BlackRock Variable Series Funds N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number: 811-03290

Name of Fund: BlackRock Variable Series Funds, Inc.

BlackRock Advantage Large Cap Core V.I. Fund

BlackRock Advantage Large Cap Value V.I. Fund

BlackRock Advantage U.S. Total Market V.I. Fund

BlackRock Basic Value V.I. Fund

BlackRock Capital Appreciation V.I. Fund

BlackRock Equity Dividend V.I. Fund

BlackRock Global Allocation V.I. Fund

BlackRock Global Opportunities V.I. Fund

BlackRock Government Money Market V.I. Fund

BlackRock High Yield V.I. Fund

BlackRock International V.I. Fund

BlackRock iShares Alternative Strategies V.I. Fund

BlackRock iShares Dynamic Allocation V.I Fund

BlackRock iShares Dynamic Fixed Income V.I. Fund

BlackRock iShares Equity Appreciation V.I. Fund

BlackRock Large Cap Focus Growth V.I. Fund

BlackRock Managed Volatility V.I. Fund

BlackRock S&P 500 Index V.I. Fund

BlackRock Total Return V.I. Fund

BlackRock U.S. Government Bond V.I. Fund

Fund Address:    100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Variable Series Funds, Inc., 55 East 52^nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 441-7762

Date of fiscal year end: 12/31/2017

Date of reporting period: 12/31/2017

Item 1 – Report to Stockholders

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

Not FDIC Insured • May Lose Value • No Bank Guarantee

The Markets in Review

Dear Shareholder,

In the 12 months ended December 31, 2017, risk assets, such as stocks and high-yield bonds, continued to deliver strong performance. The equity market advanced, month after month, despite geopolitical uncertainty and relatively high valuations, while bond returns were constrained by higher interest rates.

Rising interest rates worked against high-quality assets with more interest rate sensitivity. Consequently, longer-term U.S. Treasuries posted modest returns, as rising energy prices, modest wage increases, and steady job growth led to expectations of higher inflation and interest rate increases by the U.S. Federal Reserve (the “Fed”).

The market’s performance reflected reflationary expectations early in the reporting period, as investors began to sense that a global recovery was afoot. Thereafter, many countries throughout the world experienced sustained and synchronized growth for the first time since the financial crisis. Growth rates and inflation are still relatively low, but they are finally rising together.

The Fed responded to these positive developments by increasing short-term interest rates three times and setting expectations for additional interest rate increases. The Fed also began reducing the vast balance sheet reserves that had accumulated in the wake of the financial crisis. In October 2017, the Fed reduced its $4.5 trillion balance sheet by only $10 billion, while setting expectations for additional modest reductions and rate hikes in 2018.

By contrast, the European Central Bank (“ECB”) and the Bank of Japan (“BoJ”) both continued to expand their balance sheets despite nascent signs of sustained economic growth. The Eurozone and Japan are both approaching the limits of central banks’ ownership share of national debt, which is a structural pressure point that limits their capacity to deliver additional monetary stimulus. In October 2017, the ECB announced plans to cut the amount of its bond purchases in half for 2018, while the BoJ reiterated its commitment to economic stimulus until the inflation rate rises to its target of 2%.

Emerging market growth also stabilized, as accelerating growth in China, the second largest economy in the world and the most influential of all developing economies, improved the outlook for corporate profits and economic growth across most developing nations. Chinese demand for commodities and other raw materials allayed concerns about the country’s banking system, leading to rising equity prices and foreign investment flows.

While escalating tensions between the United States and North Korea and our nation’s divided politics are concerning, benign credit conditions, modest inflation, solid corporate earnings, and the positive outlook for growth in the world’s largest economies have kept markets relatively tranquil.

Rising consumer confidence and improving business sentiment are driving momentum for the U.S. economy. If the Fed maintains a measured pace of stimulus reduction, to the extent that inflation rises, it’s likely to be accompanied by rising real growth and higher wages. That could lead to a favorable combination of moderately higher inflation, steadily rising interest rates, and improving growth in 2018.

Further fueling optimism, Congress passed a sweeping tax reform bill in December 2017. The U.S. tax overhaul is likely to accentuate the reflationary themes already in place, including faster growth and rising interest rates. Changing the corporate tax rate to a flat 21% will create many winners and losers among high-and-low tax companies, while the windfall from lower taxes could boost business and consumer spending.

In this environment, investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of December 31, 2017
	6-month	12-month
U.S. large cap equities (S&P 500® Index)	11.42%	21.83%
U.S. small cap equities (Russell 2000® Index)	9.20	14.65
International equities (MSCI Europe, Australasia, Far East Index)	9.86	25.03
Emerging market equities (MSCI Emerging Markets Index)	15.92	37.28
3-month Treasury bills (ICE BofAML 3-Month U.S. Treasury Bill Index)	0.55	0.86
U.S. Treasury securities (ICE BofAML 10-Year U.S. Treasury Index)	(0.01)	2.07
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)	1.24	3.54
Tax-exempt municipal bonds (S&P Municipal Bond Index)	1.64	4.95
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)	2.46	7.50
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGEISNOT PARTOF YOUR FUND REPORT

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Advantage Large Cap Core V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Advantage Large Cap Core V.I. Fund

Investment Objective

BlackRock Advantage Large Cap Core V.I. Fund’s (the “Fund”) investment objective is to seek high total investment return.

On March 27, 2017, the Fund’s Board approved a proposal to change the name of BlackRock Large Cap Core V.I. Fund to BlackRock Advantage Large Cap Core V.I. Fund. The Board also approved certain changes to the Fund’s investment strategies. These changes were effective on June 12, 2017.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed its benchmark, the Russell 1000^® Index.

What factors influenced performance?

From January 1, 2017 through June 12, 2017, the information technology (“IT”) sector was the largest contributor to the Fund’s performance, with strength across segments including semiconductors, software and hardware. Additional contributions came from stock selection in consumer discretionary, in particular media and household durables. Selection in materials and an underweight to telecommunication services proved advantageous as well.

From June 12, 2017 through period-end, positive contributions to performance came from signals that seek to capture sentiment and trends from market participants. Specifically, insights driven by proprietary text-based analyses of company executive conference calls and sell-side analyst reports performed well. Additionally, sentiment-based measures that evaluate investor flow aided performance during the period. Fundamental signals that focus on company value and quality were additive to performance as well. Notably, an insight that evaluates stocks based on key corporate events such as initial public offerings, CEO changes and revisions to forward guidance proved beneficial.

Health care was the principal detractor from relative performance for the period of January 1, 2017 through June 12, 2017. Weakness in the sector was most notable in the Fund’s biotechnology and pharmaceutical industry holdings, with an underweight to the equipment & supplies segment also weighing on returns. Positioning with respect to financials constrained performance, driven by holdings within the capital markets and bank segments, as did positioning with respect to consumer staples, where food & staples retailing names held back returns.

Negative contributions to performance from June 12, 2017 to period-end came primarily from stock-specific events. Notably, an underweight in Microsoft Corp. hindered results. The underweight was motivated by deteriorating sentiment as identified by the company’s non-equity securities along with declining supply chain trends. An insight that takes a contrarian stance on crowded positions also constrained relative performance. Unsurprisingly as investors continued to favor growth assets, select quality-based insights lagged, in particular a signal that identifies dividend growth.

Describe recent portfolio activity.

The Fund was repurposed during the period. Effective June 12, 2017, the Fund changed its name to BlackRock Advantage Large Cap Core V.I. Fund. Concurrently, there were changes to its investment strategy. The Fund is now being managed by BlackRock’s Systematic Active Equity (SAE) team, which incorporates a research-driven, systematic approach to identifying differentiated performance opportunities across markets.

Describe portfolio positioning at period end.

Relative to the Russell 1000^® Index, the Fund was positioned neutrally from a sector perspective. The Fund had slight overweight positions in utilities and materials and slight underweight positions in consumer staples and IT.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Advantage Large Cap Core V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance related fees and expenses. For a portion of the period, returns do not show the effects of distribution fees (12b-1 fees) applicable to Class II Shares. If such fees were included, returns shown would have been lower. The returns for Class III Shares prior to January 27, 2009, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares. The returns for Class III Shares, however, are adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

^(b)  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 large cap equity securities and derivatives that have similar economic characteristics to such securities. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name BlackRock Large Cap Core V.I. Fund.

^(c)  An index that measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The index represents approximately 92% of the total market capitalization of the Russell 3000^® Index.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		11.59	%		22.33	%		15.33	%		6.79	%
Class II(a)		11.50			22.12			15.13			6.62
Class III(a)		11.47			21.97			15.00			6.50	(c)
Russell 1000® Index		11.36			21.69			15.71			8.59

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. For a portion of the period, returns do not show the effects of distribution fees (12b-1 fees) applicable to Class II Shares. If such fees were included, returns shown would have been lower. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name BlackRock Large Cap Core V.I. Fund.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The returns for Class III Shares prior to January 27, 2009, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares. The returns for Class III Shares, however, are adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,115.90	$	3.09	$	1,000.00	$	1,022.28	$	2.96		0.58	%
Class II		1,000.00		1,115.00		4.00		1,000.00		1,021.42		3.82		0.75
Class III		1,000.00		1,114.70		4.58		1,000.00		1,020.87		4.38		0.86

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock Advantage Large Cap Core V.I. Fund

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Information Technology		23	%
Financials		14
Health Care		14
Consumer Discretionary		13
Industrials		11
Consumer Staples		7
Energy		5
Materials		4
Utilities		3
Real Estate		3
Telecommunication Services		2
Short-Term Securities		3
Liabilities in Excess of Other Assets		(2	)

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Advantage Large Cap Core V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 99.0%
Aerospace & Defense — 3.0%
Boeing Co. (The)		31,272	$	9,222,425
Curtiss-Wright Corp.		689		83,955
Orbital ATK, Inc.		1,198		157,537
Raytheon Co.		33,500		6,292,975
Rockwell Collins, Inc.		3,384		458,938
				16,215,830
Auto Components — 1.7%
Aptiv plc		27,368		2,321,628
BorgWarner, Inc.		116,267		5,940,081
Delphi Technologies plc		9,122		478,631
Lear Corp.		2,287		404,021
				9,144,361
Banks — 5.6%
Bank of America Corp.		304,409		8,986,154
Citigroup, Inc.		53,119		3,952,585
Citizens Financial Group, Inc.(a)		148,298		6,225,550
First Republic Bank		46,901		4,063,502
JPMorgan Chase & Co.		17,368		1,857,334
SunTrust Banks, Inc.		63,139		4,078,148
Synovus Financial Corp.		13,645		654,141
				29,817,414
Beverages — 0.7%
Coca-Cola European Partners plc		39,356		1,568,337
Dr Pepper Snapple Group, Inc.		17,064		1,656,232
Molson Coors Brewing Co., Class B		7,251		595,089
				3,819,658
Biotechnology — 3.9%
AbbVie, Inc.		92,834		8,977,976
Amgen, Inc.		3,299		573,696
Celgene Corp.(b)		38,223		3,988,953
Gilead Sciences, Inc.		99,952		7,160,561
				20,701,186
Capital Markets — 4.1%
CME Group, Inc.		10,067		1,470,285
Evercore, Inc., Class A		21,908		1,971,720
Intercontinental Exchange, Inc.		94,195		6,646,399
S&P Global, Inc.		39,592		6,706,885
SEI Investments Co.		72,429		5,204,748
				22,000,037
Chemicals — 2.4%
Air Products & Chemicals, Inc.		40,305		6,613,244
Eastman Chemical Co.		54,662		5,063,888
WR Grace & Co.		13,544		949,841
				12,626,973
Commercial Services & Supplies — 0.1%
Brink’s Co. (The)		3,580		281,746
LSC Communications, Inc.		13,129		198,904
				480,650
Communications Equipment — 0.3%
InterDigital, Inc.		17,487		1,331,635
Palo Alto Networks, Inc.(b)		2,331		337,855
				1,669,490
Containers & Packaging — 0.3%
WestRock Co.		23,113		1,460,973
Diversified Consumer Services — 0.3%
H&R Block, Inc.(a)		69,591		1,824,676

Security	Shares		Value
Diversified Financial Services — 0.7%
Berkshire Hathaway, Inc., Class B(b)		18,819	$	3,730,302
Diversified Telecommunication Services — 0.2%
Zayo Group Holdings, Inc.(b)		23,140		851,552
Electric Utilities — 1.9%
Portland General Electric Co.		81,937		3,734,689
Westar Energy, Inc.		105,088		5,548,646
Xcel Energy, Inc.		22,225		1,069,245
				10,352,580
Electrical Equipment — 2.2%
AMETEK, Inc.		11,609		841,304
Hubbell, Inc.		33,017		4,468,521
Rockwell Automation, Inc.		31,199		6,125,924
				11,435,749
Electronic Equipment, Instruments & Components — 1.1%
CDW Corp.		10,588		735,760
Dolby Laboratories, Inc., Class A		15,622		968,564
IPG Photonics Corp.(b)		5,827		1,247,736
SYNNEX Corp.		2,774		377,125
TE Connectivity Ltd.		16,428		1,561,317
Zebra Technologies Corp., Class A(b)		7,431		771,338
				5,661,840
Energy Equipment & Services — 0.0%
Halliburton Co.		4,834		236,238
Equity Real Estate Investment Trusts (REITs) — 2.6%
Alexandria Real Estate Equities, Inc.(a)		2,595		338,881
Gaming and Leisure Properties, Inc.		27,364		1,012,468
Outfront Media, Inc.		91,484		2,122,429
Prologis, Inc.		26,981		1,740,544
Simon Property Group, Inc.		21,784		3,741,184
Ventas, Inc.		55,961		3,358,220
Weingarten Realty Investors		42,866		1,409,005
				13,722,731
Food & Staples Retailing — 1.0%
Costco Wholesale Corp.		9,524		1,772,607
Performance Food Group Co.(b)		73,742		2,440,860
Wal-Mart Stores, Inc.		12,077		1,192,604
				5,406,071
Food Products — 2.9%
Archer-Daniels-Midland Co.		130,436		5,227,875
Bunge Ltd.		55,306		3,709,927
Hershey Co. (The)		40,289		4,573,204
Kellogg Co.		15,235		1,035,675
Tyson Foods, Inc., Class A		12,829		1,040,047
				15,586,728
Health Care Equipment & Supplies — 3.1%
Baxter International, Inc.		98,333		6,356,245
Danaher Corp.(a)		25,621		2,378,141
Edwards Lifesciences Corp.(b)		27,563		3,106,626
IDEXX Laboratories, Inc.(b)		30,562		4,779,286
				16,620,298
Health Care Providers & Services — 2.7%
Aetna, Inc.		6,685		1,205,907
AmerisourceBergen Corp.		16,885		1,550,381
Humana, Inc.		25,251		6,264,015
McKesson Corp.		12,721		1,983,840
UnitedHealth Group, Inc.		15,043		3,316,380
				14,320,523
Health Care Technology — 0.5%
Veeva Systems, Inc., Class A(a)(b)		49,708		2,747,858

