XML 10 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Label Element Value
Risk/Return: rr_RiskReturnAbstract  
Registrant Name dei_EntityRegistrantName BLACKROCK FUNDS
Prospectus Date rr_ProspectusDate Nov. 28, 2016
Supplement [Text Block] bf12_SupplementTextBlock

BLACKROCK FUNDSSM

BlackRock Emerging Markets Long/Short Equity Fund

(the “Fund”)

Supplement dated March 28, 2017 to the Summary Prospectus, the

Prospectus and the Statement of Additional Information of the Fund, each dated November 28, 2016

On March 23, 2017, the Board of Trustees (the “Board”) of BlackRock FundsSM approved certain changes to the Fund. In particular, the Board approved a change in the name of the Fund to “BlackRock Advantage Emerging Markets Fund” and certain changes to the Fund’s investment objective, investment strategies and investment process. The Fund will no longer offer investors long and short exposure to emerging markets equity instruments in a manner that seeks to produce returns that are uncorrelated to those obtained by investing in the market as a whole. In addition, Fund management has determined to make certain changes to the Fund’s portfolio management team and the benchmark index against which the Fund compares its performance. These changes are expected to become effective on or about June 12, 2017.

In addition, effective on or about June 12, 2017, the Board approved a reduction in the existing contractual expense caps for the Fund’s Investor A, Investor C and Institutional Shares. To achieve these expense caps, BlackRock Advisors, LLC (“BlackRock”), the Fund’s investment adviser, has agreed to waive and/or reimburse fees or expenses if the Fund’s annual fund operating expenses, excluding certain expenses described in the prospectus, exceed a certain limit for the Fund’s Investor A, Investor C and Institutional Shares. BlackRock may recoup some of the waivers and reimbursements to the Fund in the following two fiscal years.

Accordingly, effective on or about June 12, 2017, the following changes are made to the Fund’s Summary Prospectus and Prospectus, as applicable:

Change in the Fund’s Name

BlackRock Emerging Markets Long/Short Equity Fund is renamed BlackRock Advantage Emerging Markets Fund.

Change in the Fund’s Investment Objective

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Investment Objective” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Investment Objective,” as applicable, is deleted in its entirety and replaced with the following:

The investment objective of BlackRock Advantage Emerging Markets Fund (the “Fund”), a series of BlackRock FundsSM (the “Trust”), is to seek long-term capital appreciation.

Change in the Fund’s Benchmark Index

Effective on or about June 12, 2017, the Fund is replacing the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index as a performance benchmark against which the Fund measures its performance with the MSCI Emerging Markets Index.

Change in the Fund’s Contractual Expense Caps

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Fees and Expenses of the Fund” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Fees and Expenses of the Fund,” as applicable, is deleted in its entirety and replaced with the following:

Fees and Expenses of the Fund

 

 

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $25,000 in the fund complex advised by BlackRock Advisors, LLC (“BlackRock”) and its affiliates. More information about these and other discounts is available from your financial professional or your selected securities dealer, broker, investment adviser, service provider or industry professional (including BlackRock, The PNC Financial Services Group, Inc. and their respective affiliates) (each a “Financial Intermediary”) and in the “Details About the Share Classes” section on page 22 of the Fund’s prospectus and in the “Purchase of Shares” section on page II-68 of Part II of the Fund’s Statement of Additional Information.

 

Shareholder Fees
(fees paid directly from your investment)		    Investor A
Shares		     Investor C
Shares		     Institutional
Shares		  
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)		      5.25%       None       None  
Maximum Deferred Sales Charge (Load) (as a percentage of offering price or redemption proceeds, whichever is lower)      None1       1.00%2       None  
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of
your investment)		    Investor A
Shares		     Investor C
Shares		     Institutional
Shares		  
Management Fee3
      1.50%       1.50%       1.50%  
Distribution and/or Service (12b-1) Fees
      0.25%       1.00%       None  
Other Expenses
      0.35%       0.35%       0.35%  
Acquired Fund Fees and Expenses4
      0.18%       0.18%       0.18%  
Total Annual Fund Operating Expenses
      2.28%       3.03%       2.03%  
Fee Waivers and/or Expense Reimbursements3,5
      (0.91)%       (0.91)%       (0.91)%  
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements3,5      1.37%       2.12%       1.12%  

 

1  A contingent deferred sales charge (“CDSC”) of 1.00% is assessed on certain redemptions of Investor A Shares made within 18 months after purchase where no initial sales charge was paid at time of purchase as part of an investment of $1,000,000 or more.

