BlackRock High Yield

Objective And Strategy

Objective
Maximize total return consistent with income generation and prudent investment management.

Strategy
The fund typically invests more than 90% of assets in a diversified portfolio of fixed-income securities. It normally invests at least 80% of assets in bonds that are rated in the lower rating categories. The fund invests in fixed-income securities of any duration or maturity. It invests most of its assets in securities issued by U.S. issuers, but may also invest a portion of its assets in securities issued by foreign issuers.
Tax Inefficient Fund

Principal Risks

* This portfolio invests in securities of foreign issuers which involves risks not typically associated with domestic issuers, including currency fluctuations and the possibility of political and economic instability. Emerging markets involve risks in addition to those generally associated with foreign securities, because political and economic structures in many emerging markets may be undergoing significant evolution and rapid development.

* This portfolio can leverage or use leveraged instruments or derivatives. Portfolios that use leverage, that is, borrow money, are subject to the risk that the cost of borrowing money to leverage will exceed the returns for the securities purchased or that the securities purchased may actually go down in value. Thus, the portfolio's net asset value can decrease more quickly than if the portfolio had not borrowed. Portfolios that use leveraged instruments or derivatives such as futures, options and swap agreements, may expose the portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The more a portfolio invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.

* Certain portfolios are subject to active trading risk. (Some may derive a significant portion of their assets from investors who take part in certain strategic and tactical asset allocation programs). The frequent exchange of shares of the portfolio may cause the portfolio to experience high turnover. High portfolio turnover may result in the portfolio having to pay higher transaction costs and may negatively impact the portfolio manager's ability to achieve the investment objective of the portfolio.

* The Fund could lose money if the issuer of a debt security is unable to meet its financial obligations or goes bankrupt. This fund may invest in securities rated below investment grade or "junk bonds." Junk bonds may be sensitive to economic changes, political changes, or adverse developments specific to a company.

* The value of your investment in a Fund is based on the net asset value ("NAV") of the underlying funds and, in turn, the securities that the underlying funds hold. The Funds are subject to the risk that one or more underlying funds will not perform as expected or will underperform other similar funds or that the combination of underlying funds selected by the Funds' investment will not perform as expected. The Funds will be exposed to all of the risk of an investment in the underlying Funds.

* Fixed income securities are subject to interest rate risk because the prices of fixed income securities tend to move in the opposite direction of interest rates. When interest rates rise, fixed income security prices fall. When interest rates fall, fixed income security prices rise.

* Credit risk is the risk that the issuer of a security may be unable to make interest payments and/or repay principal when due. A downgrade to an issuer's credit rating or a perceived change in an issuer's financial strength may affect a security's value, and thus, impact the VA Short-Term Fixed Portfolio's performance.

* During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the portfolio to reinvest in lower yielding securities.

* Generally, a security is liquid if the Portfolio is able to sell the security at a fair price within a reasonable time. Liquidity is generally related to the market trading volume for a particular security.

* Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value.

* The risk that a preferred stock will decline in price, or fail to pay dividends when expected, because the issuer experiences a decline in its financial status, or that such stock may be illiquid.

* The market for bank loans may not be highly liquid and the Fund may have difficulty selling them. These investments expose the Fund to the credit risk of both the financial institution and the underlying borrower.

* The pool of high yield securities underlying collateralized bond obligations is typically separated in grouping called tranches representing different degrees of credit quality. The higher quality tranches have greater degrees of protection and pay lower interest rates. The lower tranches, with greater risk, pay higher interest rates.

* Distressed securities are speculative and involve substantial risks in addition to the risks of investing in junk bonds.