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage Large Cap Core V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Hotels, Restaurants & Leisure — 3.0%
Carnival Corp.		79,900	$	5,302,963
Choice Hotels International, Inc.		4,120		319,712
Extended Stay America, Inc.		52,268		993,092
International Game Technology plc		15,360		407,194
McDonald’s Corp.		50,600		8,709,272
				15,732,233
Industrial Conglomerates — 1.7%
3M Co.		32,857		7,733,552
General Electric Co.		60,855		1,061,920
				8,795,472
Insurance — 3.6%
Allstate Corp. (The)		9,798		1,025,948
Aon plc		3,113		417,142
Athene Holding Ltd., Class A(b)		1,960		101,352
First American Financial Corp.		20,647		1,157,058
Hartford Financial Services Group, Inc. (The)		7,360		414,221
Lincoln National Corp.		79,207		6,088,642
Marsh & McLennan Cos., Inc.		37,423		3,045,858
Principal Financial Group, Inc.		959		67,667
Prudential Financial, Inc.		40,882		4,700,612
Reinsurance Group of America, Inc.		1,127		175,733
Unum Group		33,111		1,817,463
				19,011,696
Internet & Direct Marketing Retail — 1.9%(b)
Amazon.com, Inc.		7,039		8,231,900
Netflix, Inc.		673		129,189
Priceline Group, Inc. (The)		899		1,562,228
				9,923,317
Internet Software & Services — 4.7%(b)
Alphabet, Inc., Class A		4,767		5,021,558
Alphabet, Inc., Class C		6,317		6,610,109
Facebook, Inc., Class A		66,911		11,807,115
VeriSign, Inc.(a)		12,799		1,464,718
Yelp, Inc.		1,317		55,261
				24,958,761
IT Services — 4.9%
Booz Allen Hamilton Holding Corp.		8,522		324,944
Broadridge Financial Solutions, Inc.		31,111		2,818,034
Euronet Worldwide, Inc.(a)(b)		3,397		286,265
Fidelity National Information Services, Inc.		7,677		722,329
International Business Machines Corp.		36,213		5,555,799
Mastercard, Inc., Class A		58,150		8,801,584
Total System Services, Inc.		16,331		1,291,619
Visa, Inc., Class A		54,906		6,260,382
				26,060,956
Leisure Products — 0.1%
Hasbro, Inc.		6,994		635,685
Life Sciences Tools & Services — 0.1%
Waters Corp.(b)		2,445		472,350
Machinery — 3.8%
Cummins, Inc.		3,293		581,676
Graco, Inc.		4,839		218,820
Illinois Tool Works, Inc.		35,477		5,919,337
Ingersoll-Rand plc		22,174		1,977,699
Oshkosh Corp.		18,945		1,721,911
PACCAR, Inc.(a)		88,998		6,325,978
Xylem, Inc.		51,161		3,489,180
				20,234,601

Security	Shares		Value
Media — 2.3%
Comcast Corp., Class A		43,216	$	1,730,801
John Wiley & Sons, Inc., Class A		44,741		2,941,721
Scripps Networks Interactive, Inc., Class A		1,509		128,838
Time Warner, Inc.		16,201		1,481,905
Walt Disney Co. (The)		57,735		6,207,090
				12,490,355
Metals & Mining — 1.2%
Newmont Mining Corp.		166,279		6,238,788
Multiline Retail — 1.3%
Kohl’s Corp.(a)		18,120		982,648
Target Corp.		87,998		5,741,869
				6,724,517
Multi-Utilities — 1.5%
CMS Energy Corp.		125,107		5,917,561
Vectren Corp.		28,308		1,840,586
				7,758,147
Oil, Gas & Consumable Fuels — 5.3%
Anadarko Petroleum Corp.		50,606		2,714,506
ConocoPhillips		129,758		7,122,417
Continental Resources, Inc.(b)		2,214		117,276
Exxon Mobil Corp.		47,187		3,946,721
Marathon Petroleum Corp.		21,375		1,410,322
Occidental Petroleum Corp.		26,740		1,969,668
Suncor Energy, Inc.		63,552		2,333,629
Valero Energy Corp.		72,568		6,669,725
Williams Cos., Inc. (The)		66,607		2,030,847
				28,315,111
Personal Products — 1.2%
Estee Lauder Cos., Inc. (The), Class A		50,208		6,388,466
Herbalife Ltd.(b)		1,232		83,431
				6,471,897
Pharmaceuticals — 3.2%
Bristol-Myers Squibb Co.		88,606		5,429,775
Catalent, Inc.(b)		40,184		1,650,759
Johnson & Johnson		22,926		3,203,221
Merck & Co., Inc.		35,919		2,021,162
Zoetis, Inc.		67,075		4,832,083
				17,137,000
Real Estate Management & Development — 0.8%
CBRE Group, Inc., Class A(b)		84,392		3,655,018
Jones Lang LaSalle, Inc.		2,356		350,879
				4,005,897
Road & Rail — 0.2%
Norfolk Southern Corp.		6,507		942,864
Semiconductors & Semiconductor Equipment — 3.4%
Intel Corp.		33,990		1,568,978
KLA-Tencor Corp.		4,542		477,228
Lam Research Corp.		2,009		369,797
Maxim Integrated Products, Inc.		91,047		4,759,937
QUALCOMM, Inc.		30,319		1,941,022
Skyworks Solutions, Inc.		11,642		1,105,408
Texas Instruments, Inc.		76,907		8,032,167
				18,254,537
Software — 4.5%
Activision Blizzard, Inc.		101,945		6,455,157
Adobe Systems, Inc.(b)		20,987		3,677,762
Intuit, Inc.		4,069		642,007
Microsoft Corp.		88,422		7,563,618
Oracle Corp.		117,342		5,547,930

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage Large Cap Core V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Software (continued)
RingCentral, Inc., Class A(b)		1,181	$	57,160
Verint Systems, Inc.(b)		5,773		241,600
				24,185,234
Specialty Retail — 1.6%
Aaron’s, Inc.		24,368		971,065
Lowe’s Cos., Inc.		46,204		4,294,200
Penske Automotive Group, Inc.(a)		68,417		3,273,753
				8,539,018
Technology Hardware, Storage & Peripherals — 3.9%
Apple, Inc.		112,647		19,063,252
HP, Inc.		61,600		1,294,216
Pure Storage, Inc., Class A(b)		24,817		393,597
				20,751,065
Textiles, Apparel & Luxury Goods — 0.6%
Ralph Lauren Corp.		7,613		789,392
Skechers U.S.A., Inc., Class A(b)		64,311		2,433,528
				3,222,920
Thrifts & Mortgage Finance — 0.4%
Essent Group Ltd.(b)		50,487		2,192,146
Tobacco — 1.2%
Altria Group, Inc.		89,049		6,358,989
Wireless Telecommunication Services — 1.3%(a)
Sprint Corp.		138,130		813,586
Telephone & Data Systems, Inc.		46,760		1,299,928
T-Mobile US, Inc.(b)		76,795		4,877,250
				6,990,764
Total Common Stocks — 99.0% (Cost: $472,962,785)				526,838,038
Total Long-Term Investments — 99.0% (Cost: $472,962,785)				526,838,038

Security	Shares		Value
Short-Term Securities — 2.5%(c)(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		4,977,061	$	4,977,061
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)		8,447,651		8,446,806
Total Short-Term Securities — 2.5% (Cost: $13,423,888)				13,423,867
Total Investments — 101.5% (Cost: $486,386,673)				540,261,905
Liabilities in Excess of Other Assets — (1.5)%				(7,832,363	)
Net Assets — 100.0%			$	532,429,542

^(a) Security, or a portion of the security, is on loan.

^(b)  Non-income producing security.

^(c)  Annualized 7-day yield as of period end.

^(d)  Security was purchased with the cash collateral from loaned securities.

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		16,275,353		(11,298,292	)		4,977,061	$	4,977,061	$	58,563		$	19		$	—
SL Liquidity Series, LLC, Money Market Series		15,692,070		(7,244,419	)		8,447,651		8,446,806		58,039	(b)		(3,796	)		1,465
								$	13,423,867	$	116,602		$	(3,777	)	$	1,465

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
S&P 500 E-Mini Index		48		03/16/18	$	6,422	$	35,726

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage Large Cap Core V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Futures contracts
Net unrealized appreciation(a)	$	—	$	—	$	35,726	$	—	$	—	$	—	$	35,726

^(a)  Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Net Realized Gain from:
Futures contracts	$	—	$	—	$	671,664	$	—	$	—	$	—	$	671,664
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	$	—	$	—	$	126,008	$	—	$	—	$	—	$	126,008

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	4,592,108

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Investments:
Assets:
Long-Term Investments
Common Stocks(a)	$	526,838,038	$	—	$	—	$	526,838,038
Short-Term Securities		4,977,061		—		—		4,977,061
Subtotal	$	531,815,099	$	—	$	—	$	531,815,099
Investments valued at NAV(b)								8,446,806
Total Investments							$	540,261,905
Derivative Financial Instruments(c)
Assets:
Equity contracts	$	35,726	$	—	$	—	$	35,726

^(a)  See above Schedule of Investments for values in each industry.

^(b)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(c)  Derivative financial instruments are futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Advantage Large Cap Core V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $8,166,397) (cost — $472,962,785)	$	526,838,038
Investments at value — affiliated (cost — $13,423,888)		13,423,867
Cash		787
Cash pledged for futures contracts		206,000
Receivables:
Investments sold		6,040,879
Securities lending income — affiliated		1,212
Capital shares sold		20,865
Dividends — affiliated		4,650
Dividends — unaffiliated		672,587
Prepaid expenses		2,485
Total assets		547,211,370
LIABILITIES
Cash collateral on securities loaned at value		8,447,600
Payables:
Investments purchased		5,424,779
Capital shares redeemed		302,023
Distribution fees		73,115
Variation margin on futures contracts		21,815
Investment advisory fees		251,671
Officer’s and Directors’ fees		4,855
Other affiliates		1,008
Other accrued expenses		254,962
Total liabilities		14,781,828
NET ASSETS	$	532,429,542
NET ASSETS CONSIST OF
Paid-in capital	$	469,610,703
Undistributed net investment income		36,205
Accumulated net realized gain		8,871,065
Net unrealized appreciation (depreciation)		53,911,569
NET ASSETS	$	532,429,542
NET ASSET VALUE
Class I — Based on net assets of $185,938,116 and 6,536,460 shares outstanding, 200 million shares authorized, $0.10 par value.	$	28.45
Class II — Based on net assets of $4,861,652 and 170,765 shares outstanding, 100 million shares authorized, $0.10 par value.	$	28.47
Class III — Based on net assets of $341,629,774 and 12,103,286 shares outstanding, 100 million shares authorized, $0.10 par value.	$	28.23

See notes to financial statements.

FINANCIAL STATEMENTS 9

Statement of Operations

Year Ended December 31, 2017

	BlackRock Advantage Large Cap Core V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	58,563
Dividends — unaffiliated		9,445,844
Securities lending income — affiliated — net		58,039
Foreign taxes withheld		(45,064	)
Total investment income		9,517,382
EXPENSES
Investment advisory		2,364,757
Transfer agent — class specific		1,060,499
Distribution — class specific		834,053
Accounting services		91,674
Printing		70,205
Professional		66,664
Custodian		46,423
Directors and Officer		26,971
Transfer agent		5,000
Miscellaneous		60,703
Total expenses		4,626,949
Less:
Transfer agent fees reimbursed — class specific		(704,713	)
Fees waived and/or reimbursed by the Manager		(5,601	)
Total expenses after fees waived and/or reimbursed		3,916,635
Net investment income		5,600,747
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(3,796	)
Investments — unaffiliated		141,377,766
Capital gain distributions from investment companies — affiliated		19
Foreign currency transactions		(655	)
Futures contracts		671,664
		142,044,998
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		1,465
Investments — unaffiliated		(44,490,610	)
Foreign currency translations		611
Futures contracts		126,008
		(44,362,526	)
Net realized and unrealized gain		97,682,472
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	103,283,219

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock Advantage Large Cap Core V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	5,600,747		$	5,228,756
Net realized gain		142,044,998			40,746,201
Net change in unrealized appreciation (depreciation)		(44,362,526	)		3,376,349
Net increase in net assets resulting from operations		103,283,219			49,351,306
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(2,307,598	)		(2,047,574	)
Class II		(51,894	)		(53,362	)
Class III		(3,340,143	)		(2,999,067	)
From net realized gain:
Class I		(49,237,913	)		(12,366,480	)
Class II		(1,276,586	)		(370,135	)
Class III		(91,053,975	)		(23,127,170	)
Decrease in net assets resulting from distributions to shareholders		(147,268,109	)		(40,963,788	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		67,256,971			4,719,038
NET ASSETS
Total increase in net assets		23,272,081			13,106,556
Beginning of year		509,157,461			496,050,905
End of year	$	532,429,542		$	509,157,461
Undistributed net investment income, end of year	$	36,205		$	135,748

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 11

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Advantage Large Cap Core V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	31.91		$	31.40		$	33.26		$	33.80		$	25.55
Net investment income(a)		0.44			0.39			0.36			0.34			0.30
Net realized and unrealized gain (loss)		6.64			2.91			(0.16	)		3.86			8.27
Net increase from investment operations		7.08			3.30			0.20			4.20			8.57
Distributions:(b)
From net investment income		(0.47	)		(0.40	)		(0.39	)		(0.36	)		(0.32	)
From net realized gain		(10.07	)		(2.39	)		(1.67	)		(4.38	)		—
Total distributions		(10.54	)		(2.79	)		(2.06	)		(4.74	)		(0.32	)
Net asset value, end of year	$	28.45		$	31.91		$	31.40		$	33.26		$	33.80
Total Return:(c)
Based on net asset value		22.33	%		10.55	%		0.52	%		12.36	%		33.56	%
Ratios to Average Net Assets:
Total expenses		0.73	%		0.72	%		0.71	%		0.73	%		0.73	%
Total expenses after fees waived and/or reimbursed		0.58	%		0.58	%		0.56	%		0.57	%		0.58	%
Net investment income		1.27	%		1.26	%		1.08	%		0.97	%		1.03	%
Supplemental Data:
Net assets, end of year (000)	$	185,938		$	175,947		$	184,151		$	212,067		$	219,418
Portfolio turnover rate		149	%		50	%		31	%		48	%		42	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage Large Cap Core V.I. Fund
	Class II
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	31.93		$	31.42		$	33.27		$	33.79		$	25.56
Net investment income(a)		0.38			0.34			0.30			0.28			0.25
Net realized and unrealized gain (loss)		6.64			2.90			(0.16	)		3.87			8.25
Net increase from investment operations		7.02			3.24			0.14			4.15			8.50
Distributions:(b)
From net investment income		(0.41	)		(0.34	)		(0.32	)		(0.29	)		(0.27	)
From net realized gain		(10.07	)		(2.39	)		(1.67	)		(4.38	)		—
Total distributions		(10.48	)		(2.73	)		(1.99	)		(4.67	)		(0.27	)
Net asset value, end of year	$	28.47		$	31.93		$	31.42		$	33.27		$	33.79
Total Return:(c)
Based on net asset value		22.12	%		10.37	%		0.34	%		12.23	%		33.28	%
Ratios to Average Net Assets:
Total expenses		0.88	%		0.88	%		0.85	%		0.89	%		0.86	%
Total expenses after fees waived and/or reimbursed		0.75	%		0.75	%		0.73	%		0.74	%		0.75	%
Net investment income		1.08	%		1.09	%		0.91	%		0.81	%		0.86	%
Supplemental Data:
Net assets, end of year (000)	$	4,862		$	5,170		$	5,333		$	6,203		$	6,080
Portfolio turnover rate		149	%		50	%		31	%		48	%		42	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 13

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage Large Cap Core V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	31.74		$	31.25		$	33.11		$	33.66		$	25.46
Net investment income(a)		0.34			0.31			0.27			0.24			0.22
Net realized and unrealized gain (loss)		6.59			2.88			(0.17	)		3.84			8.22
Net increase from investment operations		6.93			3.19			0.10			4.08			8.44
Distributions:(b)
From net investment income		(0.37	)		(0.31	)		(0.29	)		(0.25	)		(0.24	)
From net realized gain		(10.07	)		(2.39	)		(1.67	)		(4.38	)		—
Total distributions		(10.44	)		(2.70	)		(1.96	)		(4.63	)		(0.24	)
Net asset value, end of year	$	28.23		$	31.74		$	31.25		$	33.11		$	33.66
Total Return:(c)
Based on net asset value		21.97	%		10.26	%		0.23	%		12.07	%		33.16	%
Ratios to Average Net Assets:
Total expenses		0.99	%		0.97	%		0.96	%		0.98	%		0.99	%
Total expenses after fees waived and/or reimbursed		0.86	%		0.86	%		0.84	%		0.85	%		0.86	%
Net investment income		0.98	%		0.98	%		0.80	%		0.69	%		0.75	%
Supplemental Data:
Net assets, end of year (000)	$	341,630		$	328,040		$	306,567		$	322,418		$	300,005
Portfolio turnover rate		149	%		50	%		31	%		48	%		42	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Advantage Large Cap Core V.I. Fund (the “Fund”) (formerly known as BlackRock Large Cap Core V.I. Fund). The Fund is classified as diversified. Class I, Class II and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class II and Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of the Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market– corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value—unaffiliated, and collateral on securities loaned at value,

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party.

However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Citigroup Global Markets, Inc.	$	4,379,463	$	(4,379,463	)	$	—
JP Morgan Securities LLC		1,592,719		(1,592,719	)		—
Morgan Stanley		2,169,837		(2,169,837	)		—
State Street Bank & Trust Co.		24,378		(24,378	)		—
	$	8,166,397	$	(8,166,397	)	$	—

^(a)  Cash collateral with a value of $8,447,600 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $250 Million		0.500	%
$250 Million — $300 Million		0.450
$300 Million — $400 Million		0.425
Greater than $400 Million		0.400

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

	Class II			Class III
Distribution Fees		0.15	%		0.25	%

For the year ended December 31, 2017, the following table shows the class specific distribution fees borne directly by each share class of the Fund:

	Class II		Class III		Total
Distribution Fees	$	6,997	$	827,056	$	834,053

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class II		Class III		Total
$	367,758	$	9,482	$	683,259	$	1,060,499

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $5,601.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2019. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $5,407 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.05	%
Class II	0.07	%
Class III	0.08	%

The Manager has agreed not to reduce or discontinue this contractual reimbursement through April 30, 2019 unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class II		Class III		Total
Transfer Agent Fees Reimbursed	$	279,908	$	6,216	$	418,589	$	704,713

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class II		Class III
	1.25%		1.40%		1.50%

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $22,601 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	17,504,678
Sales		52,509,485
Net Realized Gain		15,355,921

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $757,950,052 and $819,893,686, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued)

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions were reclassified to the following accounts:

Undistributed net investment income	$	(655	)
Accumulated net realized gain.	$	655

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income.	$	18,336,131	$	5,100,003
Long-term capital gains	$	128,931,978	$	35,863,785
	$	147,268,109	$	40,963,788

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	5,317,049
Undistributed long-term capital gains		5,205,253
Net unrealized gains(a)		52,296,537
	$	62,818,839

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain futures contracts and the timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	487,965,980
Gross unrealized appreciation	$	58,367,965
Gross unrealized depreciation		(6,072,040	)
Net unrealized appreciation (depreciation)	$	52,295,925

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the information technology sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		53,694		$	1,884,794			94,700		$	2,914,564
Shares issued in reinvestment of distributions		1,784,901			51,545,512			449,540			14,414,054
Shares redeemed		(815,802	)		(28,296,841	)		(895,068	)		(28,046,866	)
Net increase (decrease)		1,022,793		$	25,133,465			(350,828	)	$	(10,718,248	)
Class II
Shares sold		17,194		$	592,585			51,189		$	1,579,995
Shares issued in reinvestment of distributions		45,977			1,328,480			13,197			423,497
Shares redeemed		(54,296	)		(1,841,122	)		(72,213	)		(2,256,990	)
Net increase (decrease)		8,875		$	79,943			(7,827	)	$	(253,498	)
Class III
Shares sold		117,007		$	4,065,534			537,136		$	15,388,629
Shares issued in reinvestment of distributions		3,293,938			94,394,117			819,291			26,126,237
Shares redeemed		(1,644,501	)		(56,416,088	)		(829,886	)		(25,824,082	)
Net increase		1,766,444		$	42,043,563			526,541		$	15,690,784
Total Net Increase		2,798,112		$	67,256,971			167,886		$	4,719,038

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 21

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Advantage Large Cap Core V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Advantage Large Cap Core V.I. Fund (formerly BlackRock Large Cap Core V.I. Fund), of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Advantage Large Cap Value V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Advantage Large Cap Value V.I. Fund

Investment Objective

BlackRock Advantage Large Cap Value V.I. Fund’s (the “Fund”) investment objective is to seek long-term capital appreciation.

On March 27, 2017, the Fund’s Board approved a proposal to change the name of BlackRock Large Cap Value V.I. Fund to BlackRock Advantage Large Cap Value V.I. Fund. The Board also approved certain changes to the Fund’s investment objective and investment strategies. These changes were effective on June 12, 2017.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed its benchmark, the Russell 1000^® Value Index.

What factors influenced performance?

From January 1, 2017 through June 12, 2017, the information technology (“IT”) and consumer discretionary sectors were the largest contributors to performance. Strength was notable across multiple segments in IT, led by semiconductors, while hotels, restaurants & leisure, household durables and auto components drove gains in consumer discretionary. Additional contributions came from stock selection and an underweight in energy, as well as selection in materials.

From June 12, 2017 through period-end, strong performance came from signals that seek to capture sentiment and trends from market participants. Specifically, insights gained from proprietary text-based analyses of company executive conference calls and sell-side analyst reports performed well. Similarly, a newer insight that identifies longer-term trends in company fundamentals from executive statements added value. Elsewhere, fundamental signals that focus on company value and quality were additive to performance. Notably, an insight that evaluates stocks based on key corporate events like initial public offerings, CEO changes and revisions to forward guidance proved beneficial. Further, insights that use cash flows and top-line sales as measures performed well.

Health care was the prime detractor from relative performance for the period of January 1, 2017 through June 12, 2017. Weakness in the sector was most notable in the pharmaceutical and biotechnology industries, with an underweight to equipment & supplies also weighing on returns. Selection within and underweights in utilities and consumer staples also proved disadvantageous during this period.

Despite broad strength across the stock selection model, macro thematic insights were challenged during the period from June 12, 2017 to December 31, 2017. In particular, an insight that evaluates a company’s sensitivity to foreign currencies declined. Another detractor for the period was an insight that identifies excessive corporate leverage. Unsurprisingly, as investors continued to favor growth assets, select quality-based insights struggled into period-end. In this vein, a signal that identifies dividend growth struggled during the period. Finally, an insight that takes a contrarian stance on crowded positions detracted from relative performance for the period.

Describe recent portfolio activity.

The Fund was repurposed during the period. Effective June 12, 2017, the Fund changed its name to the BlackRock Advantage Large Cap Value V.I. Fund. Concurrently, there were changes to its investment strategy. The Fund is now being managed by BlackRock’s Systematic Active Equity (SAE) team, which incorporates a research-driven, systematic approach to identifying differentiated performance opportunities across markets.

Describe portfolio positioning at period end.

Relative to the Russell 1000^® Value Index, the Fund was positioned neutrally from a sector perspective. The Fund ended the period with slight overweight positions in materials and industrials and slight underweights in financials and consumer staples.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Advantage Large Cap Value V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance related fees and expenses. For a portion of the period, returns do not show the effects of distribution fees (12b-1 fees) applicable to Class II Shares. If such fees were included, returns shown would have been lower. The returns for Class III Shares prior to January 27, 2009, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

^(b)  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 large cap equity securities and derivatives that have similar economic characteristics to such securities. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed a different investment objective and different investment strategies under the name BlackRock Large Cap Value V.I. Fund.

^(c)  An unmanaged index that is a subset of the Russell 1000^® Index that consists of those Russell 1000^® securities with lower price-tobook ratios and lower expected growth values.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		10.45	%		17.22	%		14.41	%		5.58	%
Class II(a)		10.39			17.06			14.20			5.40
Class III(a)		10.29			16.86			14.01			5.21	(c)
Russell 1000® Value Index		8.61			13.66			14.04			7.10

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. For the portion of the period, returns do not show the effects of distribution fees (12b-1 fees) applicable to Class II Shares. If such fees were included, returns shown would have been lower. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed a different investment objective and different investment strategies under the name BlackRock Large Cap Value V.I. Fund.

^(b)  For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The returns for Class III Shares prior to January 27, 2009, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,104.50	$	3.13	$	1,000.00	$	1,022.20	$	3.01		0.60	%
Class II		1,000.00		1,103.90		3.98		1,000.00		1,021.40		3.82		0.75
Class III		1,000.00		1,102.90		4.51		1,000.00		1,020.90		4.33		0.85

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock Advantage Large Cap Value V.I. Fund

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Financials		26	%
Health Care		14
Energy		10
Information Technology		9
Industrials		9
Consumer Staples		8
Consumer Discretionary		7
Utilities		6
Real Estate		5
Materials		3
Telecommunication Services		2
Short-Term Securities		5
Liabilities in Excess of Other Assets		(4	)

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Advantage Large Cap Value V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 98.8%
Aerospace & Defense — 1.7%
Boeing Co. (The)		1,103	$	325,286
Orbital ATK, Inc.		493		64,829
Raytheon Co.		7,900		1,484,015
				1,874,130
Auto Components — 1.2%
BorgWarner, Inc.		23,491		1,200,155
Delphi Technologies plc		1,436		75,347
				1,275,502
Banks — 12.5%
Bank of America Corp.		124,087		3,663,048
Citigroup, Inc.		20,453		1,521,908
Citizens Financial Group, Inc.		32,599		1,368,506
First Horizon National Corp.(a)		58,390		1,167,216
First Republic Bank		14,011		1,213,913
JPMorgan Chase & Co.		19,152		2,048,115
SunTrust Banks, Inc.		22,168		1,431,831
US Bancorp		590		31,612
Wells Fargo & Co.		18,403		1,116,510
Western Alliance Bancorp(b)		1,994		112,901
				13,675,560
Beverages — 0.4%
Coca-Cola European Partners plc		7,995		318,601
Molson Coors Brewing Co., Class B		1,555		127,619
				446,220
Biotechnology — 1.9%
AbbVie, Inc.		5,841		564,883
Amgen, Inc.		700		121,730
Gilead Sciences, Inc.		19,044		1,364,312
				2,050,925
Capital Markets — 4.6%
CME Group, Inc.		1,894		276,619
Evercore, Inc., Class A		5,611		504,990
Intercontinental Exchange, Inc.		19,617		1,384,175
Invesco Ltd.		14,709		537,467
S&P Global, Inc.		6,970		1,180,718
SEI Investments Co.		16,610		1,193,595
				5,077,564
Chemicals — 2.2%
Air Products & Chemicals, Inc.		7,713		1,265,549
Eastman Chemical Co.		12,340		1,143,178
				2,408,727
Commercial Services & Supplies — 0.0%
LSC Communications, Inc.		2,354		35,663
Communications Equipment — 1.0%
Cisco Systems, Inc.		14,125		540,987
InterDigital, Inc.		6,204		472,435
Motorola Solutions, Inc.		367		33,155
Palo Alto Networks, Inc.(b)		99		14,349
				1,060,926
Diversified Consumer Services — 0.0%
H&R Block, Inc.(a)		1,430		37,495
Diversified Financial Services — 2.2%
Berkshire Hathaway, Inc., Class B(b)		12,175		2,413,328
Diversified Telecommunication Services — 1.0%
AT&T, Inc.		22,461		873,284
Verizon Communications, Inc.		3,110		164,612
				1,037,896

Security	Shares		Value
Electric Utilities — 3.3%
Portland General Electric Co.		23,504	$	1,071,313
PPL Corp.		2,638		81,646
Westar Energy, Inc.		21,769		1,149,403
Xcel Energy, Inc.		26,612		1,280,303
				3,582,665
Electrical Equipment — 2.0%
AMETEK, Inc.		5,642		408,876
Hubbell, Inc.		7,158		968,763
Rockwell Automation, Inc.		4,317		847,643
				2,225,282
Electronic Equipment, Instruments & Components — 0.5%
Dolby Laboratories, Inc., Class A		6,665		413,230
SYNNEX Corp.		852		115,829
				529,059
Energy Equipment & Services — 0.7%
Baker Hughes a GE Co.		8,438		266,978
Halliburton Co.		10,402		508,346
				775,324
Equity Real Estate Investment Trusts (REITs) — 3.5%
Alexandria Real Estate Equities, Inc.		5,429		708,973
Gaming and Leisure Properties, Inc.		2,041		75,517
Outfront Media, Inc.		45,190		1,048,408
Prologis, Inc.		4,479		288,940
Simon Property Group, Inc.		4,596		789,317
Ventas, Inc.		4,935		296,149
Weingarten Realty Investors		17,580		577,855
				3,785,159
Food & Staples Retailing — 1.4%
Performance Food Group Co.(b)		28,966		958,775
Wal-Mart Stores, Inc.		5,534		546,482
				1,505,257
Food Products — 3.6%
Archer-Daniels-Midland Co.		30,075		1,205,406
Bunge Ltd.		10,768		722,317
Hershey Co. (The)(a)		10,303		1,169,494
Kellogg Co.		7,983		542,684
Tyson Foods, Inc., Class A		3,070		248,885
				3,888,786
Gas Utilities — 0.3%
UGI Corp.		8,026		376,821
Health Care Equipment & Supplies — 3.1%
Baxter International, Inc.		21,849		1,412,319
Danaher Corp.		18,045		1,674,937
Edwards Lifesciences Corp.(b)		2,807		316,377
				3,403,633
Health Care Providers & Services — 3.1%
Aetna, Inc.		1,890		340,937
AmerisourceBergen Corp.		3,521		323,298
Cardinal Health, Inc.		2,356		144,352
Express Scripts Holding Co.(b)		8,176		610,257
Humana, Inc.		4,694		1,164,441
McKesson Corp.		5,210		812,499
				3,395,784
Hotels, Restaurants & Leisure — 1.5%
Carnival Corp.		13,473		894,203
McDonald’s Corp.		4,275		735,813
				1,630,016

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage Large Cap Value V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Household Products — 1.8%
Clorox Co. (The)		3,574	$	531,597
Kimberly-Clark Corp.		5,865		707,671
Procter & Gamble Co. (The)		7,799		716,572
				1,955,840
Industrial Conglomerates — 0.7%
3M Co.		134		31,540
General Electric Co.		37,146		648,198
Honeywell International, Inc.		312		47,848
				727,586
Insurance — 5.8%
Allstate Corp. (The)		13,606		1,424,684
First American Financial Corp.		9,598		537,872
Hanover Insurance Group, Inc. (The)		1,727		186,654
Hartford Financial Services Group, Inc. (The)		2,332		131,245
Lincoln National Corp.		16,853		1,295,490
Marsh & McLennan Cos., Inc.		942		76,669
Principal Financial Group, Inc.		10,001		705,671
Prudential Financial, Inc.		9,350		1,075,063
Reinsurance Group of America, Inc.		552		86,073
Unum Group		12,785		701,769
Validus Holdings Ltd.		2,470		115,893
				6,337,083
IT Services — 2.2%
Broadridge Financial Solutions, Inc.		5,441		492,846
Fidelity National Information Services, Inc.		884		83,175
International Business Machines Corp.		7,469		1,145,894
Mastercard, Inc., Class A		4,675		707,608
				2,429,523
Machinery — 4.0%
Cummins, Inc.		3,747		661,870
Ingersoll-Rand plc		3,265		291,205
Oshkosh Corp.		7,907		718,667
PACCAR, Inc.		19,836		1,409,943
Stanley Black & Decker, Inc.		389		66,010
Xylem, Inc.		18,245		1,244,309
				4,392,004
Media — 2.2%
John Wiley & Sons, Inc., Class A		15,580		1,024,385
Scripps Networks Interactive, Inc., Class A		334		28,517
Time Warner, Inc.		6,688		611,751
Walt Disney Co. (The)		6,878		739,454
				2,404,107
Metals & Mining — 1.2%
Newmont Mining Corp.		36,350		1,363,852
Multiline Retail — 0.8%
Target Corp.		12,666		826,457
Multi-Utilities — 2.3%
CMS Energy Corp.		27,891		1,319,244
Vectren Corp.		17,780		1,156,056
				2,475,300
Oil, Gas & Consumable Fuels — 9.7%
Anadarko Petroleum Corp.		24,071		1,291,168
Chevron Corp.		6,815		853,170
ConocoPhillips		31,955		1,754,010
Continental Resources, Inc.(b)		1,416		75,005
Devon Energy Corp.		1,012		41,897
Exxon Mobil Corp.		33,498		2,801,773
Marathon Oil Corp.		9,757		165,186
Marathon Petroleum Corp.		4,552		300,341
Occidental Petroleum Corp.		5,566		409,992

Security	Shares		Value
Oil, Gas & Consumable Fuels (continued)
Suncor Energy, Inc.		11,863	$	435,609
Valero Energy Corp.		16,957		1,558,518
Williams Cos., Inc. (The)		31,121		948,879
				10,635,548
Personal Products — 0.4%
Estee Lauder Cos., Inc. (The), Class A		3,095		393,808
Pharmaceuticals — 5.7%
Bristol-Myers Squibb Co.		26,683		1,635,134
Johnson & Johnson		13,412		1,873,925
Merck & Co., Inc.		30,320		1,706,106
Pfizer, Inc.		18,016		652,540
Zoetis, Inc.		5,285		380,731
				6,248,436
Real Estate Management & Development — 1.1%
CBRE Group, Inc., Class A(b)		21,253		920,468
Jones Lang LaSalle, Inc.		1,727		257,202
				1,177,670
Road & Rail — 0.2%
Norfolk Southern Corp.		1,393		201,846
Semiconductors & Semiconductor Equipment — 2.9%
Intel Corp.		24,515		1,131,612
QUALCOMM, Inc.		12,746		815,999
Texas Instruments, Inc.		11,552		1,206,491
				3,154,102
Software — 1.9%
Activision Blizzard, Inc.		11,598		734,385
Oracle Corp.		28,120		1,329,514
				2,063,899
Specialty Retail — 1.2%
Lowe’s Cos., Inc.		4,308		400,385
Penske Automotive Group, Inc.(a)		18,622		891,063
				1,291,448
Technology Hardware, Storage & Peripherals — 0.1%
HP, Inc.		7,397		155,411
Textiles, Apparel & Luxury Goods — 0.3%
Skechers U.S.A., Inc., Class A(b)		9,375		354,750
Thrifts & Mortgage Finance — 0.7%
Essent Group Ltd.(b)		17,322		752,121
Tobacco — 0.4%
Altria Group, Inc.		4,850		346,338
Philip Morris International, Inc.		789		83,358
				429,696
Wireless Telecommunication Services — 1.5%
Sprint Corp.		40,476		238,404
Telephone & Data Systems, Inc.(a)		20,592		572,458
T-Mobile US, Inc.(a)(b)		13,546		860,306
				1,671,168
Total Common Stocks — 98.8% (Cost: $95,471,005)				107,933,377
Total Long-Term Investments — 98.8% (Cost: $95,471,005)				107,933,377
Short-Term Securities — 4.6%(c)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%(e)		1,446,302		1,446,302

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage Large Cap Value V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Short-Term Securities (continued)
JPMorgan US Treasury Plus Money Market Fund, Agency Class, 1.14%		24,371	$	24,371
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)(e)		3,613,873		3,613,512
Total Short-Term Securities — 4.6% (Cost: $5,084,269)				5,084,185
Total Investments — 103.4% (Cost: $100,555,274)				113,017,562
Liabilities in Excess of Other Assets — (3.4)%				(3,722,685	)
Net Assets — 100.0%			$	109,294,877

^(a)  Security, or a portion of the security, is on loan.

^(b)  Non-income producing security.

^(c)  Annualized 7-day yield as of period end.

^(d)  Security was purchased with the cash collateral from loaned securities.

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		2,392,712		(946,410	)		1,446,302	$	1,446,302	$	17,995		$	6		$	—
SL Liquidity Series, LLC, Money Market Series		3,499,173		114,700			3,613,873		3,613,512		13,245	(b)		(679	)		(104	)
								$	5,059,814	$	31,240		$	(673	)	$	(104	)

^(a) Includes net capital gain distributions, if applicable.

^(b) Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Portfolio Abbreviation

S&P — Standard & Poor’s

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
S&P 500 E-Mini Index		11		03/16/18	$	1,472	$	8,234

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage Large Cap Value V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Future Contracts
Net unrealized appreciation(a)	$	—	$	—	$	8,234	$	—	$	—	$	—	$	8,234

^(a) Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Net Realized Gain from:
Futures contracts	$	—	$	—	$	184,413	$	—	$	—	$	—	$	184,413
Net Change in Unrealized Appreciation (Depreciation)
Futures contracts	$	—	$	—	$	8,234	$	—	$	—	$	—	$	8,234

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,395,191

For more information about the Fund’s investment risks regarding derivative instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Investments:
Assets:
Long-Term Investments
Common Stock(a)	$	107,933,377	$	—	$	—	$	107,933,377
Short-Term Securities		1,470,673		—		—		1,470,673
	$	109,404,050	$	—	$	—	$	109,404,050
Investments valued at NAV(b)								3,613,512
Total Investments							$	113,017,562
Derivative Financial Instruments(c)
Assets:
Equity contracts	$	8,234	$	—	$	—	$	8,234

^(a)  See above Schedule of Investments for values in each industry.

^(b)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(c)  Derivative financial instruments are futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Advantage Large Cap Value V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $3,510,771) (cost — $95,495,376)	$	107,957,748
Investments at value — affiliated (cost — $5,059,898)		5,059,814
Cash pledged for futures contracts		55,000
Receivables:
Investments sold		1,580,363
Securities lending income — affiliated		345
Dividends — affiliated		1,243
Dividends — unaffiliated		166,330
From custodian		24,371
From the Manager		1,633
Prepaid expenses		501
Total assets		114,847,348
LIABILITIES
Cash collateral on securities loaned at value		3,613,881
Payables:
Investments purchased		1,806,500
Capital shares redeemed		1,671
Investment advisory fees		6,426
Officer’s and Directors’ fees		3,546
Other accrued expenses		112,666
Other affiliates		177
Distribution fees		1,500
Variation margin on futures contracts		6,104
Total liabilities		5,552,471
NET ASSETS	$	109,294,877
NET ASSETS CONSIST OF
Paid-in capital	$	96,336,373
Distributions in excess of net investment income		5,506
Accumulated net realized gain		482,476
Net unrealized appreciation (depreciation)		12,470,522
NET ASSETS	$	109,294,877
NET ASSET VALUE
Class I — Based on net assets of $99,213,030 and 9,329,288 shares outstanding, 100 million shares authorized, $0.10 par value.	$	10.63
Class II — Based on net assets of $7,062,678 and 661,734 shares outstanding, 100 million shares authorized, $0.10 par value.	$	10.67
Class III — Based on net assets of $3,019,169 and 288,538 shares outstanding, 100 million shares authorized, $0.10 par value.	$	10.46

See notes to financial statements.

FINANCIAL STATEMENTS 9

Statement of Operations

December 31, 2017

	BlackRock Advantage Large Cap Value V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	17,995
Dividends — unaffiliated		2,308,732
Securities lending income — affiliated — net		13,245
Foreign taxes withheld		(10,570	)
Total investment income		2,329,402
EXPENSES
Investment advisory		783,086
Transfer agent — class specific		212,707
Professional		58,031
Printing		41,999
Accounting services		33,808
Custodian		21,418
Directors and Officer		21,303
Distribution — class specific		15,807
Transfer agent		4,999
Miscellaneous		45,036
Total expenses		1,238,194
Less:
Fees waived and/or reimbursed by the Manager		(318,504	)
Transfer agent fees reimbursed — class specific		(207,687	)
Total expenses after fees waived and/or reimbursed		712,003
Net investment income		1,617,399
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(679	)
Investments — unaffiliated		25,364,382
Capital gain distributions from investment companies — affiliated		6
Futures contracts		184,413
		25,548,122
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		(104	)
Investments — unaffiliated		(10,482,247	)
Futures contracts		8,234
		(10,474,117	)
Net realized and unrealized gain		15,074,005
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	16,691,404

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock Advantage Large Cap Value V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	1,617,399		$	1,222,135
Net realized gain		25,548,122			8,536,426
Net change in unrealized appreciation (depreciation)		(10,474,117	)		2,467,491
Net increase in net assets resulting from operations		16,691,404			12,226,052
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(1,493,752	)		(1,140,896	)
Class II		(93,118	)		(62,189	)
Class III		(38,131	)		(16,917	)
From net realized gain:
Class I		(23,621,034	)		(5,972,331	)
Class II		(1,667,678	)		(388,346	)
Class III		(725,996	)		(123,751	)
Decrease in net assets resulting from distributions to shareholders		(27,639,709	)		(7,704,430	)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from capital share transactions		19,457,704			(5,208,753	)
NET ASSETS
Total increase (decrease) in net assets		8,509,399			(687,131	)
Beginning of year		100,785,478			101,472,609
End of year	$	109,294,877		$	100,785,478
Undistributed (distributions in excess of) net investment income, end of year	$	5,506		$	7,169

^(a) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 11

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Advantage Large Cap Value V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	12.06		$	11.49		$	12.74		$	13.22		$	10.73
Net investment income(a)		0.20			0.15			0.14			0.15			0.14
Net realized and unrealized gain (loss)		1.86			1.41			(0.36	)		1.47			3.46
Net increase (decrease) from investment operations		2.06			1.56			(0.22	)		1.62			3.60
Distributions:(b)
From net investment income		(0.21	)		(0.16	)		(0.15	)		(0.16	)		(0.16	)
From net realized gain		(3.28	)		(0.83	)		(0.88	)		(1.94	)		(0.95	)
Total distributions		(3.49	)		(0.99	)		(1.03	)		(2.10	)		(1.11	)
Net asset value, end of year	$	10.63		$	12.06		$	11.49		$	12.74		$	13.22
Total Return:(c)
Based on net asset value		17.22	%		13.60	%		(1.72	)%		12.22	%		33.61	%
Ratios to Average Net Assets:
Total expenses		1.17	%(d)		1.09	%		1.08	%		1.08	%		1.08	%
Total expenses after fees waived and/or reimbursed		0.71	%(d)		0.82	%		0.77	%		0.77	%		0.78	%
Net investment income		1.57	%(d)		1.29	%		1.14	%		1.10	%		1.10	%
Supplemental Data:
Net assets, end of year (000)	$	99,213		$	92,795		$	93,983		$	109,570		$	115,094
Portfolio turnover rate		168	%		47	%		29	%		35	%		41	%

^(a) Based on average shares outstanding.

^(b) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c) Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage Large Cap Value V.I. Fund
	Class II
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	12.09		$	11.52		$	12.77		$	13.25		$	10.75
Net investment income(a)		0.18			0.13			0.12			0.13			0.11
Net realized and unrealized gain (loss)		1.86			1.40			(0.36	)		1.46			3.47
Net increase (decrease) from investment operations		2.04			1.53			(0.24	)		1.59			3.58
Distributions:(b)
From net investment income		(0.18	)		(0.13	)		(0.13	)		(0.13	)		(0.13	)
From net realized gain		(3.28	)		(0.83	)		(0.88	)		(1.94	)		(0.95	)
Total distributions		(3.46	)		(0.96	)		(1.01	)		(2.07	)		(1.08	)
Net asset value, end of year	$	10.67		$	12.09		$	11.52		$	12.77		$	13.25
Total Return:(c)
Based on net asset value		17.06	%		13.35	%		(1.96	)%		11.94	%		33.39	%
Ratios to Average Net Assets:
Total expenses		1.32	%(d)		1.27	%		1.19	%		1.23	%		1.20	%
Total expenses after fees waived and/or reimbursed		0.88	%(d)		1.03	%		0.96	%		0.97	%		0.98	%
Net investment income		1.38	%(d)		1.10	%		0.95	%		0.92	%		0.90	%
Supplemental Data:
Net assets, end of year (000)	$	7,063		$	6,060		$	5,680		$	4,002		$	5,324
Portfolio turnover rate		168	%		47	%		29	%		35	%		41	%

^(a) Based on average shares outstanding.

^(b) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c) Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d) Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 13

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage Large Cap Value V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	11.92		$	11.37		$	12.61		$	13.12		$	10.66
Net investment income(a)		0.16			0.11			0.10			0.10			0.09
Net realized and unrealized gain (loss)		1.83			1.38			(0.36	)		1.44			3.44
Net increase (decrease) from investment operations		1.99			1.49			(0.26	)		1.54			3.53
Distributions:(b)
From net investment income		(0.17	)		(0.11	)		(0.10	)		(0.11	)		(0.12	)
From net realized gain		(3.28	)		(0.83	)		(0.88	)		(1.94	)		(0.95	)
Total distributions		(3.45	)		(0.94	)		(0.98	)		(2.05	)		(1.07	)
Net asset value, end of year	$	10.46		$	11.92		$	11.37		$	12.61		$	13.12
Total Return:(c)
Based on net asset value		16.86	%		13.17	%		(2.11	)%		11.72	%		33.16	%
Ratios to Average Net Assets:
Total expenses		1.43	%(d)		1.35	%		1.34	%		1.32	%		1.33	%
Total expenses after fees waived and/or reimbursed		0.99	%(d)		1.18	%		1.13	%		1.13	%		1.14	%
Net investment income		1.26	%(d)		0.92	%		0.78	%		0.73	%		0.74	%
Supplemental Data:
Net assets, end of year (000)	$	3,019		$	1,930		$	1,810		$	1,931		$	1,576
Portfolio turnover rate		168	%		47	%		29	%		35	%		41	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Advantage Large Cap Value V.I. Fund (the “Fund”) (formerly known as BlackRock Large Cap Value V.I. Fund). The Fund is classified as diversified. Class I, Class II and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class II and Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of the Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Futures contracts traded on exchanges are valued at their last sale price.

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market– corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Securities Lending Agreements

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Citigroup Global Markets, Inc.	$	3,060,773	$	(3,060,773	)	$	—
Deutsche Bank Securities Inc.		574		(574	)		—
JP Morgan Securities LLC		412,323		(412,323	)		—
Morgan Stanley		37,101		(37,101	)		—
	$	3,510,771	$	(3,510,771	)	$	—

^(a)  Cash collateral with a value of $3,613,881 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: The Fund invests in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.75	%
$1 Billion — $3 Billion		0.71
$3 Billion — $5 Billion		0.68
$5 Billion — $10 Billion		0.65
Greater than $10 Billion		0.64

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

	Class II			Class III
Distribution Fees		0.15	%		0.25	%

For the year ended December 31, 2017, the following table shows the class specific distribution fees borne directly by each share class of the Fund:

	Class II		Class III		Total
Distribution Fees	$	9,796	$	6,011	$	15,807

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class II		Class III		Total
$	194,520	$	13,299	$	4,888	$	212,707

Expense Limitations, Waivers and Reimbursements: The Manager has agreed to voluntarily waive 0.05% of its investment advisory fee payable by the Fund. This voluntary waiver may be reduced or discontinued at any time without notice. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived and/or reimbursed was $52,207.

With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $1,867.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2019. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $1,065 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.00	%
Class II	0.05	%
Class III	0.11	%

The Manager has agreed not to reduce or discontinue this contractual reimbursement through April 30, 2019 unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class II		Class III		Total
Transfer Agent Fees Reimbursed	$	194,496	$	10,518	$	2,673	$	207,687

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class II		Class III
	0.60%		0.75%		0.85%

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Prior to June 12, 2017, the Fund expense limitations as a percentage of average daily net assets were as follows:

Class I	1.25%
Class II	1.40%
Class III	1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived and/or reimbursed $264,430, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $4,765 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	7,304,471
Sales		11,790,622
Net Realized Gain		2,941,625

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $171,214,434 and $176,469,284, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued)

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the reclassification of distributions were reclassified to the following accounts:

Undistributed net investment income	$	5,939
Accumulated net realized gain	$	(5,939	)

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	4,512,661	$	1,216,636
Long-Term capital gains		23,127,048		6,487,794
	$	27,639,709	$	7,704,430

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	830,526
Undistributed long-term capital gains		317,043
Net unrealized gains1		11,810,935
	$	12,958,504

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes unrealized of gains/losses on certain futures contracts and the timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	101,206,626
Gross unrealized appreciation	$	12,766,201
Gross unrealized depreciation		(955,265	)
Net unrealized appreciation (depreciation)	$	11,810,936

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

With exchange-traded futures, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the financial sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		365,201		$	4,677,279			214,822		$	2,473,890
Shares issued in reinvestment of distributions		2,324,002			25,114,786			588,001			7,113,227
Shares redeemed		(1,056,648	)		(13,532,267	)		(1,286,398	)		(14,879,343	)
Net increase (decrease)		1,632,555		$	16,259,798			(483,575	)	$	(5,292,226	)
Class II
Shares sold		110,054		$	1,387,115			194,495		$	2,194,408
Shares issued in reinvestment of distributions		162,376			1,760,796			37,157			450,535
Shares redeemed		(111,932	)		(1,430,159	)		(223,479	)		(2,574,630	)
Net increase		160,498		$	1,717,752			8,173		$	70,313
Class III
Shares sold		120,811		$	1,549,360			46,118		$	529,587
Shares issued in reinvestment of distributions		71,929			764,127			11,767			140,668
Shares redeemed		(66,112	)		(833,333	)		(55,137	)		(657,095	)
Net increase		126,628		$	1,480,154			2,748		$	13,160
Total Net Increase (Decrease)		1,919,681		$	19,457,704			(472,654	)	$	(5,208,753	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 21

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Advantage Large Cap Value V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Advantage Large Cap Value V.I. Fund (formerly BlackRock Large Cap Value V.I. Fund) of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Advantage U.S. Total Market V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Advantage U.S. Total Market V.I. Fund

Investment Objective

BlackRock Advantage U.S. Total Market V.I. Fund’s (the “Fund”) investment objective is to seek long-term growth of capital.

On June 12, 2017, BlackRock Value Opportunities V.I. Fund changed its name to BlackRock Advantage US Total Market V.I. Fund. Its benchmark changed from the S&P SmallCap 600^® Value Index to the Russell 3000 Index on the same date. Concurrently, there were changes to the Fund’s investment strategy.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its new benchmark, the Russell 3000^® Index, and outperformed its former benchmark, the S&P SmallCap 600^® Value Index.

Following the conversion, the Fund was managed by BlackRock’s Systematic Active Equity (SAE) team, which incorporates a research-driven, systematic approach to identifying differentiated performance opportunities across markets. Performance prior to that date is attributable to the previous portfolio management team.

What factors influenced performance?

From January 1, 2017 through June 12, 2017, selection in the consumer discretionary sector was the largest contributor relative to the S&P 600^® Value Index. Performance was especially strong in the hotels, restaurants & leisure industry, where positions in Bob Evans Farms, Inc. and ILG Inc. contributed to outperformance. Stock selection in the energy sector was an additional positive. Here, the Fund benefitted from its zero weightings in a number of the laggards within the energy equipment & services industry. Selection in the financials sector, where the Fund was helped by its investments in banking stocks, was an additional plus. Lastly, the Fund was aided by its effective stock selection in the healthcare sector.

From January 1, 2017 through June 12, 2017, stock selection in the materials sector was the largest detractor relative to the S&P SmallCap 600^® Value Index. Performance was weakest in the metals & mining industry, where key detractors included AK Steel Holding Corp. and Haynes International, Inc. Stock selection in real estate, industrials and consumer staples also detracted from performance.

From June 12, 2017 through the end of the period, signals that seek to capture sentiment and trends from market participants generated strong performance relative to the Russell 3000^® Index. Specifically, sentiment-based measures that evaluate investor flow, such as hedge funds, added value. Additionally, proprietary text-based analyses of company executive conference calls and sell-side analyst reports performed well. Fundamental signals that focus on company quality and value were also additive to performance. Notably, an insight that evaluates stocks based on key corporate events such as initial public offerings, CEO changes and revisions to forward guidance proved beneficial. Fundamental insights that identify value across cash flows and top-line sales further contributed to performance.

Despite broad strength across the stock selection model, there were a few notable detractors from June 12, 2017 onward relative to the Russell 3000^® Index. Given a market backdrop in which momentum strategies outperformed, select signals that reward stocks through a more cautionary lens struggled. Specifically, a quality-based insight that identifies strong cash flow generation through efficient asset use experienced weak performance. As investors focused on tax reform as a primary driver of stock returns, the market’s focus shifted away from balance sheet strength. Additionally, a signal that seeks to identify lower-risk stocks lagged amid investors’ preference for the growth style.

Describe portfolio positioning at period end.

Relative to the Russell 3000^® Index, the Fund was positioned neutrally form a sector perspective. The Fund had slight overweight positions in utilities and industrials and slight underweight positions in energy and financials.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Information Technology		23	%
Financials		15
Health Care		13
Consumer Discretionary		12
Industrials		11
Consumer Staples		7
Energy		5
Real Estate		4
Utilities		4
Materials		3
Telecommunication Services		2
Short-Term Securities		4
Liabilities in Excess of Other Assets		(3	)

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Advantage U.S. Total Market V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a) Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b) 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 of U.S. issuers and derivatives that have similar economic characteristics to such securities. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name “BlackRock Value Opportunities V.I. Fund”.

^(c) An index that measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

^(d) An unmanaged index that is a subset of the S&P 600^® Index and consists of those stocks in the S&P 600^® Index exhibiting the strongest value characteristics.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		12.40	%		14.05	%		14.56	%		8.03	%
Class II(a)		12.32			13.85			14.38			7.86
Class III(a)		12.29			13.83			14.35			7.80
Russell 3000® Index		11.20			21.13			15.58			8.60
S&P SmallCap 600® Value Index		10.56			11.51			15.52			9.99

^(a) Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name “BlackRock Value Opportunities V.I. Fund”.

^(b) For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustment made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,124.00	$	2.94	$	1,000.00	$	1,022.40	$	2.80		0.55	%
Class II		1,000.00		1,123.20		3.75		1,000.00		1,021.70		3.57		0.70
Class III		1,000.00		1,123.90		4.28		1,000.00		1,021.20		4.08		0.80

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock Advantage U.S. Total Market V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Advantage U.S. Total Market V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 99.0%
Aerospace & Defense — 3.5%
Boeing Co. (The)		10,394	$	3,065,295
Curtiss-Wright Corp.		24,278		2,958,274
HEICO Corp., Class A		27,932		2,208,025
KLX, Inc.(a)		17,638		1,203,793
				9,435,387
Airlines — 0.4%
Hawaiian Holdings, Inc.(b)		30,164		1,202,035
Auto Components — 1.7%
Lear Corp.		17,235		3,044,735
Tenneco, Inc.		26,743		1,565,535
				4,610,270
Banks — 6.6%
Bank of America Corp.		131,516		3,882,352
Cadence BanCorp(a)		13,626		369,537
Citigroup, Inc.		53,483		3,979,670
Citizens Financial Group, Inc.		1,548		64,985
CoBiz Financial, Inc.		5,200		103,948
First Horizon National Corp.(b)		149,958		2,997,661
JPMorgan Chase & Co.		31,011		3,316,316
Sandy Spring Bancorp, Inc.		3,594		140,238
Wintrust Financial Corp.(b)		36,113		2,974,628
				17,829,335
Beverages — 1.5%
PepsiCo, Inc.		33,537		4,021,757
Biotechnology — 3.7%
AbbVie, Inc.		33,176		3,208,451
Alexion Pharmaceuticals, Inc.(a)		17,808		2,129,659
Celgene Corp.(a)		12,286		1,282,167
CytomX Therapeutics, Inc.(a)		1,313		27,717
Exelixis, Inc.(a)		6,577		199,941
Gilead Sciences, Inc.		45,246		3,241,423
				10,089,358
Building Products — 0.4%
Trex Co., Inc.(a)		3,659		396,599
Universal Forest Products, Inc.		18,853		709,250
				1,105,849
Capital Markets — 4.1%			��
BGC Partners, Inc., Class A		179,623		2,714,103
Evercore, Inc., Class A		12,902		1,161,180
Intercontinental Exchange, Inc.		27,946		1,971,870
Moelis & Co., Class A		59,886		2,904,471
OM Asset Management plc		33,304		557,842
S&P Global, Inc.		10,380		1,758,372
				11,067,838
Chemicals — 1.5%
AdvanSix, Inc.(a)		23,018		968,367
Air Products & Chemicals, Inc.		10,027		1,645,230
Koppers Holdings, Inc.(a)		1,394		70,954
LyondellBasell Industries NV, Class A		6,449		711,454
Trinseo SA		8,753		635,468
				4,031,473
Commercial Services & Supplies — 1.1%
Brink’s Co. (The)		34,326		2,701,456
Interface, Inc.		13,298		334,445
				3,035,901
Communications Equipment — 0.9%
Cisco Systems, Inc.		17,789		681,319
InterDigital, Inc.		24,104		1,835,519
				2,516,838

Security	Shares		Value
Construction & Engineering — 0.4%
Argan, Inc.		4,423	$	199,035
Comfort Systems USA, Inc.		8,565		373,862
MasTec, Inc.(a)		8,759		428,753
				1,001,650
Construction Materials — 0.1%
Summit Materials, Inc., Class A(a)(b)		9,835		309,212
Consumer Finance — 1.1%(a)
Enova International, Inc.		8,481		128,911
Green Dot Corp., Class A		49,014		2,953,584
				3,082,495
Diversified Consumer Services — 0.5%
Grand Canyon Education, Inc.(a)		14,932		1,336,862
Diversified Financial Services — 0.6%
Berkshire Hathaway, Inc., Class B(a)		8,046		1,594,878
Diversified Telecommunication Services — 1.8%
Cogent Communications Holdings, Inc.		27,166		1,230,620
Verizon Communications, Inc.		70,089		3,709,811
				4,940,431
Electric Utilities — 2.5%
Duke Energy Corp.		8,767		737,392
IDACORP, Inc.		32,754		2,992,406
Portland General Electric Co.		59,940		2,732,065
PPL Corp.		10,154		314,266
				6,776,129
Electronic Equipment, Instruments & Components — 1.0%
Fitbit, Inc., Class A(a)		26,302		150,184
SYNNEX Corp.		18,981		2,580,467
				2,730,651
Energy Equipment & Services — 0.9%
Exterran Corp.(a)		5,157		162,136
Halliburton Co.		22,607		1,104,804
ProPetro Holding Corp.(a)(b)		53,309		1,074,710
				2,341,650
Equity Real Estate Investment Trusts (REITs) — 4.0%
CoreSite Realty Corp.		4,812		548,087
DCT Industrial Trust, Inc.		39,560		2,325,337
DiamondRock Hospitality Co.		23,936		270,237
EastGroup Properties, Inc.		377		33,319
First Industrial Realty Trust, Inc.		95,301		2,999,123
Ryman Hospitality Properties, Inc.		7,132		492,251
Simon Property Group, Inc.		15,372		2,639,987
Terreno Realty Corp.		12,351		433,026
Ventas, Inc.		17,046		1,022,930
Weingarten Realty Investors		1,798		59,100
				10,823,397
Food & Staples Retailing — 2.2%
Performance Food Group Co.(a)		48,682		1,611,374
Wal-Mart Stores, Inc.		43,396		4,285,355
				5,896,729
Food Products — 0.9%
Archer-Daniels-Midland Co.		18,002		721,520
Dean Foods Co.(b)		67,919		785,144
Kellogg Co.(b)		11,271		766,203
Tyson Foods, Inc., Class A		1,907		154,600
				2,427,467
Health Care Equipment & Supplies — 1.2%
Masimo Corp.(a)		31,581		2,678,069
Medtronic plc		7,415		598,761
				3,276,830

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage U.S. Total Market V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Health Care Providers & Services — 2.7%
AmerisourceBergen Corp.		1,554	$	142,688
Humana, Inc.		5,207		1,291,701
McKesson Corp.		2,072		323,128
UnitedHealth Group, Inc.		11,900		2,623,474
WellCare Health Plans, Inc.(a)		15,022		3,021,075
				7,402,066
Hotels, Restaurants & Leisure — 2.2%
International Game Technology plc		2,920		77,409
McDonald’s Corp.		23,685		4,076,662
Papa John’s International, Inc.(b)		11,890		667,148
Texas Roadhouse, Inc.		23,702		1,248,622
				6,069,841
Household Durables — 0.4%(a)
iRobot Corp.		5,627		431,591
William Lyon Homes, Class A		18,501		538,009
				969,600
Household Products — 0.7%
Kimberly-Clark Corp.		357		43,076
Procter & Gamble Co. (The)		19,626		1,803,237
				1,846,313
Independent Power and Renewable Electricity Producers — 0.1%
NRG Yield, Inc., Class A(b)		9,749		183,769
Industrial Conglomerates — 2.4%
3M Co.		18,102		4,260,668
General Electric Co.		23,939		417,736
Honeywell International, Inc.		12,123		1,859,183
				6,537,587
Insurance — 0.8%
Hartford Financial Services Group, Inc. (The)		883		49,695
James River Group Holdings Ltd.		44,187		1,767,922
Marsh & McLennan Cos., Inc.		5,290		430,553
				2,248,170
Internet & Direct Marketing Retail — 1.4%
Amazon.com, Inc.(a)		3,244		3,793,761
Internet Software & Services — 4.0%
Alphabet, Inc., Class A(a)		2,963		3,121,224
Alphabet, Inc., Class C(a)		2,953		3,090,019
Facebook, Inc., Class A(a)		21,911		3,866,415
Yelp, Inc.(a)		14,398		604,140
YuMe, Inc.		596		2,849
				10,684,647
IT Services — 4.5%
CSG Systems International, Inc.		296		12,971
EPAM Systems, Inc.(a)		339		36,419
Euronet Worldwide, Inc.(a)(b)		30,596		2,578,325
International Business Machines Corp.		14,661		2,249,290
Mastercard, Inc., Class A		18,454		2,793,197
Visa, Inc., Class A		39,331		4,484,521
				12,154,723
Leisure Products — 0.1%
MCBC Holdings, Inc.(a)		10,609		235,732
Life Sciences Tools & Services — 0.9%
PRA Health Sciences, Inc.(a)		25,899		2,358,622
Machinery — 1.4%
Alamo Group, Inc.		15,545		1,754,564
Illinois Tool Works, Inc.		530		88,431
Kadant, Inc.		4,715		473,386
PACCAR, Inc.		17,014		1,209,355
Rexnord Corp.(a)		5,221		135,850
				3,661,586

Security	Shares		Value
Media — 3.7%
Comcast Corp., Class A		112,944	$	4,523,407
Entravision Communications Corp., Class A		96,205		687,866
Time Warner, Inc.		7,577		693,068
Walt Disney Co. (The)		37,120		3,990,771
World Wrestling Entertainment, Inc., Class A		1,522		46,543
				9,941,655
Metals & Mining — 1.5%
Materion Corp.		7,761		377,185
Newmont Mining Corp.		82,325		3,088,834
Schnitzer Steel Industries, Inc., Class A		7,607		254,834
Worthington Industries, Inc.		10,667		469,988
				4,190,841
Multiline Retail — 0.7%
Big Lots, Inc.(b)		414		23,246
Target Corp.		29,091		1,898,188
				1,921,434
Multi-Utilities — 0.9%
Avista Corp.(b)		632		32,542
CMS Energy Corp.		48,587		2,298,165
				2,330,707
Oil, Gas & Consumable Fuels — 4.4%
Anadarko Petroleum Corp.		6,256		335,572
Chevron Corp.		6,749		844,907
ConocoPhillips		65,271		3,582,725
CONSOL Energy, Inc.(a)		16,626		656,893
Exxon Mobil Corp.		30,281		2,532,703
Occidental Petroleum Corp.		3,560		262,230
Pacific Ethanol, Inc.(a)(b)		63,271		287,883
Peabody Energy Corp.(a)		48,543		1,911,138
Valero Energy Corp.		14,550		1,337,291
Williams Cos., Inc. (The)		1,872		57,077
				11,808,419
Personal Products — 0.5%
Estee Lauder Cos., Inc. (The), Class A		9,185		1,168,700
Herbalife Ltd.(a)		695		47,065
Inter Parfums, Inc.		4,532		196,915
				1,412,680
Pharmaceuticals — 4.6%
Bristol-Myers Squibb Co.		18,550		1,136,744
Catalent, Inc.(a)		69,541		2,856,744
Corcept Therapeutics, Inc.(a)(b)		2,070		37,384
Johnson & Johnson		33,437		4,671,818
Merck & Co., Inc.		66,354		3,733,740
				12,436,430
Professional Services — 0.2%
Insperity, Inc.		292		16,746
WageWorks, Inc.(a)		8,435		522,970
				539,716
Road & Rail — 0.9%
Union Pacific Corp.		17,252		2,313,493
Semiconductors & Semiconductor Equipment — 3.7%
Intel Corp.		54,301		2,506,534
IXYS Corp.(a)		246		5,892
Microsemi Corp.(a)		52,009		2,686,265
QUALCOMM, Inc.		14,432		923,937
Texas Instruments, Inc.		38,108		3,979,999
				10,102,627
Software — 5.6%
Activision Blizzard, Inc.		9,803		620,726
Microsoft Corp.		38,856		3,323,743
Oracle Corp.		86,033		4,067,640

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage U.S. Total Market V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Software (continued)
RingCentral, Inc., Class A(a)		54,955	$	2,659,822
Varonis Systems, Inc.(a)		42,989		2,087,116
Verint Systems, Inc.(a)		56,119		2,348,580
Zendesk, Inc.(a)		2,006		67,883
				15,175,510
Specialty Retail — 1.4%
Aaron’s, Inc.		19,648		782,973
Home Depot, Inc. (The)		5,527		1,047,532
Lowe’s Cos., Inc.		20,533		1,908,337
TJX Cos., Inc. (The)		409		31,272
				3,770,114
Technology Hardware, Storage & Peripherals — 3.2%
Apple, Inc.		48,789		8,256,562
Pure Storage, Inc., Class A(a)		17,907		284,005
				8,540,567
Textiles, Apparel & Luxury Goods — 0.1%
NIKE, Inc., Class B		3,238		202,537
Thrifts & Mortgage Finance — 1.4%
Essent Group Ltd.(a)		63,474		2,756,041
Nationstar Mortgage Holdings, Inc.(a)(b)		33,607		621,730
Riverview Bancorp, Inc.		25,565		221,649
TFS Financial Corp.		7,943		118,668
				3,718,088
Tobacco — 1.6%
Altria Group, Inc.		59,735		4,265,677
Philip Morris International, Inc.		1,871		197,671
				4,463,348

Security	Shares		Value
Trading Companies & Distributors — 0.4%
Applied Industrial Technologies, Inc.		16,279	$	1,108,600
Water Utilities — 0.0%
SJW Group		456		29,106
Wireless Telecommunication Services — 0.0%
Boingo Wireless, Inc.(a)		4,539		102,128
Total Common Stocks — 99.0% (Cost: $246,014,555)				267,738,839
Total Long-Term Investments — 99.0% (Cost: $246,014,555)				267,738,839
Short-Term Securities — 3.7%(c)(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		1,558,684		1,558,684
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)		8,368,069		8,367,232
Total Short-Term Securities — 3.7% (Cost: $9,925,986)				9,925,916
Total Investments — 102.7% (Cost: $255,940,541)				277,664,755
Liabilities in Excess of Other Assets — (2.7)%				(7,338,122	)
Net Assets — 100.0%			$	270,326,633

^(a) Non-income producing security.

^(b) Security, or a portion of the security, is on loan.

^(c) Annualized 7-day yield as of period end.

^(d) Security was purchased with the cash collateral from loaned securities.

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		8,781,802		(7,223,118	)		1,558,684	$	1,558,684	$	24,634		$	11		$	—
SL Liquidity Series, LLC, Money Market Series		33,718,069		(25,350,000	)		8,368,069		8,367,232		125,287	(b)		(504	)		1,450
								$	9,925,916	$	149,921		$	(493	)	$	1,450

^(a)  Including net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

REIT — Real Estate Investment Trust

S&P — Standard & Poor’s

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage U.S. Total Market V.I. Fund

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
S&P 500 E-Mini Index		22		03/16/18	$	2,944	$	(2,376	)

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Liabilities — Derivative Financial Instruments
Future Contracts
Net unrealized depreciation(a)	$	—	$	—	$	2,376	$	—	$	—	$	—	$	2,376

^(a)  Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Net Realized Gain from:
Futures contracts	$	—	$	—	$	304,804		$	—	$	—	$	—	$	304,804
Net Change in Unrealized Appreciation (Depreciation) On:
Futures contracts	$	—	$	—	$	(2,376	)	$	—	$	—	$	—	$	(2,376	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,788,658

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Advantage U.S. Total Market V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2		Level 3		Total
Investments:
Assets: Long-Term Investments:
Common Stocks(a)	$	267,738,839		$	—	$	—	$	267,738,839
Short-Term Securities		1,558,684			—		—		1,558,684
Subtotal	$	269,297,523		$	—	$	—	$	269,297,523
Investments valued at NAV(b)								$	8,367,232
Total Investments								$	277,664,755
Derivative Financial Instruments(c)
Liabilties:
Equity contracts	$	(2,376	)		—		—	$	(2,376	)

^(a) See above Schedule of Investments for values in each industry.

^(b) As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(c) Derivative financial instruments are futures contracts which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 9

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Advantage U.S. Total Market V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $8,105,672) (cost — $246,014,555)	$	267,738,839
Investments at value — affiliated (cost — $9,925,986)		9,925,916
Cash pledged:
Futures contracts		96,000
Foreign currency at value (cost — $785)		776
Receivables:
Investments sold		3,844,259
Securities lending income — affiliated		5,948
Capital shares sold		1,977
Dividends — affiliated		2,062
Dividends — unaffiliated		283,204
Prepaid expenses		1,249
Total assets		281,900,230
LIABILITIES
Cash collateral on securities loaned at value		8,361,996
Payables:
Capital shares redeemed		174,437
Investment advisory fees		61,315
Investments purchased		2,787,478
Officer’s and Directors’ fees		8,929
Other accrued expenses		167,460
Other affiliates		483
Distribution fees		1,564
Variation margin on futures contracts		9,935
Total liabilities		11,573,597
NET ASSETS	$	270,326,633
NET ASSETS CONSIST OF
Paid-in capital	$	246,556,983
Undistributed net investment income		35,495
Accumulated net realized gain		2,012,326
Net unrealized appreciation (depreciation)		21,721,829
NET ASSETS	$	270,326,633
NET ASSET VALUE
Class I — Based on net assets of $261,871,845 and 10,216,680 shares outstanding, 100 million shares authorized, $0.10 par value.	$	25.63
Class II — Based on net assets of $3,131,119 and 122,443 shares outstanding, 100 million shares authorized, $0.10 par value.	$	25.57
Class III — Based on net assets of $5,323,669 and 284,097 shares outstanding, 10 million shares authorized, $0.10 par value.	$	18.74

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock Advantage U.S. Total Market V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	24,634
Dividends — unaffiliated(a)		3,993,529
Securities lending income — affiliated — net		125,287
Foreign taxes withheld		(3,567	)
Total investment income		4,139,883
EXPENSES
Investment advisory		1,934,577
Transfer agent — class specific		465,308
Printing		71,337
Professional		70,682
Accounting services		49,271
Custodian		38,184
Directors and Officer		28,338
Distribution — class specific		18,612
Transfer agent		4,992
Miscellaneous		46,863
Total expenses		2,728,164
Less:
Fees waived and/or reimbursed by the Manager		(587,216	)
Transfer agent fees reimbursed — class specific		(322,623	)
Total expenses after fees waived and/or reimbursed		1,818,325
Net investment income		2,321,558
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(504	)
Investments — unaffiliated		47,360,544
Capital gain distributions from investment companies — affiliated		11
Foreign currency transactions		(17	)
Futures contracts		304,804
		47,664,838
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		1,450
Investments — unaffiliated		(15,718,242	)
Foreign currency translations		50
Futures contracts		(2,376	)
		(15,719,118	)
Net realized and unrealized gain		31,945,720
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	34,267,278

^(a)  Includes non-recurring dividends in the amount of $464,138

See notes to financial statements.

FINANCIAL STATEMENTS 11

Statements of Changes in Net Assets

	BlackRock Advantage U.S. Total Market V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	2,321,558		$	626,144
Net realized gain		47,664,838			18,083,477
Net change in unrealized appreciation (depreciation)		(15,719,118	)		32,110,679
Net increase in net assets resulting from operations		34,267,278			50,820,300
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(2,278,683	)		(628,029	)
Class II		(22,476	)		(3,111	)
Class III		(48,843	)		(8,867	)
From net realized gain:
Class I		(50,143,967	)		(6,427,714	)
Class II		(616,770	)		(86,226	)
Class III		(1,323,283	)		(201,410	)
Decrease in net assets resulting from distributions to shareholders		(54,434,022	)		(7,355,357	)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from capital share transactions		30,391,828			(13,315,761	)
NET ASSETS
Total increase in net assets		10,225,084			30,149,182
Beginning of year		260,101,549			229,952,367
End of year	$	270,326,633		$	260,101,549
Undistributed net investment income, end of year	$	35,495		$	63,956

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Advantage U.S. Total Market V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	27.93		$	23.24		$	26.96		$	27.48		$	19.39
Net investment income(a)		0.26	(b)		0.07			0.07			0.10			0.09
Net realized and unrealized gain (loss)		3.60			5.43			(1.80	)		1.35			8.13
Net increase (decrease) from investment operations		3.86			5.50			(1.73	)		1.45			8.22
Distributions:(c)
From net investment income		(0.27	)		(0.07	)		(0.07	)		(0.08	)		(0.13	)
From net realized gain		(5.89	)		(0.74	)		(1.92	)		(1.89	)		—
From return of capital		—			—			(0.00	)(d)		—			—
Total distributions		(6.16	)		(0.81	)		(1.99	)		(1.97	)		(0.13	)
Net asset value, end of year	$	25.63		$	27.93		$	23.24		$	26.96		$	27.48
Total Return:(e)
Based on net asset value		14.05	%		23.65	%		(6.61	)%		5.22	%		42.40	%
Ratios to Average Net Assets:
Total expenses		1.05	%		1.01	%		1.01	%		1.02	%		1.00	%
Total expenses after fees waived and/or reimbursed		0.71	%		0.92	%		0.90	%		0.90	%		0.90	%
Net investment income		0.91	%(b)		0.28	%		0.26	%		0.37	%		0.37	%
Supplemental Data:
Net assets, end of year (000)	$	261,872		$	250,567		$	220,681		$	260,860		$	279,345
Portfolio turnover rate		179	%		78	%		61	%		57	%		66	%

^(a)  Based on average shares outstanding.

^(b) Net investment income per share and the ratio of net investment income to average net assets includes $0.05 per share and 0.18%, respectively, resulting from a special dividend.

^(c) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d) Amount is greater than $(0.005) per share.

^(e) Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 13

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage U.S. Total Market V.I. Fund
	Class II
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	27.88		$	23.21		$	26.91		$	27.43		$	19.35
Net investment income(a)		0.20	(b)		0.03			0.02			0.05			0.05
Net realized and unrealized gain (loss)		3.60			5.41			(1.77	)		1.34			8.12
Net increase (decrease) from investment operations		3.80			5.44			(1.75	)		1.39			8.17
Distributions:(c)
From net investment income		(0.22	)		(0.03	)		(0.03	)		(0.02	)		(0.09	)
From net realized gain		(5.89	)		(0.74	)		(1.92	)		(1.89	)		—
From return of capital		—			—			(0.00	)(d)		—			—
Total distributions		(6.11	)		(0.77	)		(1.95	)		(1.91	)		(0.09	)
Net asset value, end of year	$	25.57		$	27.88		$	23.21		$	26.91		$	27.43
Total Return:(e)
Based on net asset value		13.85	%		23.40	%		(6.76	)%		5.03	%		42.25	%
Ratios to Average Net Assets:
Total expenses		1.22	%		1.20	%		1.18	%		1.19	%		1.14	%
Total expenses after fees waived and/or reimbursed		0.88	%		1.09	%		1.07	%		1.07	%		1.04	%
Net investment income		0.72	%(b)		0.10	%		0.08	%		0.20	%		0.22	%
Supplemental Data:
Net assets, end of year (000)	$	3,131		$	3,351		$	3,120		$	3,764		$	4,701
Portfolio turnover rate		179	%		78	%		61	%		57	%		66	%

^(a)  Based on average shares outstanding.

^(b) Net investment income per share and the ratio of net investment income to average net assets includes $0.05 per share and 0.17%, respectively, resulting from a special dividend.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage U.S. Total Market V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	21.89		$	18.36		$	21.73		$	22.50		$	15.90
Net investment income(a)		0.14	(b)		0.01			0.01			0.04			0.02
Net realized and unrealized gain (loss)		2.82			4.29			(1.43	)		1.11			6.67
Net increase (decrease) from investment operations		2.96			4.30			(1.42	)		1.15			6.69
Distributions:(c)
From net investment income		(0.22	)		(0.03	)		(0.03	)		(0.03	)		(0.09	)
From net realized gain		(5.89	)		(0.74	)		(1.92	)		(1.89	)		—
From return of capital		—			—			(0.00	)(d)		—			—
Total distributions		(6.11	)		(0.77	)		(1.95	)		(1.92	)		(0.09	)
Net asset value, end of year	$	18.74		$	21.89		$	18.36		$	21.73		$	22.50
Total Return:(e)
Based on net asset value		13.83	%		23.41	%		(6.78	)%		5.07	%		42.08	%
Ratios to Average Net Assets:
Total expenses		1.32	%		1.29	%		1.29	%		1.25	%		1.32	%
Total expenses after fees waived and/or reimbursed		0.95	%		1.11	%		1.09	%		1.09	%		1.09	%
Net investment income		0.65	%(b)		0.08	%		0.06	%		0.18	%		0.13	%
Supplemental Data:
Net assets, end of year (000)	$	5,324		$	6,184		$	6,152		$	8,002		$	8,764
Portfolio turnover rate		179	%		78	%		61	%		57	%		66	%

^(a)  Based on average shares outstanding.

^(b)  Net investment income per share and the ratio of net investment income to average net assets includes $0.04 per share and 0.17%, respectively, resulting from a special dividend.

^(c) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d) Amount is greater than $(0.005) per share.

^(e) Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 15

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Advantage U.S. Total Market V.I. Fund (the “Fund”) (formerly known as BlackRock Value Opportunities V.I. Fund). The Fund is classified as diversified. Class I, Class II and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class II and Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities are recognized on the accrual basis.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distribution of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
BNP Paribas S.A.	$	1,034,516	$	(1,034,516	)	$	—
Citigroup Global Markets, Inc.		4,891,252		(4,891,252	)		—
Deutsche Bank Securities Inc.		18,473		(18,473	)		—
JP Morgan Securities LLC		932,907		(932,907	)		—
Morgan Stanley		788,512		(788,512	)		—
State Street Bank & Trust Co.		440,012		(440,012	)		—
	$	8,105,672	$	(8,105,672	)	$	—

^(a)  Cash collateral with a value of $8,361,996 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.75	%
$1 Billion — $3 Billion		0.71
$3 Billion — $5 Billion		0.68
$5 Billion — $10 Billion		0.65
Greater than $10 Billion		0.64

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates of 0.15% and 0.25% based upon the average daily net assets attributable to Class II and Class III, respectively.

For the year ended December 31, 2017, the following table shows the class specific distribution fees borne directly by each share class of the Fund:

	Class II		Class III		Total
Distribution Fees	$	4,759	$	13,853	$	18,612

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class II		Class III		Total
$	447,523	$	6,474	$	11,311	$	465,308

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $2,258.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2019. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) of the Fund or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $2,681 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.07	%
Class II	0.09	%
Class III	0.01	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements are as follows:

	Class I		Class II		Class III		Total
Transfer Agent Fees Reimbursed	$	307,766	$	4,023	$	10,834	$	322,623

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued)

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class II		Class III
	0.55%		0.70%		0.80%

Prior to June 12, 2017, the expense limitations as a percentage of average daily net assets are as follows:

Class I	1.25	%
Class II	1.40	%
Class III	1.50	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived $584,958, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $45,936 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were $65,341,107.

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $458,831,594 and $476,092,877, respectively.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions was reclassified to the following accounts:

Undistributed net investment income	$	(17	)
Undistributed net realized gain	$	17

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	20,827,050	$	640,007
Long term capital gains		33,606,972		6,715,350
Tax Return of Capital		—		—
	$	54,434,022	$	7,355,357

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	2,349,618
Undistributed long-term capital gains		166,043
Net unrealized gains(a)		21,253,989
	$	23,769,650

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain futures contracts and the timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	256,410,757
Gross unrealized appreciation	$	24,514,211
Gross unrealized depreciation		(3,260,213	)
Net unrealized appreciation (depreciation)	$	21,253,998

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

NOTESTO FINANCIAL STATEMENTS 21

Notes to Financial Statements  (continued)

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares				Amount
Class I
Shares sold		289,177		$	8,303,261			327,636			$	7,975,556
Shares issued in reinvestment of distributions		2,015,232			52,422,649			251,991				7,055,742
Shares redeemed		(1,058,658	)		(30,166,900	)		(1,102,731	)			(26,953,529	)
Net increase (decrease)		1,245,751		$	30,559,010			(523,104	)		$	(11,922,231	)
Class II										��
Shares sold		836		$	22,989			1,234			$	31,358
Shares issued in reinvestment of distributions		24,627			639,247			3,196				89,337
Shares redeemed		(23,204	)		(646,382	)		(18,686	)			(468,111	)
Net increase (decrease)		2,259		$	15,854			(14,256	)		$	(347,416	)
Class III
Shares sold		20,673		$	458,121			16,572			$	323,624
Shares issued in reinvestment of distributions		71,553			1,372,125			9,584				210,277
Shares redeemed		(90,639	)		(2,013,282	)		(78,719	)			(1,580,015	)
Net increase (decrease)		1,587		$	(183,036	)		(52,563	)		$	(1,046,114	)
Total Net Increase (Decrease)		1,249,597		$	30,391,828			(589,923	)		$	(13,315,761	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Advantage U.S. Total Market V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Advantage U.S. Total Market V.I. Fund (formerly, BlackRock Value Opportunities V.I. Fund) of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOFTHE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 23

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Basic Value V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Basic Value V.I. Fund

Investment Objective

BlackRock Basic Value V.I. Fund’s (the “Fund”) investment objective is to seek capital appreciation and, secondarily, income.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its benchmark, the Russell 1000^® Value Index.

What factors influenced performance?

Stock selection in the consumer staples sector was the largest detractor from performance relative to the benchmark over the 12-month period, particularly the Fund’s overweight position in grocery store retailer Kroger Co., which reacted excessively negatively to Amazon.com’s entry into the grocery industry.

Stock selection in energy also weighed on relative performance, as the Fund’s valuation-based preference for smaller oil producers over major integrated oil companies underperformed due to falling oil prices early in the year. Among individual stock detractors in energy were Apache Corp., Devon Energy Corp., and Gulfport Energy Corp.

Finally, the Fund’s holding in payment services operator Discover Financial Services drove underperformance among financials after the company reported higher loss provisions than expected, prompting the Fund to shift exposure from credit card companies to banks within the sector.

On the positive side, stock selection in the health care sector was the leading contributor to relative performance during the period. The Fund’s overweight allocation to health care also contributed positively, particularly due to an overweight position in hospital products specialist Baxter International Inc.

An underweight allocation to the real estate sector on the basis of stretched valuations and tepid growth prospects also added value during the period. Within the telecommunication services (“telecom”) sector, the Fund’s decision not to own AT&T Inc. also contributed to performance, as the telecom giant’s earnings results revealed increasingly competitive conditions in the industry domestically.

Describe recent portfolio activity.

During the period, a combination of market movement and trading activity increased the Fund’s allocation to the health care and consumer staples sectors, while reducing the Fund’s weights in energy and financials.

Describe portfolio positioning at period end.

Relative to the Russell 1000^® Value Index, the Fund ended the period with overweight exposures to the health care, information technology, telecom, and financials sectors. The Fund maintained underweight exposures to real estate, industrials, consumer discretionary, and consumer staples.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Financials		27	%
Health Care		18
Information Technology		12
Energy		11
Consumer Staples		8
Utilities		7
Industrials		5
Telecommunication Services		4
Consumer Discretionary		4
Materials		3
Real Estate		—	(a)
Short-Term Securities		7
Liabilities in Excess of Other Assets		(6	)

^(a) Representing less than 0.5% of the Fund’s net assets.

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Basic Value V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests primarily in equity securities that Fund management believes are undervalued, which means that their prices are less than Fund management believes they are worth.

^(c)  An unmanaged index that is a subset of the Russell 1000^® Index that consists of those Russell 1000^® securities with lower price-to-book ratios and lower expected growth values.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5.Years (b)			10 Years (b)
Class I(a)		9.10	%		8.24	%		12.80	%		6.63	%
Class II(a)		9.08			8.15			12.62			6.47
Class III(a)		9.03			8.01			12.48			6.35
Russell 1000® Value Index		8.61			13.66			14.04			7.10

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,091.00	$	3.85	$	1,000.00	$	1,021.53	$	3.72		0.73	%
Class II		1,000.00		1,090.80		4.74		1,000.00		1,020.67		4.58		0.90
Class III		1,000.00		1,090.30		5.32		1,000.00		1,020.11		5.14		1.01

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock Basic Value V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Basic Value V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 99.4%
Airlines — 0.3%
Delta Air Lines, Inc.		21,974	$	1,230,544
Auto Components — 1.1%
Lear Corp.		29,966		5,293,794
Banks — 15.2%
Bank of America Corp.		320,895		9,472,820
Citigroup, Inc.		233,150		17,348,692
JPMorgan Chase & Co.		245,637		26,268,421
Regions Financial Corp.		360,188		6,224,049
Wells Fargo & Co.		226,720		13,755,102
				73,069,084
Biotechnology — 2.2%
Gilead Sciences, Inc.		150,661		10,793,354
Capital Markets — 4.2%
E*TRADE Financial Corp.(a)		66,997		3,321,041
Morgan Stanley		183,748		9,641,258
Nasdaq, Inc.		93,541		7,186,755
				20,149,054
Chemicals — 0.7%
Akzo Nobel NV, ADR		112,178		3,268,867
Communications Equipment — 5.0%
Cisco Systems, Inc.		623,961		23,897,706
Consumer Finance — 3.1%
Capital One Financial Corp.		71,698		7,139,687
Discover Financial Services		54,020		4,155,218
SLM Corp.(a)		327,196		3,697,315
				14,992,220
Containers & Packaging — 0.8%
Avery Dennison Corp.		13,402		1,539,354
Owens-Illinois, Inc.(a)		94,274		2,090,054
				3,629,408
Diversified Telecommunication Services — 2.5%
Verizon Communications, Inc.		226,248		11,975,307
Electric Utilities — 4.3%
Edison International		10,690		676,036
Exelon Corp.		238,217		9,388,132
FirstEnergy Corp.(b)		195,865		5,997,386
PG&E Corp.		98,936		4,435,301
				20,496,855
Electrical Equipment — 1.4%
ABB Ltd., ADR(b)		244,713		6,563,203
Equity Real Estate Investment Trusts (REITs) — 0.2%
Brixmor Property Group, Inc.		55,630		1,038,056
Food & Staples Retailing — 2.2%
Kroger Co. (The)(b)		134,242		3,684,943
Walgreens Boots Alliance, Inc.		93,533		6,792,366
				10,477,309
Food Products — 4.8%
General Mills, Inc.(b)		167,747		9,945,719
JM Smucker Co. (The)(b)		38,241		4,751,062
Kellogg Co.(b)		82,694		5,621,538
Tyson Foods, Inc., Class A		36,812		2,984,349
				23,302,668
Health Care Equipment & Supplies — 8.5%
Baxter International, Inc.		209,102		13,516,353
Koninklijke Philips NV, NYRS		139,112		5,258,434

Security	Shares		Value
Health Care Equipment & Supplies (continued)
Medtronic plc		66,326	$	5,355,824
Zimmer Biomet Holdings, Inc.		137,294		16,567,267
				40,697,878
Health Care Providers & Services — 0.3%
DaVita, Inc.(a)		20,050		1,448,613
Independent Power and Renewable Electricity Producers — 2.3%
AES Corp.		1,037,272		11,233,656
Industrial Conglomerates — 1.7%
General Electric Co.		365,799		6,383,192
Honeywell International, Inc.		11,469		1,758,886
				8,142,078
Insurance — 4.9%
American International Group, Inc.		88,539		5,275,154
Hartford Financial Services Group, Inc. (The)		127,055		7,150,655
Lincoln National Corp.		62,643		4,815,367
Prudential Financial, Inc.		28,465		3,272,906
XL Group Ltd.		88,153		3,099,460
				23,613,542
Internet Software & Services — 0.8%
eBay, Inc.(a)		104,425		3,941,000
Media — 2.8%
Comcast Corp., Class A		192,419		7,706,381
Interpublic Group of Cos., Inc. (The)(b)		298,134		6,010,381
				13,716,762
Metals & Mining — 1.3%
Nucor Corp.(b)		57,546		3,658,775
Reliance Steel & Aluminum Co.		31,636		2,714,052
				6,372,827
Oil, Gas & Consumable Fuels — 11.2%
ConocoPhillips		238,080		13,068,211
Devon Energy Corp.		271,487		11,239,562
Marathon Oil Corp.		226,647		3,837,134
Marathon Petroleum Corp.		65,333		4,310,671
Royal Dutch Shell plc, ADR, Class A(b)		167,992		11,206,746
Suncor Energy, Inc.		157,393		5,779,471
Valero Energy Corp.		46,247		4,250,562
				53,692,357
Personal Products — 0.2%
Unilever NV, NYRS		21,576		1,215,160
Pharmaceuticals — 7.3%
Novartis AG, ADR(b)		131,450		11,036,542
Pfizer, Inc.		669,876		24,262,909
				35,299,451
Professional Services — 0.9%
Nielsen Holdings plc(b)		125,573		4,570,857
Road & Rail — 0.9%
Norfolk Southern Corp.		30,319		4,393,223
Semiconductors & Semiconductor Equipment — 3.3%
NXP Semiconductors NV(a)		15,247		1,785,271
QUALCOMM, Inc.		218,040		13,958,921
				15,744,192
Software — 1.2%
Oracle Corp.		122,630		5,797,946
Technology Hardware, Storage & Peripherals — 1.5%
Apple, Inc.		41,994		7,106,645
Tobacco — 0.5%
Philip Morris International, Inc.		20,992		2,217,805

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Basic Value V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Wireless Telecommunication Services — 1.8%
Telephone & Data Systems, Inc.		286,623	$	7,968,119
United States Cellular Corp.(a)		21,130		795,122
				8,763,241
Total Common Stocks — 99.4% (Cost: $392,228,206)				478,144,662
Total Long-Term Investments — 99.4% (Cost: $392,228,206)				478,144,662
Short-Term Securities — 6.7%(c)(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		3,156,745		3,156,745
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)		28,837,798		28,834,914
Total Short-Term Securities — 6.7% (Cost: $31,992,266)				31,991,659
Total Investments — 106.1% (Cost: $424,220,472)				510,136,321
Liabilities in Excess of Other Assets — (6.1)%				(29,132,070	)
Net Assets — 100.0%			$	481,004,251

^(a)  Non-income producing security.

^(b)  Security, or a portion of the security, is on loan.

^(c)  Annualized 7-day yield as of period end.

^(d)  Security was purchased with the cash collateral from loaned securities.

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		9,004,744		(5,847,999	)		3,156,745	$	3,156,745	$	69,311		$	9		$	—
SL Liquidity Series, LLC, Money Market Series		15,486,989		13,350,809			28,837,798		28,834,914		66,168	(b)		(6,511	)		332
								$	31,991,659	$	135,479		$	(6,502	)	$	332

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Portfolio Abbreviations

ADR — American Depositary Receipts

NYRS — New York Registered Shares

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Investments:
Assets:
Long-Term Investments
Common Stocks(a)	$	478,144,662	$	—	$	—	$	478,144,662
Short-Term Securities		3,156,745		—		—		3,156,745
Subtotal	$	481,301,407	$	—	$	—	$	481,301,407
Investments valued at NAV(b)								28,834,914
Total Investments							$	510,136,321

^(a)  See above Schedule of Investments for values in each Industry.

^(b)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Basic Value V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $28,186,018) (cost — $392,228,206)	$	478,144,662
Investments at value — affiliated (cost — $31,992,266)		31,991,659
Cash		132,076
Receivables:
Securities lending income — affiliated		3,613
Capital shares sold		5,483
Dividends — affiliated		3,853
Dividends — unaffiliated		304,622
Prepaid expenses		2,130
Total assets		510,588,098
LIABILITIES
Cash collateral on securities loaned at value		28,837,484
Payables:
Capital shares redeemed		254,993
Investment advisory fees		286,812
Officer’s and Directors’ fees		4,805
Other accrued expenses		84,113
Other affiliates		1,515
Professional fees		41,436
Distribution fees		17,247
Transfer agent fees		55,442
Total liabilities		29,583,847
NET ASSETS	$	481,004,251
NET ASSETS CONSIST OF
Paid-in capital	$	392,597,592
Undistributed net investment income		98,753
Accumulated net realized gain		2,392,057
Net unrealized appreciation (depreciation)		85,915,849
NET ASSETS	$	481,004,251
NET ASSET VALUE
Class I — Based on net assets of $397,179,745 and 25,454,793 shares outstanding, 300 million shares authorized, $0.10 par value	$	15.60
Class II — Based on net assets of $4,928,343 and 316,812 shares outstanding, 100 million shares authorized, $0.10 par value	$	15.56
Class III — Based on net assets of $78,896,163 and 5,096,392 shares outstanding, 100 million shares authorized, $0.10 par value	$	15.48

See notes to financial statements.

FINANCIAL STATEMENTS 7

Statement of Operations

Year Ended December 31, 2017

	BlackRock Basic Value V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	69,311
Dividends — unaffiliated		10,689,334
Securities lending income — affiliated — net		66,168
Foreign taxes withheld		(47,523	)
Total investment income		10,777,290
EXPENSES
Investment advisory		2,954,622
Transfer agent — class specific		954,127
Distribution — class specific		240,466
Accounting services		90,196
Printing		84,338
Professional		69,211
Custodian		30,017
Directors and Officer		26,564
Transfer agent		5,001
Miscellaneous		32,752
Total expenses		4,487,294
Less:
Transfer agent fees reimbursed — class specific		(630,576	)
Fees waived and/or reimbursed by the Manager		(5,233	)
Total expenses after fees waived and/or reimbursed		3,851,485
Net investment income		6,925,805
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(6,511	)
Investments — unaffiliated		20,237,023
Capital gain distributions from investment companies — affiliated		9
		20,230,521
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		332
Investments — unaffiliated		10,057,317
		10,057,649
Net realized and unrealized gain		30,288,170
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	37,213,975

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock Basic Value V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	6,925,805		$	7,398,267
Net realized gain		20,230,521			11,127,761
Net change in unrealized appreciation (depreciation)		10,057,649			62,151,962
Net increase in net assets resulting from operations		37,213,975			80,677,990
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(5,893,355	)		(5,872,962	)
Class II		(64,132	)		(67,020	)
Class III		(909,408	)		(1,460,033	)
From net realized gain:
Class I		(15,171,206	)		(9,240,298	)
Class II		(189,626	)		(121,410	)
Class III		(3,173,178	)		(2,595,104	)
Decrease in net assets resulting from distributions to shareholders		(25,400,905	)		(19,356,827	)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from capital share transactions		(59,465,107	)		23,301,671
NET ASSETS
Total increase (decrease) in net assets		(47,652,037	)		84,622,834
Beginning of year		528,656,288			444,033,454
End of year	$	481,004,251		$	528,656,288
Undistributed net investment income, end of year	$	98,753		$	34,308

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations

See notes to financial statements.

FINANCIAL STATEMENTS 9

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Basic Value V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	15.21		$	13.36		$	16.42		$	17.44		$	12.80
Net investment income(a)		0.22			0.23			0.24			0.25			0.22
Net realized and unrealized gain (loss)		1.03			2.19			(1.20	)		1.51			4.65
Net increase (decrease) from investment operations		1.25			2.42			(0.96	)		1.76			4.87
Distributions:(b)
From net investment income		(0.25	)		(0.22	)		(0.25	)		(0.27	)		(0.23	)
From net realized gain		(0.61	)		(0.35	)		(1.85	)		(2.51	)		—
Total distributions		(0.86	)		(0.57	)		(2.10	)		(2.78	)		(0.23	)
Net asset value, end of year	$	15.60		$	15.21		$	13.36		$	16.42		$	17.44
Total Return:(c)
Based on net asset value		8.24	%		18.19	%		(5.95	)%		9.93	%		38.07	%
Ratios to Average Net Assets:
Total expenses		0.85	%(d)		0.84	%		0.86	%		0.85	%		0.84	%
Total expenses after fees waived and/or reimbursed		0.73	%(d)		0.73	%		0.73	%		0.72	%		0.72	%
Net investment income		1.47	%(d)		1.63	%		1.47	%		1.40	%		1.41	%
				��
Supplemental Data:
Net assets, end of year (000)	$	397,180		$	409,216		$	393,370		$	468,876		$	448,299
Portfolio turnover rate		41	%		45	%		50	%		39	%		47	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Basic Value V.I. Fund
	Class II
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	15.16		$	13.33		$	16.38		$	17.40		$	12.77
Net investment income(a)		0.20			0.20			0.21			0.22			0.19
Net realized and unrealized gain (loss)		1.03			2.18			(1.18	)		1.51			4.64
Net increase (decrease) from investment operations		1.23			2.38			(0.97	)		1.73			4.83
Distributions:(b)
From net investment income		(0.22	)		(0.20	)		(0.23	)		(0.24	)		(0.20	)
From net realized gain		(0.61	)		(0.35	)		(1.85	)		(2.51	)		—
Total distributions		(0.83	)		(0.55	)		(2.08	)		(2.75	)		(0.20	)
Net asset value, end of year	$	15.56		$	15.16		$	13.33		$	16.38		$	17.40
Total Return:(c)
Based on net asset value		8.15	%		17.88	%		(6.07	)%		9.75	%		37.85	%
Ratios to Average Net Assets:
Total expenses		1.02	%(d)		1.02	%		1.02	%		1.02	%		1.01	%
Total expenses after fees waived and/or reimbursed		0.90	%(d)		0.90	%		0.90	%		0.89	%		0.89	%
Net investment income		1.29	%(d)		1.47	%		1.30	%		1.23	%		1.24	%
Supplemental Data:
Net assets, end of year (000)	$	4,928		$	5,280		$	5,466		$	6,233		$	6,715
Portfolio turnover rate		41	%		45	%		50	%		39	%		47	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 11

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Basic Value V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	15.08		$	13.28		$	16.32		$	17.35		$	12.74
Net investment income(a)		0.18			0.18			0.19			0.20			0.17
Net realized and unrealized gain (loss)		1.02			2.17			(1.17	)		1.50			4.62
Net increase (decrease) from investment operations		1.20			2.35			(0.98	)		1.70			4.79
Distributions:(b)
From net investment income		(0.19	)		(0.20	)		(0.21	)		(0.22	)		(0.18	)
From net realized gain		(0.61	)		(0.35	)		(1.85	)		(2.51	)		—
Total distributions		(0.80	)		(0.55	)		(2.06	)		(2.73	)		(0.18	)
Net asset value, end of year	$	15.48		$	15.08		$	13.28		$	16.32		$	17.35
Total Return:(c)
Based on net asset value		8.01	%		17.72	%		(6.15	)%		9.63	%		37.65	%
Ratios to Average Net Assets:
Total expenses		1.16	%(d)		1.04	%		1.13	%		1.11	%		1.12	%
Total expenses after fees waived and/or reimbursed		1.01	%(d)		1.00	%		1.01	%		1.00	%		1.00	%
Net investment income		1.16	%(d)		1.25	%		1.19	%		1.11	%		1.14	%
Supplemental Data:
Net assets, end of year (000)	$	78,896		$	114,160		$	45,197		$	54,394		$	47,184
Portfolio turnover rate		41	%		45	%		50	%		39	%		47	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Basic Value V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I, Class II and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class II and Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and

NOTESTO FINANCIAL STATEMENTS 13

Notes to Financial Statements  (continued)

cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Recieved (a)			Net Amount
Citigroup Global Markets, Inc.	$	22,263,014	$	(22,263,014	)	$	—
Deutsche Bank Securities Inc.		934,706		(934,706	)		—
Morgan Stanley		4,988,298		(4,988,298	)		—
	$	28,186,018	$	(28,186,018	)	$	—

^(a)  Cash collateral with a value of $28,837,484 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.60	%
$1 Billion — $3 Billion		0.56
$3 Billion — $5 Billion		0.54
$5 Billion — $10 Billion		0.52
Greater than $10 Billion		0.51

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

	Class II			Class III
Distribution Fees		0.15	%		0.25	%

For the year ended December 31, 2017, the following table shows the class specific distribution fees borne directly by each share class of the Fund:

	Class II		Class III		Total
Distribution Fees	$	7,542	$	232,924	$	240,466

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class II		Class III		Total
$	713,087	$	10,229	$	230,811	$	954,127

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $5,233.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $5,749 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.06	%
Class II	0.08	%
Class III	0.09	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class II		Class III		Total
Transfer Agent Fees Reimbursed	$	477,549	$	6,206	$	146,821	$	630,576

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class II		Class III
	1.25%		1.40%		1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $22,664 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 ¹⁄₃% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $196,333,906 and $265,590,370, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the timing and recognition of partnership income were reclassified to the following accounts:

Undistributed net investment income	$	5,535
Accumulated net realized gain	$	(5,535	)

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	10,837,279	$	9,681,536
Long term capital gains		14,563,626		9,675,291
	$	25,400,905	$	19,356,827

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed long-term capital gains	$	5,529,932
Net unrealized gains(a)		82,876,727
	$	88,406,659

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	427,259,594
Gross unrealized appreciation	$	91,430,370
Gross unrealized depreciation		(8,553,643	)
Net unrealized appreciation (depreciation)	$	82,876,727

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the financials sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		654,115		$	9,987,597			513,208		$	7,180,733
Shares issued in reinvestment of distributions		1,355,509			21,064,561			997,564			15,113,260
Shares redeemed		(3,465,286	)		(53,113,894	)		(4,036,476	)		(56,435,698	)
Net decrease		(1,455,662	)	$	(22,061,736	)		(2,525,704	)	$	(34,141,705	)
Class II
Shares sold		5,727		$	86,583			—		$	—
Shares issued in reinvestment of distributions		16,392			253,758			12,491			188,430
Shares redeemed		(53,552	)		(815,043	)		(74,442	)		(1,035,844	)
Net decrease		(31,433	)	$	(474,702	)		(61,951	)	$	(847,414	)
Class III
Shares sold		805,717		$	12,136,647			5,548,659		$	78,156,015
Shares issued in reinvestment of distributions		265,245			4,082,586			269,920			4,055,137
Shares redeemed		(3,542,663	)		(53,147,902	)		(1,655,158	)		(23,920,362	)
Net increase (decrease)		(2,471,701	)	$	(36,928,669	)		4,163,421		$	58,290,790
Total Net Increase (Decrease)		(3,958,796	)	$	(59,465,107	)		1,575,766		$	23,301,671

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Basic Value V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Basic Value V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOFTHE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 19

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Capital Appreciation V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Capital Appreciation V.I. Fund

Investment Objective

BlackRock Capital Appreciation V.I. Fund’s (the “Fund”) investment objective is to seek long-term growth of capital.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed the benchmark Russell 1000^® Growth Index and the broad-market S&P 500^® Index. The following discussion of relative performance pertains to the Russell 1000^® Growth Index.

What factors influenced performance?

On a sector basis, information technology (“IT”) and consumer discretionary were the prime contributors to relative performance in the 12 months. Internet software & services accounted for the majority of the outperformance in IT, while internet & direct marketing retail holdings and an underweight to media drove gains within consumer discretionary. Stock selection and an underweight to the consumer staples sector also proved advantageous. Conversely, industrials and financials detracted from performance during the one-year period. Weakness among electrical equipment and professional services holdings, coupled with selection and an underweight to aerospace & defense, hindered returns in industrials. Within financials, banks were the main drag.

In stock specifics, the top individual contributors were Tencent Holdings Ltd. and Amazon.com Inc. Tencent outperformed after several quarters of accelerating revenue growth. The company exceeded expectations in almost every segment (payments, mobile games, advertising and cloud). The investment adviser maintains a material overweight in the shares. Amazon outperformed as continued underperformance among traditional retailers focused investors on its share gain opportunities. The company delivered a series of strong earnings reports, with notable acceleration in North America, International, Prime and Advertising. Further, Amazon Web Services continued its impressive growth.

Additional contributions came from positions in Activision Blizzard Inc., Netflix Inc. and Alibaba Group Holding Ltd.

Detractors over the annual period included Acuity Brands Inc. and Alexion Pharmaceuticals Inc. LED-lighting specialist Acuity underperformed after a series of earnings disappointments due to an industry slowing in short-cycle projects and a stock and flow business under pressure (weak volume and pricing trends/outlook). The stock was sold by the end of the reporting period. Alexion underperformed during the year amid a host of negative headlines, including executive management departures, an investigation into the sales practices used to sell its flagship product Soliris, and ongoing concerns as it relates to the company’s dependence on and durability of Soliris. Notwithstanding the year’s controversies, the investment adviser maintains its position as it continues to believe consensus expectations for Soliris’s revenue duration are unreasonably bearish; new management is making progress at stabilizing the operations environment; and, the valuation reflects extreme investor pessimism.

Underweights to Apple Inc. and Boeing Co. also weighed, as did the investment in private technology firm Palantir Technologies.

Describe recent portfolio activity.

Due to a combination of portfolio trading activity and market movement during the 12-month period, the portfolio’s weighting in IT substantially increased, particularly within software and internet software & services. Materials exposure also increased, namely within construction materials and chemicals. Exposure to financials and health care decreased, largely with respect to banks, diversified financials and biotechnology. Consumer discretionary saw declines as well.

Describe portfolio positioning at period end.

As of period end, the Fund’s largest sector overweight relative to the Russell 1000^® Growth Index was financials, followed by consumer discretionary, energy and materials. Industrials and consumer staples were the largest portfolio underweights.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Capital Appreciation V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses. The returns for Class III Shares prior to June 15, 2010, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution and/or service (12b-1) fees applicable to the Class III Shares.

^(b)  The Fund invests primarily in a diversified portfolio consisting primarily of common stock of U.S. companies that the investment adviser believes have exhibited above-average growth rates in earnings over the long-term.

^(c)  An unmanaged index that measures the performance of the large cap growth segment of the U.S. equity universe and consists of those Russell 1000^® securities with higher price-to-book ratios and higher forecasted growth values.

^(d)  An unmanaged index that covers 500 leading companies and captures approximately 80% coverage of available market capitalization.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		13.39	%		33.22	%		15.73	%		7.91	%
Class III(a)		13.35			32.94			15.43			7.65	(c)
Russell 1000® Growth Index		14.23			30.21			17.33			10.00
S&P 500® Index		11.42			21.83			15.79			8.50

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b) For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c) The returns for Class III Shares prior to June 15, 2010, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,133.90	$	4.20	$	1,000.00	$	1,021.27	$	3.97		0.78	%
Class III		1,000.00		1,133.50		5.59		1,000.00		1,019.96		5.30		1.04

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b) For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock Capital Appreciation V.I. Fund

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Information Technology		38	%
Consumer Discretionary		20
Health Care		13
Financials		8
Industrials		8
Materials		5
Consumer Staples		4
Energy		2
Real Estate		1
Software		1
Telecommunication Services		—	(a)
Short-Term Securities		4
Liabilities in Excess of Other Assets		(4	)

^(a)  Representing less than 1% of the Fund’s net assets.

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Capital Appreciation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 98.9%
Aerospace & Defense — 1.0%
TransDigm Group, Inc.		15,194	$	4,172,576
Airlines — 0.5%
Southwest Airlines Co.		31,307		2,049,043
Banks — 5.2%
Bank of America Corp.		370,368		10,933,263
First Republic Bank		63,412		5,494,016
Wells Fargo & Co.		73,847		4,480,298
				20,907,577
Beverages — 3.8%
Constellation Brands, Inc., Class A		47,962		10,962,674
Dr Pepper Snapple Group, Inc.		44,168		4,286,946
				15,249,620
Biotechnology — 3.5%(a)
Alexion Pharmaceuticals, Inc.		48,298		5,775,958
Biogen, Inc.		14,532		4,629,459
Vertex Pharmaceuticals, Inc.		24,455		3,664,826
				14,070,243
Capital Markets — 1.0%
S&P Global, Inc.		23,735		4,020,709
Chemicals — 3.1%
DowDuPont, