to those of a Fund and/or that engage in and compete for transactions in the same types of securities, currencies and other instruments as a Fund. The trading activities of these Affiliates or Entities are carried out without reference to positions held directly or indirectly by a Fund and may result in an Affiliate or an Entity having positions that are adverse to those of a Fund. No Affiliate or Entity is under any obligation to share any investment opportunity, idea or strategy with a Fund. As a result, an Affiliate or an Entity may compete with a Fund for appropriate investment opportunities. The results of a Fund s investment activities, therefore, may differ from those of an Affiliate or an Entity and of other accounts managed by an Affiliate or an Entity, and it is possible that a Fund could sustain losses during periods in which one or more Affiliates or Entities and other accounts achieve profits on their trading for proprietary or other accounts. The opposite result is also possible. In addition, a Fund may, from time to time, enter into transactions in which an Affiliate or an Entity or its other clients have an adverse interest. Furthermore, transactions undertaken by Affiliate-advised clients may adversely impact a Fund. Transactions by one or more Affiliate- or Entity-advised clients or BlackRock may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of a Fund. A Fund s activities may be limited because of regulatory restrictions applicable to one or more Affiliates or Entities, and/or their internal policies designed to comply with such restrictions. In addition, a Fund may invest in securities of companies with which an Affiliate or an Entity has or is trying to develop investment banking relationships or in which an Affiliate or an Entity has significant debt or equity investments. A Fund also may invest in securities of companies for which an Affiliate or an Entity provides or may some day provide research coverage. An Affiliate or an Entity may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend a Fund or who engage in transactions with or for a Fund, and may receive compensation for such services. A Fund may also make brokerage and other payments to Affiliates or Entities in connection with a Fund s portfolio investment transactions. III-10 60

65 Under a securities lending program approved by the Funds Board, the Funds have retained an Affiliate of BlackRock to serve as the securities lending agent for the funds to the extent that the Funds participate in the securities lending program. For these services, the lending agent will receive a fee from the Funds, including a fee based on the returns earned on the Funds investment of the cash received as collateral for the loaned securities. In addition, one or more Affiliates may be among the entities to which the Funds may lend its portfolio securities under the securities lending program. The activities of Affiliates may give rise to other conflicts of interest that could disadvantage the Funds and their shareholders. BlackRock has adopted policies and procedures designed to address these potential conflicts of interest. See the SAI for further information. Valuation of Fund Investments When an Insurance Company purchases shares, the Insurance Company pays the net asset value. This is the offering price. Shares are also redeemed at their net asset value. Each Fund calculates its net asset value of each class of its shares (generally by using market quotations) each day the New York Stock Exchange ( NYSE ) is open, as of the close of business on the NYSE, based on prices at the time of closing. The NYSE generally closes at 4:00 p.m. Eastern time. The net asset value used in determining your share price is the next one calculated after your purchase or redemption order is placed. The Funds assets and liabilities are valued primarily on the basis of market quotations. Equity investments are valued at market value, which is generally determined using the last reported sale price on the exchange or market on which the security is primarily traded at the time of valuation. The Funds value fixed income portfolio securities using market prices provided directly from one or more broker-dealers, market makers, or independent third-party pricing services, which may use matrix pricing and valuation models to derive values, each in accordance with valuation procedures approved by the Funds Board. Certain short-term debt securities are valued on the basis of amortized cost. If a Fund invests in foreign securities, these securities may trade on weekends or other days when such Fund does not price its shares. As a result, a Fund s next available net asset value will reflect any changes in the value of foreign securities. In addition, foreign currency exchange rates are generally determined as of the close of business on the NYSE. Generally, trading in foreign securities, U.S. government securities and money market instruments, and certain fixed income securities is substantially completed each day at various times prior to the close of business on the NYSE. The values of such securities used in computing the net asset value of a Fund s shares are determined as of such times. When market quotations are not readily available or are not believed by BlackRock to be reliable, a Fund s investments are valued at fair value. Fair value determinations are made by BlackRock in accordance with procedures approved by the Funds Board. BlackRock may conclude that a market quotation is not readily available or is unreliable if a security or other asset or liability does not have a price source due to its lack of liquidity, if BlackRock believes a market quotation from a broker-dealer or other source is unreliable, where the security or other asset or liability is thinly traded (e.g., municipal securities and certain non-u.s. securities) or where there is a significant event subsequent to the most recent market quotation. For this purpose, a significant event is deemed to occur if BlackRock determines, in its business judgment prior to or at the time of pricing a Fund s assets or liabilities, that it is likely that the event will cause a material change to the last closing market price of one or more assets or liabilities held by the Fund. Foreign securities whose values are affected by volatility that occurs in U.S. markets on a trading day after the close of foreign securities markets may be fair valued. Fair value represents a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining a Fund s net asset value. A Fund may accept orders from certain authorized Financial Intermediaries or their designees. A Fund will be deemed to receive an order when accepted by the intermediary or designee and the order will receive the net asset value next computed by the Fund after such acceptance. If the payment for a purchase order is not made by a designated later time, the order will be canceled and the Financial Intermediary could be held liable for any losses. 61 III-11

66 Dividends and Taxes The Total Return V.I. Fund declares dividends daily and reinvests dividends monthly in additional full and fractional shares of the Total Return V.I. Fund. The Basic Value V.I., Capital Appreciation V.I., Equity Dividend V.I., Global Opportunities V.I., Global Allocation V.I., Large Cap Core V.I., Large Cap Growth V.I., Large Cap Value V.I., and Value Opportunities V.I. Funds declare dividends at least annually and reinvest dividends at least annually in additional shares of the respective Funds. Each Fund has elected to be treated, and intends to qualify each year, as a regulated investment company under the Internal Revenue Code of 1986, as amended (the Code ). In order to qualify to be taxed as a regulated investment company, each Fund must meet certain income and asset diversification tests and distribution requirements. As regulated investment companies, the Funds will not be subject to federal income tax on their net investment income and net capital gains that they distribute to their shareholders. In addition, each Fund intends to meet certain diversification and investor control requirements applicable to regulated investment companies underlying variable insurance products. The requirements generally provide that, as of the end of each calendar quarter or within 30 days thereafter, no more than 55% of the total assets of a Fund may be represented by any one investment, no more than 70% by any two investments, no more than 80% by any three investments, and no more than 90% by any four investments. For this purpose, 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 diversification test may be satisfied under certain circumstances. If a Fund should fail to comply with the diversification or investor control requirements or were to otherwise fail to qualify for the special tax treatment afforded regulated investment companies under the Code, Contracts invested in the Fund would not be treated as annuity, endowment, or life insurance contracts for federal tax purposes and income and gain earned inside the Contracts in current and prior years would be taxed currently to the Contract holders and would remain taxable in future years as well, even if the Fund were to become adequately diversified. Dividends paid by the Company may be included in an 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. A 3.8% Medicare contribution tax will be imposed on the net investment income (which includes taxable dividends and redemption proceeds) of certain individuals, trusts and estates, for taxable years beginning after December 31, A 30% withholding tax will be imposed on dividends and redemption proceeds paid after December 31, 2012, to (i) foreign financial institutions (as defined in Section 1471(d)(4) of the Code) unless they agree to collect and disclose to the IRS information regarding their direct and indirect United States account holders and (ii) certain other foreign entities unless they certify certain information regarding their direct and indirect United States owners. Under some circumstances, a foreign shareholder may be eligible for refunds or credits of such taxes. III-12 62

67 General Information Shareholder Documents Please contact your Insurance Company for a copy of the Funds annual and semi-annual reports. Certain Fund Policies Anti-Money Laundering Requirements The Funds are subject to the USA PATRIOT Act (the Patriot Act ). The Patriot Act is intended to prevent the use of the U.S. financial system in furtherance of money laundering, terrorism or other illicit activities. Pursuant to requirements under the Patriot Act, the Funds may request information from shareholders to enable it to form a reasonable belief that it knows the true identity of its shareholders. This information will be used to verify the identity of investors or, in some cases, the status of financial professionals; it will be used only for compliance with the requirements of the Patriot Act. The Funds reserve the right to reject purchase orders from persons who have not submitted information sufficient to allow the Funds to verify their identity. The Funds also reserve the right to redeem any amounts in the Funds from persons whose identity it is unable to verify on a timely basis. It is the Funds policy to cooperate fully with appropriate regulators in any investigations conducted with respect to potential money laundering, terrorism or other illicit activities. BlackRock Privacy Principles BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, Clients ) and to safeguarding their nonpublic personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties. If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations. BlackRock obtains or verifies personal nonpublic information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your Financial Intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our website. BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic personal information about its Clients, except as permitted by law, or as is necessary to respond to regulatory requests or to service Client accounts. These nonaffiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose. We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to nonpublic personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the nonpublic personal information of its Clients, including procedures relating to the proper storage and disposal of such information. Statement of Additional Information If you would like further information about the Funds, including how the Funds invest, please see the SAI. For a discussion of the Funds policies and procedures regarding the selective disclosure of their portfolio holdings, please see the SAI. 63 III-13

68 Glossary This glossary contains an explanation of some of the common terms used in this prospectus. For additional information about the Funds, please see the SAI. Acquired Fund Fees and Expenses fees and expenses charged by other investment companies in which a Fund invests a portion of its assets. Annual Fund Operating Expenses expenses that cover the costs of operating a Fund. Barclays Capital U.S. Aggregate Bond Index a widely recognized unmanaged market-weighted index, is comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and Government agency issues with at least one year to maturity. BofA Merrill Lynch Current 5-Year U.S. Treasury Index an unmanaged index designed to track the total return of the current coupon five-year U.S. Treasury bond. Citigroup Non-U.S. Dollar World Government Bond Index an unmanaged, market capitalization-weighted index that tracks ten government bond indices, excluding the United States. Contract the Fund offers its shares only to participating insurance companies. These insurance companies write variable annuity and/or variable life insurance contracts that allow the contract owner to choose the Fund as an investment option. The contract owner does not become a Fund shareholder. Distribution Fees fees used to support a Fund s marketing and distribution efforts, such as compensating financial professionals and other financial intermediaries, advertising and promotion. FTSE World Index this unmanaged market capitalization-weighted Index is comprised of over 2,000 equities from 31 countries, including the United States. FTSE World Index (ex US) an unmanaged, capitalization-weighted index comprised of over 1,700 companies in 30 countries, excluding the United States. Management Fee a fee paid to BlackRock for managing the Fund. MSCI All Country World Index a free float-adjusted market capitalization weighted index, calculated by Morgan Stanley Capital International, that is designed to measure the equity market performance of developed and emerging markets. As of May 27, 2010, the index consisted of 45 country indexes comprising 24 developed and 21 emerging market country indexes. Other Expenses include accounting, transfer agency, custody, professional fees and registration fees. Reference Benchmark the Reference Benchmark is an unmanaged weighted index comprised as follows: 36% of the S&P 500 Index; 24% FTSE World Index (ex US); 24% BofA Merrill Lynch Current 5-Year U.S. Treasury Index; and 16% Citigroup Non-US Dollar World Government Bond Index. Russell 1000 Index an unmanaged broad-based index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. Russell 1000 Growth Index a subset of the Russell 1000 Index that consists of those Russell 1000 securities with a greater than average growth orientation. Russell 1000 Value Index a subset of the Russell 1000 Index that consists of those Russell 1000 securities with lower price to book ratios and lower forecasted growth values. Russell 2000 Index this unmanaged index is comprised of approximately 2,000 smaller-capitalization common stocks from various industrial sectors. S&P 500 Index this unmanaged index covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE issues), representing about 75% of NYSE market capitalization and 30% of NYSE issuers. S&P 500 is a registered trademark of The McGraw-Hill Companies. III-14 64