 

2  There is no CDSC on Investor C Shares after one year.

 

3  As described in the “Management of the Fund” section of the Fund’s prospectus beginning on page 36, BlackRock has contractually agreed to waive the management fee with respect to any portion of the Fund’s assets estimated to be attributable to investments in other equity and fixed income mutual funds and exchange-traded funds managed by BlackRock or its affiliates that have a contractual management fee, through November 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Fund.

 

4  The Total Annual Fund Operating Expenses do not correlate to the ratios of expenses to average net assets given in the Fund’s most recent annual report, which do not include Acquired Fund Fees and Expenses.

 

5 
As described in the “Management of the Fund” section of the Fund’s prospectus beginning on page 36, BlackRock has contractually agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements (excluding Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Fund expenses) as a percentage of average daily net assets to 1.19% (for Investor A Shares), 1.94% (for Investor C Shares), and 0.94% (for Institutional Shares) through November 30, 2018. The Fund may have to repay some of these waivers and/or reimbursements to BlackRock in the following two years. The contractual agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Fund.

Example:

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other 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. 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  
Investor A Shares
    $ 657      $ 1,117      $ 1,603      $ 2,936  
Investor C Shares
    $ 315      $ 851      $ 1,512      $ 3,282  
Institutional Shares
    $ 114      $ 549      $ 1,009      $ 2,286  

You would pay the following expenses if you did not redeem your shares:

 

      1 Year      3 Years      5 Years      10 Years  
Investor C Shares
    $ 215      $ 851      $ 1,512      $ 3,282  

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 and may result in higher taxes when shares are held in a taxable account. 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 0% of the average value of its portfolio.

Changes in the Fund’s Investment Strategy and Investment Process

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Investment Strategies of the Fund,” “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Investment Strategies of the Fund” or “Details About the Fund — How the Fund Invests — Principal Investment Strategies,” as applicable, is deleted in its entirety and replaced with the following:

Under normal circumstances, the Fund seeks to invest at least 80% of its net assets plus the amount of any borrowings for investment purposes in equity securities issued by, or tied economically to, companies in emerging markets and derivatives that have similar economic characteristics to such securities. BlackRock considers an emerging market country to include any country that is: (1) generally recognized to be an emerging market country by the international financial community, including the World Bank; (2) classified by the United Nations as a developing country; or (3) included in the MSCI Emerging Markets IndexSM (the “MSCI EM Index”). BlackRock determines that an investment is tied economically to an emerging market if such investment satisfies one or more of the following conditions: (1) the issuer’s primary trading market is in an emerging market; (2) the issuer is organized under the laws of, derives at least 50% of its revenue from, or has at least 50% of its assets in emerging markets; (3) the investment is included in an index representative of emerging markets; and (4) the investment is exposed to the economic risks and returns of emerging markets. The Fund primarily intends to invest in equity securities or other financial instruments that are components of, or have characteristics similar to, the securities included in the MSCI EM Index. The MSCI EM Index is a capitalization-weighted index from a broad range of industries chosen for market size, liquidity and industry group representation. The Fund primarily seeks to buy common stock and may also invest in preferred stock and convertible securities. From time to time, the Fund may invest in shares of companies through “new issues” or initial public offerings (“IPOs”). The Fund may use derivatives, including options, futures, swaps, forward contracts and contracts for difference, 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. In order to manage cash flows into or out of the Fund effectively, the Fund may buy and sell financial futures contracts or options on such contracts. Derivatives are financial instruments whose value is derived from another security, a currency or an index, including but not limited to the MSCI EM Index. The use of options, futures, swaps, forward contracts and contracts for difference can be effective in protecting or enhancing the value of the Fund’s assets.

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund,” as applicable, is revised as follows:

The paragraphs entitled “Derivatives Risk — Risks Specific to Certain Derivatives Used by the Fund” are deleted in their entirety.

The paragraph entitled “Short Sales Risk” is deleted in its entirety.

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund,” as applicable, is amended to add the following:

 

•   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 factors 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.

 

•   “New Issues” Risk — “New issues” are IPOs of equity securities. Securities issued in IPOs have no trading history, and information about the companies may be available for very limited periods. In addition, the prices of securities sold in IPOs may be highly volatile or may decline shortly after the IPO.

 

•   Preferred Securities Risk — Preferred securities may pay fixed or adjustable rates of return. Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. In addition, a company’s preferred securities generally pay dividends only after the company makes required payments to holders of its bonds and other debt. For this reason, the value of preferred securities will usually react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Preferred securities of smaller companies may be more vulnerable to adverse developments than preferred stock of larger companies.
BlackRock Emerging Markets Long/Short Equity Fund  
Risk/Return: rr_RiskReturnAbstract  
Supplement [Text Block] bf12_SupplementTextBlock

BLACKROCK FUNDSSM

BlackRock Emerging Markets Long/Short Equity Fund

(the “Fund”)

Supplement dated March 28, 2017 to the Summary Prospectus, the

Prospectus and the Statement of Additional Information of the Fund, each dated November 28, 2016

On March 23, 2017, the Board of Trustees (the “Board”) of BlackRock FundsSM approved certain changes to the Fund. In particular, the Board approved a change in the name of the Fund to “BlackRock Advantage Emerging Markets Fund” and certain changes to the Fund’s investment objective, investment strategies and investment process. The Fund will no longer offer investors long and short exposure to emerging markets equity instruments in a manner that seeks to produce returns that are uncorrelated to those obtained by investing in the market as a whole. In addition, Fund management has determined to make certain changes to the Fund’s portfolio management team and the benchmark index against which the Fund compares its performance. These changes are expected to become effective on or about June 12, 2017.

In addition, effective on or about June 12, 2017, the Board approved a reduction in the existing contractual expense caps for the Fund’s Investor A, Investor C and Institutional Shares. To achieve these expense caps, BlackRock Advisors, LLC (“BlackRock”), the Fund’s investment adviser, has agreed to waive and/or reimburse fees or expenses if the Fund’s annual fund operating expenses, excluding certain expenses described in the prospectus, exceed a certain limit for the Fund’s Investor A, Investor C and Institutional Shares. BlackRock may recoup some of the waivers and reimbursements to the Fund in the following two fiscal years.

Accordingly, effective on or about June 12, 2017, the following changes are made to the Fund’s Summary Prospectus and Prospectus, as applicable:

Change in the Fund’s Name

BlackRock Emerging Markets Long/Short Equity Fund is renamed BlackRock Advantage Emerging Markets Fund.

Change in the Fund’s Investment Objective

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Investment Objective” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Investment Objective,” as applicable, is deleted in its entirety and replaced with the following:

The investment objective of BlackRock Advantage Emerging Markets Fund (the “Fund”), a series of BlackRock FundsSM (the “Trust”), is to seek long-term capital appreciation.

Change in the Fund’s Benchmark Index

Effective on or about June 12, 2017, the Fund is replacing the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index as a performance benchmark against which the Fund measures its performance with the MSCI Emerging Markets Index.

Change in the Fund’s Contractual Expense Caps

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Fees and Expenses of the Fund” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Fees and Expenses of the Fund,” as applicable, is deleted in its entirety and replaced with the following:

Fees and Expenses of the Fund

 

 

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $25,000 in the fund complex advised by BlackRock Advisors, LLC (“BlackRock”) and its affiliates. More information about these and other discounts is available from your financial professional or your selected securities dealer, broker, investment adviser, service provider or industry professional (including BlackRock, The PNC Financial Services Group, Inc. and their respective affiliates) (each a “Financial Intermediary”) and in the “Details About the Share Classes” section on page 22 of the Fund’s prospectus and in the “Purchase of Shares” section on page II-68 of Part II of the Fund’s Statement of Additional Information.

 

Shareholder Fees
(fees paid directly from your investment)		    Investor A
Shares		     Investor C
Shares		     Institutional
Shares		  
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)		      5.25%       None       None  
Maximum Deferred Sales Charge (Load) (as a percentage of offering price or redemption proceeds, whichever is lower)      None1       1.00%2       None  
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of
your investment)		    Investor A
Shares		     Investor C
Shares		     Institutional
Shares		  
Management Fee3
      1.50%       1.50%       1.50%  
Distribution and/or Service (12b-1) Fees
      0.25%       1.00%       None  
Other Expenses
      0.35%       0.35%       0.35%  
Acquired Fund Fees and Expenses4
      0.18%       0.18%       0.18%  
Total Annual Fund Operating Expenses
      2.28%       3.03%       2.03%  
Fee Waivers and/or Expense Reimbursements3,5
      (0.91)%       (0.91)%       (0.91)%  
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements3,5      1.37%       2.12%       1.12%  

 

1  A contingent deferred sales charge (“CDSC”) of 1.00% is assessed on certain redemptions of Investor A Shares made within 18 months after purchase where no initial sales charge was paid at time of purchase as part of an investment of $1,000,000 or more.

 

2  There is no CDSC on Investor C Shares after one year.

 

3  As described in the “Management of the Fund” section of the Fund’s prospectus beginning on page 36, BlackRock has contractually agreed to waive the management fee with respect to any portion of the Fund’s assets estimated to be attributable to investments in other equity and fixed income mutual funds and exchange-traded funds managed by BlackRock or its affiliates that have a contractual management fee, through November 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Fund.

 

4  The Total Annual Fund Operating Expenses do not correlate to the ratios of expenses to average net assets given in the Fund’s most recent annual report, which do not include Acquired Fund Fees and Expenses.

 

5 
As described in the “Management of the Fund” section of the Fund’s prospectus beginning on page 36, BlackRock has contractually agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements (excluding Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and certain other Fund expenses) as a percentage of average daily net assets to 1.19% (for Investor A Shares), 1.94% (for Investor C Shares), and 0.94% (for Institutional Shares) through November 30, 2018. The Fund may have to repay some of these waivers and/or reimbursements to BlackRock in the following two years. The contractual agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Fund.

Example:

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other 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. 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  
Investor A Shares
    $ 657      $ 1,117      $ 1,603      $ 2,936  
Investor C Shares
    $ 315      $ 851      $ 1,512      $ 3,282  
Institutional Shares
    $ 114      $ 549      $ 1,009      $ 2,286  

You would pay the following expenses if you did not redeem your shares:

 

      1 Year      3 Years      5 Years      10 Years  
Investor C Shares
    $ 215      $ 851      $ 1,512      $ 3,282  

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 and may result in higher taxes when shares are held in a taxable account. 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 0% of the average value of its portfolio.

Changes in the Fund’s Investment Strategy and Investment Process

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Investment Strategies of the Fund,” “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Investment Strategies of the Fund” or “Details About the Fund — How the Fund Invests — Principal Investment Strategies,” as applicable, is deleted in its entirety and replaced with the following:

Under normal circumstances, the Fund seeks to invest at least 80% of its net assets plus the amount of any borrowings for investment purposes in equity securities issued by, or tied economically to, companies in emerging markets and derivatives that have similar economic characteristics to such securities. BlackRock considers an emerging market country to include any country that is: (1) generally recognized to be an emerging market country by the international financial community, including the World Bank; (2) classified by the United Nations as a developing country; or (3) included in the MSCI Emerging Markets IndexSM (the “MSCI EM Index”). BlackRock determines that an investment is tied economically to an emerging market if such investment satisfies one or more of the following conditions: (1) the issuer’s primary trading market is in an emerging market; (2) the issuer is organized under the laws of, derives at least 50% of its revenue from, or has at least 50% of its assets in emerging markets; (3) the investment is included in an index representative of emerging markets; and (4) the investment is exposed to the economic risks and returns of emerging markets. The Fund primarily intends to invest in equity securities or other financial instruments that are components of, or have characteristics similar to, the securities included in the MSCI EM Index. The MSCI EM Index is a capitalization-weighted index from a broad range of industries chosen for market size, liquidity and industry group representation. The Fund primarily seeks to buy common stock and may also invest in preferred stock and convertible securities. From time to time, the Fund may invest in shares of companies through “new issues” or initial public offerings (“IPOs”). The Fund may use derivatives, including options, futures, swaps, forward contracts and contracts for difference, 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. In order to manage cash flows into or out of the Fund effectively, the Fund may buy and sell financial futures contracts or options on such contracts. Derivatives are financial instruments whose value is derived from another security, a currency or an index, including but not limited to the MSCI EM Index. The use of options, futures, swaps, forward contracts and contracts for difference can be effective in protecting or enhancing the value of the Fund’s assets.

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund,” as applicable, is revised as follows:

The paragraphs entitled “Derivatives Risk — Risks Specific to Certain Derivatives Used by the Fund” are deleted in their entirety.

The paragraph entitled “Short Sales Risk” is deleted in its entirety.

The section of the Summary Prospectus and the Prospectus entitled “Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund” or “Fund Overview — Key Facts About BlackRock Emerging Markets Long/Short Equity Fund — Principal Risks of Investing in the Fund,” as applicable, is amended to add the following:

 

•   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 factors 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.

 

•   “New Issues” Risk — “New issues” are IPOs of equity securities. Securities issued in IPOs have no trading history, and information about the companies may be available for very limited periods. In addition, the prices of securities sold in IPOs may be highly volatile or may decline shortly after the IPO.

 

•   Preferred Securities Risk — Preferred securities may pay fixed or adjustable rates of return. Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. In addition, a company’s preferred securities generally pay dividends only after the company makes required payments to holders of its bonds and other debt. For this reason, the value of preferred securities will usually react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Preferred securities of smaller companies may be more vulnerable to adverse developments than preferred stock of larger companies.