69 S&P Global Broad Market Index (BMI) a comprehensive, rules-based index designed to measure global stock market performance. The index covers all publicly listed equities with float-adjusted market values of US$ 100 million or more and annual dollar value traded of at least US$ 50 million in all included countries. The BMI is segmented into two size components: the S&P LargeMidCap Index and the S&P SmallCap Index. S&P SmallCap 600 Value Index a subset of the S&P 600 Index that consists of those stocks in the S&P 600 Index exhibiting the strongest value characteristics. S&P 500 Telecommunication Services Index an unmanaged index comprised of all stocks designed to measure the performance of telecommunications services companies within the S&P 500 Index. S&P 500 Utilities Index this unmanaged capitalization Index is comprised of all stocks designed to measure the performance of all the electric utility sectors of the S&P 500 Index. Service Fees fees used to compensate securities dealers and other financial intermediaries for certain shareholder servicing activities. 65 III-15

70 For More Information Funds and Service Providers THE FUNDS BlackRock Variable Series Funds, Inc. 100 Bellevue Parkway Wilmington, Delaware Written Correspondence: P.O. Box 9819 Providence, Rhode Island Overnight Mail: 101 Sabin Street Pawtucket, Rhode Island (800) MANAGER BlackRock Advisors, LLC 100 Bellevue Parkway Wilmington, Delaware SUB-ADVISERS BlackRock Financial Management, Inc. 55 East 52nd Street New York, New York BlackRock Investment Management, LLC 800 Scudders Mill Road Plainsboro, New Jersey BlackRock International Limited 40 Torpichen Street Edinburgh, EH3 8JB, United Kingdom BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, Delaware TRANSFER AGENT BNY Mellon Investment Servicing (US) Inc. 301 Bellevue Parkway Wilmington, Delaware INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 750 College Road East Princeton, New Jersey ACCOUNTING SERVICES PROVIDER State Street Bank and Trust Company 600 College Road East Princeton, New Jersey DISTRIBUTOR BlackRock Investments, LLC 40 East 52nd Street New York, New York CUSTODIANS The Bank of New York Mellon One Wall Street New York, New York Brown Brothers Harriman & Co. 40 Water Street Boston, Massachusetts COUNSEL Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York

71 [This page intentionally left blank] 67

72 Additional Information This prospectus contains important information you should know before investing, including information about risks. Read it carefully and keep it for future reference. More information about the Funds is available at no charge upon request. This information includes: Annual/Semi-Annual Reports These reports contain additional information about each of the Fund s investments. The annual report describes each Fund s performance, lists portfolio holdings, and discusses recent market conditions, economic trends and Fund investment strategies that significantly affected a Fund s performance for the last fiscal year. Statement of Additional Information (SAI) A Statement of Additional Information, dated May 1, 2011, has been filed with the Securities and Exchange Commission (SEC). The SAI, which includes additional information about each Fund, may be obtained free of charge, along with the Fund s annual and semi-annual reports, by calling (800) or visiting The SAI, as supplemented from time to time, is incorporated by reference into this prospectus. BlackRock Investor Services Representatives are available to discuss mutual fund prospectuses, literature, programs and services available. Hours: 8:00 a.m. to 6:00 p.m. (Eastern time), Monday-Friday. Call: (800) Purchases and Redemptions Call your financial professional or BlackRock Investment Services at (800) General Fund Information General fund information and specific fund performance, including SAI and annual/semi-annual reports, mutual fund prospectuses and literature, can be obtained by calling (800) Written Correspondence BlackRock Variable Series Funds, Inc. PO Box 9819 Providence, RI Overnight Mail BlackRock Variable Series Funds, Inc. 101 Sabin Street Pawtucket, RI Internal Wholesalers/Broker Dealer Support Available to support investment professionals 8:30 a.m. to 6:00 p.m. (Eastern time), Monday-Friday. Call: (800) Portfolio Characteristics and Holdings A description of each Fund s policies and procedures related to disclosure of portfolio characteristics and holdings is available in the SAI. For information about portfolio holdings and characteristics, BlackRock fund shareholders and prospective investors may call (800) Securities and Exchange Commission You may also view and copy public information about each Fund, including the SAI, by visiting the EDGAR database on the SEC website ( or the SEC s Public Reference Room in Washington, D.C. Information about the operation of the public reference room can be obtained by calling the SEC directly at (202) Copies of this information can be obtained, for a duplicating fee, by electronic request at the following address: publicinfo@sec.gov, or by writing to the Public Reference Section of the SEC, Washington, D.C You should rely only on the information contained in this Prospectus. No one is authorized to provide you with information that is different from information contained in this Prospectus. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. BLACKROCK VARIABLE SERIES FUNDS, INC. INVESTMENT COMPANY ACT FILE NO Code Pro-Var

73 MAY 1, 2011 Before you invest, you may want to review the Fund s prospectus, which contains more information about the Fund and its risks. You can find the Fund s prospectus, statement of additional information and other information about the Fund online at franklintempleton.com/ftviptfunds. You can also get this information at no cost by calling FRANKLIN or by sending an request to FTVIPTprospectus@franklintempleton.com. The Fund s prospectus and statement of additional information, both dated May 1, 2011, as may be amended from time to time, are incorporated by reference into this Summary prospectus, which means that they are legally a part of this Summary prospectus. Shares of the insurance funds of Franklin Templeton Variable Insurance Products Trust are not offered to the public; they are offered and sold only to: (1) insurance company separate accounts to serve as the underlying investment vehicles for variable contracts; (2) certain qualified plans; and (3) other mutual funds (fund of funds). This Summary prospectus is not intended for use by other investors. Please check with your insurance company for availability. Please read this Summary prospectus together with your variable annuity or variable life insurance product prospectus. FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST CLASS 4 SUMMARY PROSPECTUS Franklin Templeton VIP Founding Funds Allocation Fund 69

74 SUMMARY PROSPECTUS Investment Goal Capital appreciation. Its secondary goal is income. Fees and Expenses of the Fund These tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund. The tables and the example do not include any fees or sales charges imposed by variable insurance contracts, qualified retirement plans or investment companies. If they were included, your costs would be higher. SHAREHOLDER FEES (fees paid directly from your investment) Class 4 Maximum Sales Charge (Load) Imposed on Purchases N/A ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a percentage of the value of your investment) Class 4 Management fees 1 None Distribution and service (12b-1) fees 0.35% Other expenses 0.11% Acquired fund fees and expenses % Total annual Fund operating expenses % Fee waiver and/or expense reimbursement % Total annual Fund operating expenses after fee waiver and/or expense reimbursement 1, % 1. The administrator has contractually agreed to waive or assume certain expenses so that common expenses of the Fund (excluding Rule 12b-1 fees and acquired fund fees and expenses) do not exceed 0.10% (other than certain non-routine expenses), until April 30, Total annual Fund operating expenses differ from the ratio of expenses to average net assets shown in the Financial Highlights, which reflect the operating expenses of the Fund and do not include acquired fund fees and expenses. Example This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. The Example reflects adjustments made to the Fund s operating expenses due to the fee waiver and/or expense reimbursement by the investment manager and/or administrator for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Class 4 $114 $358 $621 $1,374 Portfolio Turnover A mutual fund generally pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover may indicate higher transaction costs. The Fund does not pay transaction costs when buying and selling shares of the Franklin Templeton mutual funds in which it invests (underlying funds); however, underlying funds pay transaction costs when buying and selling securities of their portfolios. The transaction costs incurred by the underlying funds, which are not reflected in annual fund operating expenses or in the example, affect the Fund s performance. During the most recent fiscal year, the Fund s portfolio turnover rate was 18% of the average value of its portfolio. Principal Investment Strategies The Fund is a fund of funds meaning that it seeks to achieve its investment goal by investing its assets in a combination of Class 1 shares of the Franklin Income Securities Fund (33 1/3%), Mutual Shares Securities Fund (33 1/3%) and Templeton Growth Securities Fund (33 1/3%) (underlying funds). The Fund makes equal allocations to each of the underlying funds on a fixed percentage basis. The administrator rebalances the Fund s investments in the underlying funds periodically and may recommend to the Fund s board of trustees additional or different underlying funds for investment (without the approval of shareholders). These underlying funds, in turn, invest primarily in U.S. and foreign equity securities, and, to a lesser extent, fixed income and money market securities, each following a value oriented approach. Franklin Income Securities Fund The fund seeks to maximize income while maintaining prospects for capital appreciation by investing, 70

75 SUMMARY PROSPECTUS under normal market conditions, in debt and equity securities. The fund may shift its investments from one asset class to another based on the investment manager s analysis of the best opportunities in a given market. The fund seeks income by investing in corporate, foreign and U.S. Treasury bonds, as well as stocks with dividend yields the investment manager believes are attractive. In its search for growth opportunities, the fund maintains the flexibility to invest in common stocks of companies from a variety of industries and may from time to time have significant investments in particular sectors. The fund may invest up to 100% of its assets in debt securities that are rated below investment grade (sometimes called junk bonds ). The fund may also invest up to 25% of its assets in foreign securities. Mutual Shares Securities Fund The fund s principal investment goal is capital appreciation and its secondary goal is income. Under normal market conditions, the fund invests primarily in equity securities (including securities convertible into, or that the investment manager expects to be exchanged for, common or preferred stock) of U.S. and foreign companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). Under normal market conditions, the fund invests primarily in undervalued securities and, to a lesser extent, in merger arbitrage securities and distressed companies. The fund generally invests the equity portion of its portfolio primarily to predominantly in companies with market capitalization values greater than $5 billion, with a portion or significant amount of its assets in smaller companies. The fund expects to invest significantly in foreign investments. The fund may also use certain derivative instruments to hedge against currency or market risks. Templeton Growth Securities Fund The fund seeks long-term capital growth. Under normal market conditions, the fund invests primarily to predominantly in the equity securities and depositary receipts of companies located anywhere in the world, including those in the U.S. and emerging markets. It may from time to time have significant investments in particular countries or in particular sectors, such as the financial sector. The fund may invest a portion of its net assets in debt securities of companies and governments located anywhere in the world. Principal Risks You could lose money by investing in the Fund. Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government. Investing in Underlying Funds Because the Fund s investments are concentrated in the underlying funds, and the Fund s performance is directly related to the performance of the underlying funds held by it, the ability of the Fund to achieve its investment goal is directly related to the ability of the underlying funds to meet their investment goal. In addition, shareholders of the Fund will indirectly bear the fees and expenses of the underlying funds. The risks described below are the principal risks of the Fund and the underlying funds. For purposes of the discussion below, Fund means the Fund and/or one or more of the underlying funds in which the Fund invests. Asset Allocation The Fund s ability to achieve its investment goal depends upon the Fund s asset allocation and underlying funds, which may not achieve the Fund s goal in view of actual market trends. Market The market value of securities owned by the Fund will go up and down, sometimes rapidly or unpredictably. A security s market value may be reduced by market activity or other results of supply and demand unrelated to the issuer. This is a basic risk associated with all securities. When there are more sellers than buyers, prices tend to fall. Likewise, when there are more buyers than sellers, prices tend to rise. Generally, stocks have historically outperformed other types of investments over the long term. Individual stock prices, however, tend to go up and down more dramatically. A slower-growth or recessionary economic environment could have an adverse effect on the price of the various stocks held by the Fund. Value Style Investing A value stock may not increase in price as anticipated by the investment manager if other investors fail to recognize the company s value and bid up the price, the markets favor faster-growing 71

76 SUMMARY PROSPECTUS companies, or the factors that the investment manager believes will increase the price of the security do not occur. Foreign Securities Investing in foreign securities typically involves more risks than investing in U.S. securities, and includes risks associated with: political and economic developments - the political, economic and social structures of some foreign countries may be less stable and more volatile than those in the U.S.; trading practices - government supervision and regulation of foreign securities and currency markets, trading systems and brokers may be less than in the U.S.; availability of information - foreign issuers may not be subject to the same disclosure, accounting and financial reporting standards and practices as U.S. issuers; limited markets - the securities of certain foreign issuers may be less liquid (harder to sell) and more volatile; and currency exchange rate fluctuations and policies. The risks of foreign investments typically are greater in less developed countries or emerging market countries. Focus To the extent that the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, the Fund may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Smaller and Midsize Companies Securities issued by smaller and midsize companies may be more volatile in price than those of larger companies, involve substantial risks and should be considered speculative. Such risks may include greater sensitivity to economic conditions, less certain growth prospects, lack of depth of management and funds for growth and development and limited or less developed product lines and markets. In addition, smaller companies may be particularly affected by interest rate increases, as they may find it more difficult to borrow money to continue or expand operations, or may have difficulty in repaying any loans. Derivative Instruments The performance of derivative instruments depends largely on the performance of an underlying currency, security or index and such derivative instruments often have risks similar to their underlying instrument, in addition to other risks. Derivative instruments involve costs, may be volatile and illiquid, may give rise to leverage and may involve a small initial investment relative to the risk assumed. There may also be imperfect correlation between the value of the derivative and the underlying instrument. When used for hedging, the change in value of the derivative may also not correlate specifically with the currency, security or other risk being hedged. With over-the-counter derivatives, there is the risk that the other party to the transaction will fail to perform. Income Because the Fund can only distribute what it earns, the Fund s distributions to shareholders may decline when prevailing interest rates fall or when the Fund experiences defaults on debt securities it holds. Credit An issuer of debt securities may fail to make interest payments and repay principal when due, in whole or in part. Changes in an issuer s financial strength or in a security s credit rating may affect a security s value. Interest Rate When interest rates rise, debt security prices generally fall. The opposite is also generally true: debt security prices rise when interest rates fall. In general, securities with longer maturities are more sensitive to these interest rate changes. High-Yield Debt Securities Issuers of lower-rated or high yield debt securities are not as strong financially as those issuing higher credit quality debt securities. These issuers are more likely to encounter financial difficulties and are more vulnerable to changes in the relevant economy, such as a recession or a sustained period of rising interest rates, that could affect their ability to make interest and principal payments when due. The prices of high yield debt securities generally fluctuate more than those of higher credit quality. High yield debt securities are generally more illiquid (harder to sell) and harder to value. Management The underlying funds are subject to management risk because they are each an actively managed investment portfolio. Each underlying funds investment manager will apply investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that these decisions will produce the desired results. 72

77 SUMMARY PROSPECTUS Performance The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Fund s performance from year to year for Class 4 shares. The table shows how the Fund s average annual returns for 1 year, 5 years, 10 years or since inception, as applicable, compare with those of a broad measure of market performance. The Fund s past performance is not necessarily an indication of how the Fund will perform in the future. Performance reflects all Fund expenses but does not include any fees or sales charges imposed by variable insurance contracts, qualified plans or other mutual funds. If they had been included, the returns shown below would be lower. Investors should consult the variable insurance contract prospectus, or the disclosure documents for qualified plans or mutual funds for more information. ANNUAL TOTAL RETURNS 30.06% 10.24% % AVERAGE ANNUAL TOTAL RETURNS For the periods ended December 31, 2010 Since Inception 1 Year 2/29/2008 Franklin Templeton VIP Founding Funds Allocation Fund - Class % -4.28% S&P 500 Index (index reflects no deduction for fees, expenses or taxes) 15.06% 0.28% MSCI World Index (index reflects no deduction for fees, expenses or taxes) 12.34% -1.65% Year 2010 The Morgan Stanley Capital International (MSCI) World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets. Best Quarter: Q % Worst Quarter: Q % As of March 31, 2011, the Fund s year-to-date return was 5.19% for Class 4. 73

78 SUMMARY PROSPECTUS Investment Manager The Fund does not have an investment manager, nor does it pay investment management fees. Franklin Templeton Services, LLC (FT Services), the Fund s administrator, monitors the percentage of the Fund s assets allocated to the underlying funds and periodically rebalances the Fund s portfolio. T. Anthony Coffey, CFA, Vice President of Franklin Advisers, Inc., assists FT Services, at no charge to the Fund, in monitoring the underlying funds and the Fund s investment in the underlying funds and assists in the periodic rebalancing. Purchase and Sale of Fund Shares Shares of the Fund are sold to insurance companies separate accounts (Insurers) to fund variable annuity or variable life insurance contracts and to qualified plans. Insurance companies offer variable annuity and variable life insurance products through separate accounts. Shares of the Fund may also be sold to other mutual funds, either underlying funds in a fund of funds or other structures. In periods of market volatility, Fund assets may decline significantly, causing total annual fund operating expenses to become higher than the numbers shown in the fees and expenses table above. In addition, Fund shares are held by a limited number of Insurers and, when applicable, funds of funds. Substantial withdrawals by one or more Insurers, qualified retirement plans or funds of funds could reduce Fund assets, causing total Fund expenses to become higher than the numbers shown in the fees and expenses table above. The terms of the offering of interests in separate accounts are included in the variable annuity or variable life insurance product prospectus. The terms of offerings of funds of funds and feeder funds are included in those funds prospectuses. Investors should consult the variable contract prospectus, disclosure document or fund of funds prospectus for more information on fees and expenses imposed by variable insurance contracts, qualified retirement plans or investment companies. Taxes Because shares of the Fund are generally purchased through variable annuity contracts or variable life insurance contracts, the Fund s distributions (which the Fund expects, based on its investment objectives and strategies to consist of ordinary income, capital gains or some combination of both) will be exempt from current taxation if left to accumulate within the variable contract. You should refer to your contract prospectus for more information on these tax consequences. Payments to Sponsoring Insurance Companies and Other Financial Intermediaries The Fund or its distributor (and related companies) may pay broker/dealers or other financial intermediaries (such as banks and insurance companies, or their related companies) for the sale and retention of variable contracts which offer Fund shares and/or for other services. These payments may create a conflict of interest for a financial intermediary, or be a factor in the insurance company s decision to include the Fund as an investment option in its variable contract. For more information, ask your financial advisor, visit your financial intermediary s website, or consult the variable insurance contract prospectus or this Fund s prospectus. 74

79 [THIS PAGE INTENTIONALLY LEFT BLANK] 75

80 Investment Company Act file # Franklin Templeton Investments. All rights reserved. 701 PSUM 05/11 76

81 GE Investments Funds, Inc. Summary Prospectus May 1, 2011 Total Return Fund Class 3 GETTX Before you invest, you may want to review the Fund s Statutory Prospectus, which contains more information about the Fund and its risks. You can find the Fund s Statutory Prospectus, Statement of Additional Information and other information about the Fund online at You can also get this information at no cost by calling or by sending an request to gefunds@ge.com. The Fund s Statutory Prospectus and Statement of Additional Information, both dated May 1, 2011, are incorporated by reference into this Summary Prospectus. Investment Objective The highest total return, composed of current income and capital appreciation, as is consistent with prudent investment risk. Fees and Expenses of the Fund The following table describes the fees that you may pay if you buy and hold shares of the Fund, but does not reflect the fees or charges imposed by the separate accounts ( Accounts ) of the life insurance companies through which shares of the Fund may be purchased. If these fees and charges were included, the costs shown below would be higher. Shareholder Fees (fees paid directly from your investment): None. Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment). Class 3 Management Fees 0.50% Distribution and/or Service (12b-1) Fees 0.25% Other Expenses (includes an Investor Service Plan fee of 0.20% of the average daily net assets) 0.23% Acquired Fund Fees and Expenses 0.02% Total Annual Fund Operating Expenses 1.00% Expenses Reimbursed/Fees Waived by Adviser 0.02% Total Annual Fund Operating Expenses after Fee Waiver and/or Expense Reimbursement 0.98% companies through which shares of the Fund are offered. If these fees and charges were included, the expenses shown below would be higher. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Class 3 $100 $312 $542 $1,200 Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in the Annual Fund Operating Expenses or in the Expense Example, affect the Fund s performance. During the most recent fiscal year, the Fund s portfolio turnover rate was 148% of the average value of its portfolio. Expense Example The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeemed all of your shares at the end of those periods or continued to hold them. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. The example does not reflect the fees or charges imposed by the Accounts of the various life insurance 77

82 Principal Investment Strategies The Fund seeks to achieve its investment objective by investing primarily in a combination of U.S. and foreign (non- U.S.) equity and debt securities and cash. The Fund s asset allocation process utilizes information from GE Asset Management s Asset Allocation Committee to diversify holdings across these asset classes. The Fund adjusts its weightings based on market and economic conditions to meet its objective. The Fund may also invest in various types of derivatives to gain exposure to certain types of securities as an alternative to investing directly in such securities, to manage currency exposure and interest rate exposure (also known as duration), and to manage exposure to credit quality. The Fund invests in equity securities, such as common and preferred stocks, principally for their capital appreciation potential and investment-grade debt securities principally for their income potential. The Fund invests in cash principally for the preservation of capital, income potential or maintenance of liquidity. Within each asset class, the portfolio managers use active security selection to choose securities based on the perceived merits of individual issuers, although portfolio managers of different asset classes or strategies may place different emphasis on the various characteristics of a company (as identified below) during the selection process. The portfolio managers seek to identify equity securities of companies with characteristics such as: strong earnings growth favorable valuation attractive prices a presence in successful industries high quality management focused on generating shareholder value large or medium capitalization (meaning a market capitalization of $2 billion or more) The portfolio managers seek to identify debt securities with characteristics such as: attractive yields and prices the potential for capital appreciation reasonable credit quality (typically investment grade debt securities, such as mortgage-backed securities, corporate bonds, U.S. Government securities and money market instruments) The portfolio managers may consider selling a security when one of these characteristics no longer applies, or when valuation becomes excessive and more attractive alternatives are identified. The portion of the Fund invested in debt securities normally has a weighted average maturity of approximately five to ten years, but is subject to no limitations with respect to the maturities of the instruments in which it may invest. The Fund may also invest to a lesser extent in high yield securities (also known as junk bonds ), equity and debt securities of companies that are located in emerging market countries, small-capitalization securities and securities of U.S. issuers that are principally engaged in or related to the real estate industry. Principal Risks The principal risks of investing in the Fund are: Securities Market Risk is the risk that the value of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably, due to factors affecting particular companies or the securities markets generally. A general downturn in the securities market may cause multiple asset classes to decline in value simultaneously, although equity securities generally have greater price volatility than fixed income securities. Despite gains in some markets after steep declines during certain periods of , negative conditions and price declines may return unexpectedly and dramatically. In addition, the Fund could experience a loss when selling securities in order to meet unusually large or frequent redemption requests in times of overall market turmoil or declining prices for the securities sold. Mid-Cap Company Risk is the risk of investing in securities of mid-cap companies that could entail greater risks than investments in larger, more established companies. Mid-cap companies tend to have more narrow product lines, more limited financial resources and a more limited trading market for their stocks, as compared with larger companies. As a result, their stock prices may decline significantly as market conditions change. Small-Cap Company Risk is the risk that investing in the securities of small-cap companies may pose greater market and liquidity risks than larger, more established companies, because of limited product lines and/or operating history, limited financial resources, limited trading markets, and the potential lack of management depth. In addition, the securities of such companies are typically more volatile than securities of larger capitalization companies. Growth Investing Risk is the risk of investing in growth stocks that may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company s growth potential. Growth-oriented funds will typically underperform when value investing is in favor. Value Investing Risk is the risk of investing in undervalued stocks that may not realize their perceived value for extended periods of time or may never realize their perceived value. Value stocks may respond differently to market and other developments than other types of stocks. Value-oriented funds will typically underperform when growth investing is in favor. Foreign Investment Risk is the risk that investing in foreign (non-u.s.) securities may result in the Fund experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies, due to smaller markets, differing reporting, accounting and auditing standards, nationalization, expropriation or confiscatory taxation, currency blockages and political changes or diplomatic developments. The costs of investing in many foreign markets are higher than the U.S., and investments may be less liquid. 2 78

83 GE Investments Funds Summary Prospectus May 1, 2011 Currency Risk is the risk that the values of foreign investments may be affected by changes in currency rates or exchange control regulations. If a foreign currency weakens against the U.S. dollar, the value of a foreign investment denominated in that currency would also decline in dollar terms. Interest Rate Risk is the risk that fixed income securities will decline in value because of changes in interest rates. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. Credit Risk is the risk that the Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty of a derivatives contract or repurchase agreement, is unable or unwilling (or is perceived to be unable or unwilling) to make timely payment of principal and/or interest, or to otherwise honor its obligations. Prepayment Risk is the risk that during periods of falling interest rates, issuers of debt securities may repay higher rate securities before their maturity dates. This may cause the Fund to lose potential price appreciation and to be forced to reinvest the unanticipated proceeds at lower interest rates. Allocation Risk is the risk that GE Asset Management may not allocate assets of the Fund among strategies or asset classes in an optimal manner, if, among other reasons, it does not correctly assess the attractiveness of a strategy or asset class. Valuation Risk is the risk that the portfolio securities that have been valued using techniques other than market quotations, may have valuations that are different from those produced using other methodology, and that the security may be sold at a discount to the value established by the Fund. Liquidity Risk is the risk that the Fund cannot readily sell securities within seven days, at approximately the price at which the Fund has valued them or at a favorable time or price during periods of infrequent trading. Illiquid investments may trade at a substantial discount and may be subject to wide fluctuations in market value. High Yield Securities Risk is the risk that high yield securities or unrated securities of similar credit quality (commonly known as junk bonds ) are more likely to default than higher rated securities. The market value of these securities is more sensitive to corporate developments and economic conditions and can be volatile. Market conditions can diminish liquidity and make accurate valuations difficult to obtain. Emerging Markets Risk is the risk of investing in securities of companies located in emerging market countries, which primarily includes increased foreign investment risk. Emerging markets countries may have unstable governments and/or economies that are subject to sudden change, and may also lack the legal, business and social framework to support securities markets, which tends to make investments less liquid and more volatile. REIT-Specific Risk is the risk that an investment in the stocks of REITs will decline because of adverse developments affecting the real estate industry and real property values. Real Estate Securities Risk is the risk that an investment in real estate securities will be closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments. Derivatives Risk is a combination of several risks, including the risks that: (1) an investment in a derivative instrument will not correlate well with the performance of the securities or asset class to which the Fund seeks exposure, (2) a derivative instrument entailing leverage may result in a loss greater than the principal amount invested, and (3) derivatives not traded on an exchange may be subject to credit risk, as well as liquidity risk and the related risk that the instrument is difficult or impossible to value accurately. For example, the methodology the Fund uses to establish the fair value of a derivative may result in a value materially different from the value obtained using an alternative methodology. It is possible to lose money on an investment in the Fund, and this risk of loss is heightened if you hold shares of the Fund for a shorter period. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Performance The bar chart and the Average Annual Total Returns table below provide some indication of the risks of investing in the Fund by showing changes in the Fund s performance from year to year and by showing how the Fund s average annual returns compare with the returns of two broad-based securities market indices. Past performance assumes the reinvestment of all dividend income and capital gains distributions. The Fund s past performance is not necessarily an indication of how the Fund will perform in the future. For updated performance information, please visit the Fund s website at or call Calendar Year Total Returns (%) % Highest/Lowest quarterly results during this time period were: Highest (quarter ended June 30, 2009) Lowest (quarter ended December 31, 2008) 79 3

84 Average Annual Total Returns (%) (as of December 31, 2010) 1 Year Since Inception (4/30/06 for Index) Class 3 (inception 5/1/06) S&P 500 Index (does not reflect fees, expenses or taxes) Barclays Capital U.S. Aggregate Bond Index (does not reflect fees, expenses or taxes) Portfolio Management Investment Adviser GE Asset Management Incorporated Investment Sub-Advisers Palisade Capital Management, L.L.C. (for small-cap equity investments only) Urdang Securities Management, Inc. (for real estate related investments only) Portfolio Managers The primary individual portfolio managers of the Fund are: Portfolio Manager Portfolio manager experience in this Fund Primary title with Investment Adviser Paul M. Colonna 6 years President and Chief Investment Officer Fixed Income Greg Hartch Less than 1 year Senior Vice President Ralph Layman 14 years President and Chief Investment Officer Public Equities Thomas R. Lincoln 3 years Senior Vice President Diane M. Wehner 5 years Senior Vice President David Wiederecht Less than 1 year President and Chief Investment Officer Investment Strategies Tax Information Since the Accounts of the various life insurance companies are the only shareholders of the Fund, no discussion is included herein as to the federal income tax consequences for such Accounts. For information concerning the federal income tax consequences to the purchasers of variable contracts, see the contract prospectus or other disclosure document for such contract which describes the particular Account and variable contract. Payments to Broker-Dealers and Other Financial Intermediaries Shares of the Fund are available only through the purchase of variable contracts issued by certain life insurance companies. GE Investments Funds, Inc. and its affiliates may pay such insurance companies (or their related companies) for the sale of shares of the Fund and/or administrative or other related services. When received by an insurance company, such payments may be a factor that the insurance company considers in including the Fund as an investment option in its variable contracts. The prospectus or other disclosure document for the variable contracts may contain additional information about these payments. Such insurance companies (or their related companies) may pay broker-dealers or other financial intermediaries (such as banks) that sell the variable contracts for the sale of shares of the Fund and related services. When received by a broker-dealer or other intermediary, such payments may create a conflict of interest by influencing the broker-dealer or other intermediary and salespersons to recommend the Fund over other mutual funds available as investment options in a variable contract. Ask the salesperson or visit the financial intermediary s website for more information. Purchase and Sale of Fund Shares The Fund does not offer its shares to the general public. The Fund currently offers shares of each class only to Accounts of various life insurance companies as funding vehicles for certain variable contracts issued by such life insurance companies. GE Investments Funds, Inc. has entered into an agreement with the life insurance company sponsor of each Account (participation agreement) setting forth the terms and conditions pursuant to which the insurer will purchase and redeem shares of the Fund. For information regarding the purchase and sale of Fund shares, see the contract prospectus or other disclosure document for such contract which describes the particular Account and variable contract GEI SP TR

85 Summary Prospectus May 2, 2011 Invesco V.I. Balanced-Risk Allocation Fund Series II shares Before you invest, you may want to review the Fund s prospectus, which contains more information about the Fund and its risks. You can find the Fund s prospectus and other information about the Fund online at You can also get this information at no cost by calling (800) or by sending an request to ProspectusRequest@invesco.com. The Fund s prospectus and statement of additional information, both dated May 2, 2011, are all incorporated by reference into this Summary Prospectus and may be obtained, free of charge, at the Web site, phone number or address noted above. Investment Objective The Fund s investment objective is total return with a low to moderate correlation to traditional financial market indices. Fees and Expenses of the Fund This table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the Fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher. Fees and expenses of Invesco Cayman Commodity Fund IV Ltd., a wholly-owned subsidiary of the Fund (Subsidiary), are included in this table. Shareholder Fees (fees paid directly from your investment) Series II shares Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) N/A Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) N/A N/A in the above table means not applicable. AnnualFundOperatingExpenses(expensesthatyou payeachyear asapercentage ofthevalue of your investment) Series II shares Management Fees 0.95% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses Acquired Fund Fees and Expenses Total Annual Fund Operating Expenses Fee Waiver and/or Expense Reimbursement Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement Other Expenses, Acquired Fund Fees and Expenses and Total Annual Operating Expenses are based on estimated amounts for the current fiscal year. 2 Invesco Advisers, Inc. (Invesco or the Adviser) has contractually agreed, through at least June 30, 2013, to waive advisory fees and/or reimburse expenses of Series II shares to the extent necessary to limit the Total Annual Fund Operating Expenses (excluding certain items discussed below) of Series I shares to 0.95% of average daily nets assets. In determining the Adviser s obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items; (5) expenses of the underlying funds that are paid indirectly as a result of share ownership of the underlying funds (as disclosed above as Acquired Fund Fees and Expenses); and (6) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agreed to amend or continue the fee waiver agreement, it will terminate on June 30, Example. This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This Example does not represent the effect of any fees or expenses assessed in connection with your variable product, and if it did, expenses would be higher. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: 1 Year 3 Years Series II shares $101 $385 Portfolio Turnover. The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund s performance. The portfolio turnover rate of the Fund s predecessor funds (described below under Performance Information ) for the most recent fiscal year was 444% of the average value of the portfolio. Principal Investment Strategies of the Fund The Fund invests, under normal conditions, in derivatives and other financially-linked instruments whose performance is expected to correspond to U.S. and international fixed income, equity and commodity markets. The Fund may invest in derivatives and other financially-linked instruments such as futures, swap agreements, including total return swaps, and may also 1 Invesco V.I. Balanced-Risk Allocation Fund VIIBRA-SUMPRO-2 81

86 invest in U.S. and foreign government debt securities and other securities such as exchange-traded funds (ETFs) and commodity linked notes. The Fund s international investments will generally be in developed countries, but may also include emerging market countries. The Fund s fixed income investments are generally considered to be investment grade while the Fund s commodity markets exposure will generally be in the precious metals, agriculture, energy and industrial metals sectors. The Fund will also invest in the Subsidiary and ETFs to gain exposure to commodity markets. The Subsidiary, in turn, will invest in futures, exchange traded notes (ETNs) and other securities and financially-linked instruments. ETNs are senior, unsecured, unsubordinated debt securities whose returns are linked to the performance of a particular market benchmark or strategy, minus applicable fees. ETNs are traded on an exchange (e.g., the New York Stock Exchange) during normal trading hours; however, investors can also hold an ETN until maturity. The Fund will generally maintain 60% of its assets in cash and cash equivalent instruments including affiliated money market funds. Some of the cash holdings will serve as margin or collateral for the Fund s obligations under derivative transactions. The Fund s investments in certain derivatives may create significant leveraged exposure to certain equity, fixed income and commodity markets. Leverage occurs when the investments in derivatives create greater economic exposure than the amount invested. This means that the Fund could lose more than originally invested in the derivative. The Subsidiary is advised by the Adviser and has the same investment objective as the Fund and generally employs the same investment strategy but limits its investments to commodity derivatives, ETNs, cash and cash equivalent instruments, including affiliated money market funds. The Subsidiary, unlike the Fund, may invest without limitation in commodities, commodity-linked derivatives and other securities, such as ETNs, that may provide leverage and non-leveraged exposure to commodity markets. The Subsidiary also may hold cash and invest in cash equivalent instruments, including affiliated money market funds, some of which may serve as margin or collateral for the Subsidiary s derivative positions. The Fund may invest up to 25% of its total assets in the Subsidiary. The Fund will be subject to the risks associated with any investment by the Subsidiary to the extent of the Fund s investment in the Subsidiary. The Fund is non-diversified, which means that it can invest a greater percentage of its assets in any one issuer than a diversified fund can. Relative to traditional balanced portfolios, the Fund will seek to provide greater capital loss protection during down markets. The portfolio s management team will accomplish this through a three-step investment process. The first step involves asset selection. The management team selects representative assets to gain exposure to equity, fixed income and commodity markets. The selection process (1) evaluates a particular asset s theoretical case for long-term excess returns relative to cash; (2) screens the identified assets to meet minimum liquidity criteria; and (3) reviews the expected correlation among the assets and the expected risk for each asset to determine whether the selected assets are likely to improve the expected risk adjusted return of the Fund. The second step involves portfolio construction. Proprietary estimates for risk and correlation are used by the management team to create a portfolio. The team re-estimates the risk contributed by each asset and re-optimizes the portfolio periodically or when new assets are introduced to the Fund. The final step involves active positioning. The management team actively adjusts portfolio positions to reflect the near-term market environment, while remaining consistent with the optimized long-term portfolio structure described in step two above. The management team balances these two competing ideas opportunity for excess return from active positioning and the need to maintain asset class exposure set forth in the optimized portfolio structure by setting controlled tactical ranges around the longterm asset allocation. The resulting asset allocation is then implemented by investing in derivatives, other financially-linked instruments, U.S. and foreign government debt securities, other securities, cash and cash equivalent instruments, including affiliated money market funds. By using derivatives, the Fund is able to gain greater exposure to assets within each class than would be possible using cash instruments, and thus seeks to balance the amount of risk each asset class contributes to the portfolio. In attempting to meet its investment objective, the Fund may engage in active and frequent trading of portfolio securities. Principal Risks of Investing in the Fund As with any mutual fund investment, loss of money is a risk of investing. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The risks associated with an investment in the Fund can increase during times of significant market volatility. The principal risks of investing in the Fund are: Active Trading Risk. The Fund may engage in frequent trading of portfolio securities. Active trading results in added expenses and may result in a lower return. Commodity-Linked Notes Risk. The Fund s investments in commoditylinked notes may involve substantial risks, including risk of loss of a significant portion of their principal value. In addition to risks associated with the underlying commodities, they may be subject to additional special risks, such as the lack of a secondary trading market and temporary price distortions due to speculators and/or the continuous rolling over of futures contracts underlying the notes. Commodity-linked notes are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund. Commodity Risk. The Fund s and the Subsidiary s significant investment exposure to the commodities markets and/or a particular sector of the commodities markets, may subject the Fund and the Subsidiary to greater volatility than investments in traditional securities, such as stocks and bonds. The commodities markets may fluctuate widely based on a variety of factors, including changes in overall market movements, domestic and foreign political and economic events and policies, war, acts of terrorism, changes in domestic or foreign interest rates and/or investor expectations concerning interest rates, domestic and foreign inflation rates and investment and trading activities of mutual funds, hedge funds and commodities funds. Prices of various commodities may also be affected by factors such as drought, floods, weather, livestock disease, embargoes, tariffs and other regulatory developments. The prices of commodities can also fluctuate widely due to supply and demand disruptions in major producing or consuming regions. Because the Fund s and the Subsidiary s performance is linked to the performance of potentially volatile commodities, investors be willing to assume the risks of potentially significant fluctuations in the value of the Fund s shares. Counterparty Risk. Many of the instruments that the Fund expects to hold may be subject to the risk that the other party to a contract will not fulfill its contractual obligations. Credit Risk. The issuers of instruments in which the Fund invests may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer s credit rating. Currency/Exchange Rate Risk. The dollar value of the Fund s foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded. Derivatives Risk. Derivatives may be more difficult to purchase, sell or value than other investments and may be subject to market, interest rate, credit, leverage, counterparty and management risks. A fund investing in a derivative could lose more than the cash amount invested or incur higher taxes. Over-the-counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund. The derivative instruments and techniques that the Fund and the Subsidiary may principally use include: m Swaps. A swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indexes, reference rates, currencies 2 Invesco V.I. Balanced-Risk Allocation Fund 82

87 or other instruments. Swaps are subject to credit risk and counterparty risk. m Futures. A decision as to whether, when and how to use futures involves the exercise of skill and judgment and even a well conceived futures transaction may be unsuccessful because of market behavior or unexpected events. Developing Markets Securities Risk. Securities issued by foreign companies and governments located in developing countries may be affected more negatively by inflation, devaluation of their currencies, higher transaction costs, delays in settlement, adverse political developments, the introduction of capital controls, withholding taxes, nationalization of private assets, expropriation, social unrest, war or lack of timely information than those in developed countries. Exchange-Traded Funds Risk. An investment by the Fund in an ETF generally presents the same primary risks as an investment in a mutual fund. In addition, ETFs may be subject to the following: (1) a discount of the ETF s shares to its net asset value; (2) failure to develop an active trading market for the ETF s shares; (3) the listing exchange halting trading of the ETF s shares; (4) failure of the ETF s shares to track the referenced index; and (5) holding troubled securities in the referenced index. ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests. Further, certain of the ETFs in which the Fund may invest are leveraged. The more a Fund invests in such leveraged ETFs, the more this leverage will magnify any losses on those investments. Exchange-Traded Notes Risk. ETNs are subject to credit risk, including the credit risk of the issuer, and the value of the ETN may drop due to a downgrade in the issuer s credit rating, despite the underlying market benchmark or strategy remaining unchanged. The value of an ETN may also be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying assets, changes in the applicable interest rates, changes in the issuer s credit rating, and economic, legal, political, or geographic events that affect the referenced underlying asset. Foreign Securities Risk. The Fund s foreign investments may be affected by changes in a foreign country s exchange rates; political and social instability; changes in economic or taxation policies; difficulties when enforcing obligations; decreased liquidity; and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies. Interest Rate Risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on their individual characteristics, including duration. Leverage Risk. Leverage exists when the Fund purchases or sells an instrument or enters into a transaction without investing cash in an amount equal to the full economic exposure of the instrument or transaction and the Fund could lose more than it invested. Leverage created from borrowing or certain types of transactions or instruments, including derivatives, may impair the Fund s liquidity, cause it to liquidate positions at an unfavorable time, increase volatility or otherwise not achieve its intended objective. Liquidity Risk. The Fund may hold illiquid securities that it is unable to sell at the preferred time or price and could lose its entire investment in such securities. Management Risk. The investment techniques and risk analysis used by the Fund s and the underlying funds portfolio managers may not produce the desired results. Market Risk. The prices of and the income generated by the Fund s securities may decline in response to, among other things, investor sentiment; general economic and market conditions; regional or global instability; and currency and interest rate fluctuations. Non-Diversification Risk. The Fund is non-diversified and can invest a greater portion of its assets in a single issuer. A change in the value of the issuer could affect the value of the Fund more than if it was a diversified fund. Subsidiary Risk. By investing in the Subsidiary, the Fund is indirectly exposed to risks associated with the Subsidiary s investments, including derivatives and commodities. Because the Subsidiary is not registered under the Investment Company Act of 1940, as amended (1940 Act), the Fund, as the sole investor in the Subsidiary, will not have the protections offered to investors in U.S. registered investment companies. Changes in the laws of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary, respectively, are organized, could result in the inability of the Fund and/or the Subsidiary to operate as described in this prospectus and the Statement of Additional Information, and could negatively affect the Fund and its shareholders. Tax Risk. If the Internal Revenue Service were to change its position, as set out in a number of private letter rulings (which the Fund may not cite as precedent), such that the Fund s income from the Subsidiary and commodity-linked notes is not qualifying income, the Fund may be unable to qualify as a regulated investment company for one or more years. In this event, the Fund s Board of Trustees may authorize a significant change in investment strategy or Fund liquidation. U.S. Government Obligations Risk. Obligations issued by U.S. government agencies and instrumentalities may receive varying levels of support from the government, which could affect the Fund s ability to recover should they default. Performance Information The bar chart and performance table provide an indication of the risks of investing in the Fund. The bar chart shows changes in the performance of the Fund from year to year as of December 31. The performance table compares the Fund s performance to that of a broad-based securities market benchmark and a style specific benchmark. The bar chart and performance table below do not reflect charges assessed in connection with your variable product; if they did, the performance shown would be lower. The Fund s past performance is not necessarily an indication of its future performance. The returns shown include (i) the returns of Series II shares of Invesco Van Kampen V.I. Global Tactical Asset Allocation Fund (the first predecessor fund) for the period June 1, 2010 to May 2, 2011, the date the first predecessor fund was reorganized into the Fund, and (ii) the returns of Class II shares of the Van Kampen Life Investment Trust Global Tactical Asset Allocation Portfolio (the second predecessor fund) for the period prior to June 1, 2010, the date the second predecessor fund was reorganized into the first predecessor fund. The second predecessor fund was advised by Van Kampen Asset Management. Returns of Series II shares of the Fund will be different from the returns of the predecessor funds as they have different expenses. All performance shown assumes the reinvestment of dividends and capital gains. Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the Fund). 10% 8% 6% 4% 2% 0% % Best Quarter (ended September 30, 2010): 10.92% Worst Quarter (ended June 30, 2010): Invesco V.I. Balanced-Risk Allocation Fund 83

88 Average Annual Total Returns (for the periods ended December 31, 2010) 1 Year Series II: Inception (01/23/09) Since Inception 9.32% 18.87% MSCI World Index SM : Inception (01/31/09) VK GTAA Blended Benchmark: Inception (01/31/09) Management of the Fund Investment Adviser: Invesco Advisers, Inc. Portfolio Managers Title Length of Service on the Fund 2010 Mark Ahnrud Portfolio Manager 2010 Chris Devine Portfolio Manager Scott Hixon Portfolio Manager 2010 Christian Ulrich Portfolio Manager 2010 Scott Wolle Portfolio Manager 2010 Purchase and Sale of Fund Shares You cannot purchase or sell (redeem) shares of the Fund directly. Please contact the insurance company that issued your variable product for more information on the purchase and sale of Fund shares. For more information, see Other Information Purchase and Sale of Shares in this prospectus. Tax Information The Fund expects, based on its investment objective and strategies, that its distributions, if any, will consist of ordinary income, capital gains, or some combination of both. Because shares of the Fund must be purchased through variable products, such distributions will be exempt from current taxation if left to accumulate within the variable product. Payments to Insurance Companies If you purchase the Fund through an insurance company or other financial intermediary, the Fund and the Fund s distributor or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the insurance company or other intermediary and your salesperson or financial adviser to recommend the Fund over another investment. Ask your salesperson or financial adviser or visit your financial intermediary s Web site for more information. invesco.com/us VIIBRA-SUMPRO-2 84

89 SUMMARY PROSPECTUS April 30, 2011 MFS Total Return Series Service Class Before you invest, you may want to review the fund s prospectus, which contains more information about the fund and its risks. You can find the fund s prospectus and other information about the fund, including the fund s statement of additional information, online at insurancefunds.mfs.com. You can also get this information at no cost by calling or by sending an request to orderliterature@mfs.com. The fund s prospectus and statement of additional information, both dated April 30, 2011, as may be supplemented from time to time, are incorporated by reference into this Summary Prospectus. Summary of Key Information Investment Objective The fund s investment objective is to seek total return. Fees and Expenses This table describes the fees and expenses that you may pay when you hold shares of the fund. If the fees and expenses imposed by the investment vehicle through which an investment in the fund is made were included, your expenses would be higher. Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment): Management Fee 0.75% Distribution and/or Service (12b-1) Fees 0.25% Other Expenses 0.06% Total Annual Fund Operating Expenses 1.06% Fee Reductions and/or Expense Reimbursements 1 (0.04)% Total Annual Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements 1.02% CLASS Service Class TICKER SYMBOL N/A 1 Effective May 1, 2011, MFS has agreed in writing to reduce its management fee to 0.70% of the fund's average daily net assets annually in excess of $1 billion and 0.65% of the fund's average daily net assets annually in excess of $2.5 billion to $3 billion until modified by a vote of the fund's Board of Trustees, but such agreement will continue until at least April 30, VTR-SSUM Page 1 of 3 85

90 MFS Total Return Series Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. If the fees and expenses imposed by the investment vehicle through which an investment in the fund is made were included, your expenses would be higher. The example assumes that: you invest $10,000 in the fund for the time periods indicated and you redeem your shares at the end of the time periods; your investment has a 5% return each year; and the fund s operating expenses remain the same. Although your actual costs will likely be higher or lower, under these assumptions your costs would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Service Class Shares $104 $333 $581 $1,291 Portfolio Turnover The fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These transaction costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the fund s performance. During the most recent fiscal year, the fund s portfolio turnover rate was 30% of the average value of its portfolio. Principal Investment Strategies MFS (Massachusetts Financial Services Company, the fund's investment adviser) invests the fund s assets in equity securities and debt instruments. Equity securities include common stocks, preferred stocks, securities convertible into stocks, and depositary receipts for those securities. Debt instruments include corporate bonds, U.S. Government securities, collateralized instruments, municipal instruments, foreign government securities, inflationadjusted bonds, and other obligations to repay money borrowed. MFS seeks to invest between 40% and 75% of the fund s assets in equity securities and at least 25% of the fund s assets in fixedincome senior securities. MFS focuses on investing the fund's assets in the stocks of companies it believes are undervalued compared to their perceived worth (value companies). While MFS may invest the fund s assets in companies of any size, MFS generally focuses on companies with large capitalizations. MFS may invest the fund s assets in foreign securities. Of the fund s investments in debt instruments, MFS generally invests substantially all of these investments in investment grade debt instruments. While MFS may use derivatives for any investment purpose, to the extent MFS uses derivatives, MFS expects to use derivatives primarily to increase or decrease exposure to a particular market, segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives include futures, forward contracts, options, structured securities, inverse floating rate instruments, and swaps. MFS uses a bottom-up investment approach to buying and selling investments for the fund. Investments are selected primarily based on fundamental analysis of individual issuers and/or instruments in light of the issuer's current financial condition and market, economic, political, and regulatory conditions. Factors considered for equity securities may include analysis of an issuer's earnings, cash flows, competitive position, and management ability. Factors Page 2 of 3 86 considered for debt instruments may include the instrument s credit quality, collateral characteristics and indenture provisions and the issuer s management ability, capital structure, leverage, and ability to meet its current obligations. Quantitative models that systematically evaluate the valuation, price and earnings momentum, earnings quality, and other factors of the issuer of an equity security or the structure of a debt instrument may also be considered. Principal Risks As with any mutual fund, the fund may not achieve its objective and/or you could lose money on your investment in the fund. An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The principal risks of investing in the fund are: Stock Market/Company Risk: Stock markets are volatile and can decline significantly in response to issuer, market, economic, industry, political, regulatory, geopolitical, and other conditions, as well as to investor perceptions of these conditions. The price of an equity security can decrease significantly in response to these conditions, and these conditions can affect a single issuer or type of security, issuers within a broad market sector, industry or geographic region, or the market in general. Value Company Risk: The stocks of value companies can continue to be undervalued for long periods of time and not realize their expected value and can be more volatile than the market in general. Interest Rate Risk: The price of a debt instrument falls when interest rates rise and rises when interest rates fall. Instruments with longer maturities, or that do not pay current interest, are more sensitive to interest rate changes. Credit Risk: The price of a debt instrument depends, in part, on the credit quality of the issuer, borrower, counterparty, or underlying collateral and can decline in response to changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral, or changes in specific or general market, economic, industry, political, regulatory, geopolitical, or other conditions. Foreign Risk: Exposure to foreign markets through issuers or currencies can involve additional risks relating to market, economic, political, regulatory, geopolitical, or other conditions. These factors can make foreign investments, especially those in emerging markets, more volatile and less liquid than U.S. investments. In addition, foreign markets can react differently to these conditions than the U.S. market. Prepayment/Extension Risk: Instruments subject to prepayment and/or extension can reduce the potential for gain for the instrument s holders if the instrument is prepaid and increase the potential for loss if the maturity of the instrument is extended. Inflation-Adjusting Risk: Interest payments on inflation-adjusted debt instruments can be unpredictable and vary based on the level of inflation. If inflation is negative, principal and income can both decline. Municipal Risk: The price of a municipal instrument can be volatile and significantly affected by adverse tax or court rulings, legislative or political changes, changes in specific or general market and economic conditions, and the financial condition of municipal issuers and insurers. Because many municipal instruments are issued to finance similar projects, conditions in these industries can significantly affect the fund and the overall municipal market.

91 MFS Total Return Series Derivatives Risk: Derivatives can be highly volatile and involve risks in addition to the risks of the underlying indicator(s) on which the derivative is based. Gains or losses from derivatives can be substantially greater than the derivatives original cost. Derivatives can involve leverage. Leveraging Risk: Leverage involves investment exposure in an amount exceeding the initial investment. Leverage can cause increased volatility by magnifying gains or losses. Investment Selection Risk: The MFS analysis of an investment can be incorrect and can lead to an investment focus that results in the fund underperforming other funds with similar investment strategies and/or underperforming the markets in which the fund invests. Counterparty and Third Party Risk: Transactions involving a counterparty or third party other than the issuer of the instrument are subject to the credit risk of the counterparty or third party, and to the counterparty s or third party s ability to perform in accordance with the terms of the transaction. Liquidity Risk: It may not be possible to sell certain investments, types of investments, and/or segments of the market at any particular time or at an acceptable price. Performance Information The bar chart and performance table below are intended to provide some indication of the risks of investing in the fund by showing changes in the fund s performance over time. The performance table also shows how the fund's performance over time compares with that of a broad measure of market performance and one or more other performance measures. The fund s past performance does not necessarily indicate how the fund will perform in the future. Updated performance is available at mfs.com or by calling If the fees and expenses imposed by the investment vehicle through which an investment in the fund is made were included, they would reduce the returns shown. Service Class Bar Chart. GAIN or LOSS (%) (5.35) (22.32) CALENDAR YEAR The total return for the three-month period ended March 31, 2011 was 3.57%. During the period(s) shown in the bar chart, the highest quarterly return was 11.45% (for the calendar quarter ended June 30, 2009) and the lowest quarterly return was (12.01)% (for the calendar quarter ended December 31, 2008). Performance Table. Average Annual Total Returns (for the Periods Ended December 31, 2010) Share Class 1 YEAR 5 YEARS 10 YEARS Service Class Shares 9.63% 3.07% 3.82% Index Comparisons (Reflects no deduction for fees, expenses or taxes) Standard & Poor s 500 Stock Index 15.06% 2.29% 1.41% Barclays Capital U.S. Aggregate Bond Index 6.54% 5.80% 5.84% Total Return Blended Index 12.13% 4.08% 3.53% Standard & Poor s 500 Stock Index is a market capitalizationweighted index of 500 widely held equity securities designed to measure broad U.S. equity performance compared to i) Barclays Capital U.S. Aggregate Bond Index, a market capitalizationweighted index that measures the performance of the U.S. investment-grade, fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with at least one year to final maturity and ii) the Total Return Blended Index which is composed of 60% Standard & Poor s 500 Stock Index and 40% Barclays Capital U.S. Aggregate Bond Index. Investment Adviser serves as the investment adviser for the fund. Portfolio Manager(s) Portfolio Manager Since Title Brooks A. Taylor 2004 Investment Officer of MFS Nevin P. Chitkara 2006 Investment Officer of MFS William P. Douglas 2004 Investment Officer of MFS Steven R. Gorham 2002 Investment Officer of MFS Richard O. Hawkins 2005 Investment Officer of MFS Joshua P. Marston 2008 Investment Officer of MFS Taxes Because shares of the fund are offered to insurance company separate accounts, qualified retirement plans and pension plans, and other eligible investors, you should consult with the insurance company that issued your contract, plan sponsor, or other eligible investor through which your investment in the fund is made to understand the tax treatment of your investment. Payments to Financial Intermediaries If you purchase the fund through an insurance company, plan sponsor, broker-dealer, or other financial intermediary, the fund, MFS, and its affiliates may make payments to insurance companies, plan sponsors, other financial intermediaries, and all of their affiliates for distribution and/or other services. These payments may create a conflict of interest for the insurance company, plan sponsor, or other financial intermediary to include the fund as an investment option in their product or to recommend the fund over another investment option. Ask your financial intermediary, insurance company, or plan sponsor, or visit your financial intermediary's or insurance company's Web site, for more information. Page 3 of 3 87

92 (THIS PAGE INTENTIONALLY LEFT BLANK) 88

93 Share Class: Advisor Summary Prospectus April 29, 2011 PIMCO Global Multi-Asset Portfolio Before you invest, you may want to review the Portfolio s prospectus, which, as supplemented, contains more information about the Portfolio and its risks. You can find the Portfolio s prospectus and other information about the Portfolio online at You can also get this information at no cost by calling or by sending an request to Orders@MySummaryProspectus.com. The Portfolio s prospectus and Statement of Additional Information, both dated April 29, 2011, as supplemented, along with the financial statements included in the Portfolio s most recent annual report to shareholders dated December 31, 2010, are incorporated by reference into this Summary Prospectus. INVESTMENT OBJECTIVE The Portfolio seeks total return which exceeds that of a blend of 60% MSCI World Index/40% Barclays Capital U.S. Aggregate Index. FEES AND EXPENSES OF THE PORTFOLIO This table describes the fees and expenses that you may pay if you buy and hold Advisor Class shares of the Portfolio. Overall fees and expenses of investing in the Portfolio are higher than shown because the table does not reflect variable contract fees and expenses. Shareholder Fees (fees paid directly from your investment): None Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Advisor Class Management Fees 0.95% Distribution and/or Service (12b-1) Fees 0.25% Acquired Fund Fees and Expenses (1) 0.54% Total Annual Portfolio Operating Expenses (2)(3) 1.74% Expense Reimbursement (4)(5) (0.44%) Total Annual Portfolio Operating Expenses After Expense Reimbursement (6) 1.30% (1) Acquired Fund Fees and Expenses include interest expense of 0.01%. Interest expense is based on the amount incurred during an Underlying PIMCO Fund s most recent fiscal year as a result of entering into certain investments, such as reverse repurchase agreements. Interest expense is required to be treated as an expense of the Underlying PIMCO Fund for accounting purposes and is not payable to PIMCO. The amount of interest expense (if any) will vary based on the Underlying PIMCO Fund s use of such investments as an investment strategy. (2) Total Annual Portfolio Operating Expenses do not match the Ratio of Expenses to Average Net Assets of the Portfolio as set forth in the Financial Highlights table of the prospectus, because the Ratio of Expenses to Average Net Assets reflects the operating expenses of the Portfolio and does not include Acquired Fund Fees and Expenses. (3) Total Annual Portfolio Operating Expenses excluding interest expense of the Underlying PIMCO Funds is 1.73% for the Advisor Class shares. (4) PIMCO has contractually agreed, through May 1, 2012, to waive, first, the supervisory and administrative fee and, to the extent necessary, the advisory fee it receives from the Portfolio in an amount equal to the expenses attributable to advisory and supervisory and administrative fees of Underlying PIMCO Funds indirectly incurred by the Portfolio in connection with its investments in Underlying PIMCO Funds, to the extent the supervisory and administrative fee and the supervisory and administrative fee and advisory fee taken together are greater than or equal to the advisory fees and supervisory and administrative fees of the Underlying PIMCO Funds. This waiver renews annually for a full year unless terminated by PIMCO upon at least 30 days notice prior to the end of the contract term. (5) PIMCO has contractually agreed to waive the Portfolio s advisory fee and the supervisory and administrative fee in an amount equal to the management fee and administrative services fee, respectively, paid by the PIMCO Cayman Commodity Portfolio II Ltd. (the GMA Subsidiary ) to PIMCO. The GMA Subsidiary pays PIMCO a management fee and an administrative services fee at the annual rates of 0.49% and 0.20%, respectively, of its net assets. This waiver may not be terminated by PIMCO and will remain in effect for as long as PIMCO s contract with the GMA Subsidiary is in place. (6) Total Annual Portfolio Operating Expenses After Expense Reimbursement excluding interest expense of the Underlying PIMCO Funds is 1.29% for the Advisor Class shares. Example. The Example is intended to help you compare the cost of investing in Advisor Class shares of the Portfolio with the costs of investing in other mutual funds. The Example assumes that you invest $10,000 for the time periods indicated, and then redeem all your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, the Example shows what your costs would be based on these assumptions. The Example does not reflect fees and expenses of any variable annuity contract or variable life insurance policy, and would be higher if it did. 1 Year 3 Years 5 Years 10 Years Advisor Class $132 $505 $903 $2,015 PORTFOLIO TURNOVER The Portfolio pays transaction costs when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in the Annual Portfolio Operating Expenses or in the Example tables, affect the Portfolio s performance. During the most recent fiscal year, the Portfolio s portfolio turnover rate was 71% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Portfolio is intended for investors who prefer to have their asset allocation decisions made by professional investment managers. Pacific Investment Management Company LLC ( PIMCO ) uses a three-step approach in seeking to achieve the Portfolio s investment objective which consists of: 1) developing a target asset allocation; 2) developing a series of relative value strategies designed to add value beyond the target allocation; and 3) utilizing tail risk hedging techniques to 89

94 PIMCO Global Multi-Asset Portfolio manage risks. PIMCO evaluates these three steps daily and uses varying combinations of Acquired Funds and/or direct investments to implement them within the Portfolio. The funds of the PIMCO Funds and PIMCO Equity Series, affiliated open-end investment companies, except for certain fund of funds such as the PIMCO All Asset, PIMCO All Asset All Authority, PIMCO Global Multi- Asset and PIMCO RealRetirement Funds ( Underlying PIMCO Funds ) and other affiliated, including PIMCO ETF Trust, and unaffiliated funds in which the Portfolio may invest are collectively referred to as Acquired Funds in this prospectus. The Portfolio invests under normal circumstances in a combination of affiliated and unaffiliated funds, which may or may not be registered under the 1940 Act, Fixed Income Instruments, equity securities, forwards and derivatives. Fixed Income Instruments include bonds, debt securities and other similar instruments issued by various U.S. and non-u.s. public- or private-sector entities. The Portfolio will invest in such funds, securities, instruments and other investments to the extent permitted under the Investment Company Act of 1940 (the 1940 Act ), or any exemptive relief therefrom. The Portfolio may invest, without limitation, in any of the Underlying PIMCO Funds (except the PIMCO CommodityRealReturn Strategy Fund ). The Portfolio will invest either directly or indirectly (through a fund) in instruments that are economically tied to at least three countries (one of which may be the United States). The Portfolio seeks concurrent exposure to a broad spectrum of asset classes and other investments. The Portfolio will typically invest 20% to 80% of its total assets in equity-related investments (including investment in common stock, preferred stock, equity securities of real estate investment trusts and/or investment in the Domestic Equity-Related Underlying PIMCO Funds, the International Equity-Related Underlying PIMCO Funds and the PIMCO RealEstate RealReturn Strategy Fund, an Underlying PIMCO Fund and in other equity-related Acquired Funds). With respect to its direct or indirect (through a fund) investments in equity securities, there is no limitation on the market capitalization range of the issuers in which the Portfolio may invest. The Portfolio may invest up to 25% of its total assets in commodity-related investments (including investment in the PIMCO Cayman Commodity Portfolio II Ltd., a wholly-owned subsidiary of the Portfolio organized under the laws of the Cayman Islands (the GMA Subsidiary ), and the PIMCO CommodityRealReturn Strategy Fund, an Underlying PIMCO Fund). The GMA Subsidiary is advised by PIMCO and primarily invests in commodity-linked derivative instruments backed by a portfolio of inflation-indexed securities and other Fixed Income Instruments. As discussed in greater detail elsewhere in this prospectus, the GMA Subsidiary (unlike the Portfolio) may invest without limitation in commoditylinked swap agreements and other commodity-linked derivative instruments. The Portfolio may invest up to 25% of its total assets in the GMA Subsidiary. The Portfolio may invest, without limitation, in securities denominated in foreign currencies and in U.S. dollardenominated securities of foreign issuers. The Portfolio may invest, without limitation, in high yield securities ( junk bonds ). The Portfolio may invest, without limitation, in securities and instruments that are economically tied to emerging market countries. The Portfolio may purchase and sell securities on a when-issued, delayed delivery or forward commitment basis and may engage in short sales. The Portfolio is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund. The Portfolio s assets are not allocated according to a predetermined blend of shares of the Acquired Funds and/or direct investments in securities, instruments and other investments. Instead, when making allocation decisions among the Acquired Funds, securities, instruments and other investments, PIMCO considers various qualitative and quantitative factors relating to the U.S. and non-u.s. economies, and securities and commodities markets. These factors include projectedgrowthtrendsintheu.s.andnon-u.s.economies,forecasts for interest rates and the relationship between short- and long-term interest rates (yield curve), current and projected trends in inflation, relative valuation levels in the equity, fixed income, commodity and real estate markets and various segments within those markets, the outlook and projected growth of various industrial sectors, information relating to business cycles, borrowing needs and the cost of capital, political trends data relating to trade balances, and labor information. PIMCO uses these factors to help determine the Portfolio s target asset allocation and to identify potentially attractive relative value and risk hedging strategies. PIMCO has the flexibility to reallocate the Portfolio s assets among any or all of the investment exposures represented by affiliated or unaffiliated funds, or invest directly in securities, instruments and other investments, based on its ongoing analyses of the global economy and financial markets. While these analyses are performed daily, material shifts in investment exposures typically take place over longer periods of time. As part of its investment process, PIMCO will seek to reduce exposure to certain risks by implementing various hedging transactions. These hedging transactions seek to reduce the Portfolio s exposure to certain severe, unanticipated market events that could significantly detract from returns. Once the target asset allocation, relative value strategies and risk hedging strategies have been determined, PIMCO then evaluates various combinations of affiliated or unaffiliated funds, securities, instruments andotherinvestmentstoobtainthedesiredexposuresandinvests accordingly. Additional information for these Underlying PIMCO Funds can be found in the Statement of Additional Information and the Underlying PIMCO Funds prospectuses and financial reports. Additional Underlying PIMCO Funds may be added or deleted in the future without shareholder notification. PRINCIPAL RISKS It is possible to lose money on an investment in the Portfolio. The principal risks of investing in the Portfolio, which could adversely affect its net asset value, yield and total return are: Allocation Risk: the risk that a Portfolio could lose money as a result of less than optimal or poor asset allocation decisions as to how its assets are allocated or reallocated Acquired Fund Risk: the risk that a Portfolio s performance is closely related to the risks associated with the securities and other investments held by the Acquired Funds and that the ability of a Portfolio to achieve its investment objective will depend upon the ability of the Acquired Funds to achieve their investment objectives Interest Rate Risk: the risk that fixed income securities will decline in value because of an increase in interest rates; a fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration Credit Risk: the risk that the Portfolio could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivative contract, is unable or unwilling to meet its financial obligations 90

95 Summary Prospectus High Yield Risk: the risk that high yield securities and unrated securities of similar credit quality (commonly known as junk bonds ) are subject to greater levels of credit and liquidity risks. High yield securities are considered primarily speculative with respect to the issuer s continuing ability to make principal and interest payments Distressed Company Risk: the risk that securities of distressed companies may be subject to greater levels of credit, issuer and liquidity risk than a portfolio that does not invest in such securities. Securities of distressed companies include both debt and equity securities. Debt securities of distressed companies are considered predominantly speculative with respect to the issuers continuing ability to make principal and interest payments Market Risk: the risk that the value of securities owned by the Portfolio may go up or down, sometimes rapidly or unpredictably, due to factors affecting securities markets generally or particular industries Issuer Risk: the risk that the value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer s goods or service Liquidity Risk: the risk that a particular investment may be difficult to purchase or sell and that the Portfolio may be unable to sell illiquid securities at an advantageous time or price or achieve its desired level of exposure to a certain sector Derivatives Risk: the risk of investing in derivative instruments, including liquidity, market, credit and management risks, mispricing or improper valuation. Changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index, and the Portfolio could lose more than the principal amount invested Commodity Risk: the risk that investing in commodity-linked derivative instruments may subject the Portfolio to greater volatility than investments in traditional securities. The value of commoditylinked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments Equity Risk: the risk that the value of equity or equity-related securities may decline due to general market conditions which are not specifically related to a particular company or to factors affecting a particular industry or industries. Equity or equity-related securities generally have greater price volatility than fixed income securities Mortgage-Related and Other Asset-Backed Risk: the risks of investing in mortgage-related and other asset-backed securities, including interest rate risk, extension risk and prepayment risk Foreign (non-u.s.) Investment Risk: the risk that investing in foreign (non-u.s.) securities may result in the Portfolio experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies, due to smaller markets, differing reporting, accounting and auditing standards, and nationalization, expropriation or confiscatory taxation, currency blockage, or political changes or diplomatic developments. Foreign securities may also be less liquid and more difficult to value than securities of U.S. issuers Real Estate Risk: the risk that a Portfolio s investments in Real Estate Investment Trusts ( REITs ) or real estate-linked derivative instruments will subject the Portfolio to risks similar to those associated with direct ownership of real estate, including losses from casualty or condemnation, and changes in local and general economic conditions, supply and demand, interest rates, zoning laws, regulatory limitations on rents, property taxes and operating expenses. A Portfolio s investments in REITs or real estate-linked derivative instruments subject it to management and tax risks Emerging Markets Risk: the risk of investing in emerging market securities, primarily increased foreign (non-u.s.) investment risk Currency Risk: the risk that foreign currencies will decline in value relative to the U.S. dollar and affect the Portfolio s investments in foreign (non-u.s.) currencies or in securities that trade in, and receive revenues in, or in derivatives that provide exposure to, foreign (non-u.s.) currencies Issuer Non-Diversification Risk: the risks of focusing investments in a small number of issuers, including being more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. Portfolios that are nondiversified may invest a greater percentage of their assets in the securities of a single issuer (such as bonds issued by a particular state) than funds that are diversified Leveraging Risk: the risk that certain transactions of the Portfolio, such as reverse repurchase agreements, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions, or derivative instruments, may give rise to leverage, causing the Portfolio to be more volatile than if it had not been leveraged Smaller Company Risk: the risk that the value of securities issued by a smaller company may go up or down, sometimes rapidly and unpredictably as compared to more widely held securities, due to narrow markets and limited resources of smaller companies. A Portfolio s investments in smaller companies subject it to greater levels of credit, market and issuer risk Management Risk: the risk that the investment techniques and risk analyses applied by PIMCO will not produce the desired results and that legislative, regulatory, or tax developments may affect the investment techniques available to PIMCO and the individual portfolio managers in connection with managing the Portfolio. There is no guarantee that the investment objective of the Portfolio will be achieved Tax Risk: the risk that the tax treatment of swap agreements and other derivative instruments, such as commodity-linked derivative instruments, including commodity index-linked notes, swap agreements, commodity options, futures, and options on futures, may be affected by future regulatory or legislative changes that could affect the character, timing and/or amount of the Portfolio s taxable income or gains and distributions Subsidiary Risk: the risk that, by investing in the GMA Subsidiary, the Portfolio is indirectly exposed to the risks associated with the GMA Subsidiary s investments. There is no guarantee that the investment objective of the GMA Subsidiary will be achieved Short Sale Risk: the risk of entering into short sales, including the potential loss of more money than the actual cost of the investment, and the risk that the third party to the short sale may fail to honor its contract terms, causing a loss to the Portfolio Value Investing Risk: a value stock may decrease in price or may not increase in price as anticipated by PIMCO if it continues to be undervalued by the market or the factors that the portfolio manager believes will cause the stock price to increase do not occur 91

96 PIMCO Global Multi-Asset Portfolio Arbitrage Risk: the risk that securities purchased pursuant to an arbitrage strategy intended to take advantage of a perceived relationship between the value of two securities may not perform as expected Convertible Securities Risk: as convertible securities share both fixed income and equity characteristics, they are subject to risks to which fixed income and equity investments are subject. These risks include equity risk, interest rate risk and credit risk Please see Description of Principal Risks in the Portfolio s prospectus for a more detailed description of the risks of investing in the Portfolio. An investment in the Portfolio is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Calendar Year Total Returns Advisor Class* 15% 11.34% 10% 5% 0% PERFORMANCE INFORMATION The performance information below shows summary performance information for the Portfolio in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Portfolio by showing changes in its performance from year to year and by showing how the Portfolio s average annual returns compare with the returns of a broad-based securities market index. The Portfolio s performance information reflects applicable fee waivers and/or expense limitations in effect during the periods presented. Absent such fee waivers and/or expense limitations, if any, performance would have been lower. Performance shown does not reflect any charges or expenses imposed by an insurance company and if it did, performance shown would be lower. The bar chart shows performance of the Portfolio s Advisor Class shares. The Portfolio s past performance is not necessarily an indication of how the Portfolio will perform in the future. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of May 27, 2010 the MSCI World Index consisted of the following 24 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,Greece,HongKong,Ireland,Israel,Italy,Japan,Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The index represents the unhedged performance of the constituent stocks, in US dollars. The 60% MSCI World Index/40% Barclays Capital U.S. Aggregate Index, the secondary benchmark, is a free-float market capitalization weighted index that is designed to measure the equity market performance of developed markets. The Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and assetbacked securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. The Advisor Class Shares commenced operations on 4/15/09. Index comparisons began on 4/30/09. Performance for the Portfolio is updated monthly and may be obtained at -5% 10 * For the periods shown in the bar chart, the highest quarterly return was 9.91% in the 3rd quarter of 2010, and the lowest quarterly return was -4.55% in the 2nd quarter of Since Average Annual Total Returns (for periods ended 12/31/10) 1 Year Inception (04/15/09) Advisor Class Return Before Taxes 11.34% 17.92% MSCI World Index (reflects no deductions for fees, expenses or taxes) 11.76% 26.60% 60% MSCI World Index/40% Barclays Capital U.S. Aggregate Index (reflects no deductions for fees, expenses or taxes) 10.23% 18.92% INVESTMENT ADVISER/PORTFOLIO MANAGER Dr. El-Erian Mr. Mewbourne Dr. Bhansali PIMCOservesasthe investment adviser for the Portfolio. The Portfolio s portfolio is jointly managed by Mohamed El-Erian, Vineer Bhansali and Curtis Mewbourne. Dr. El-Erian is the Chief Executive Officer and a Co-Chief Investment Officer of PIMCO. Dr. Bhansali and Mr. Mewbourne are Managing Directors of PIMCO. Dr. El-Erian, Mr. Mewbourne and Dr. Bhansali have managed the Portfolio since April Dr. El-Erian has overall responsibility for managing the Portfolio. Mr. Mewbourne is responsible for tactical allocations, and Dr. Bhansali is responsible for risk management. PURCHASE AND SALE OF PORTFOLIO SHARES Shares of the Portfolio currently are sold to segregated asset accounts ( Separate Accounts ) of insurance companies that fund variable annuity contracts and variable life insurance policies ( Variable Contracts ). Investors do not deal directly with the Portfolio to purchase and redeem shares. Please refer to the prospectus for the Separate Account for information on the allocation of premiums and on transfers of accumulated value among sub-accounts of the Separate Account. 92

97 Summary Prospectus TAX INFORMATION The shareholders of the Portfolio are the insurance companies offering the variable products. Please refer to the prospectus for the Separate Account and the Variable Contract for information regarding the federal income tax treatment of distributions to the Separate Account. PAYMENTS TO INSURANCE COMPANIES AND OTHER FINANCIAL INTERMEDIARIES The Portfolio and/or its related companies (including PIMCO) may pay the insurance company and other intermediaries for the sale of the Portfolio and/or other services. These payments may create a conflict of interest by influencing the insurance company or intermediary and your salesperson to recommend a Variable Contract and the Portfolio over another investment. Ask your insurance company or salesperson or visit your financial intermediary s Web site for more information. 93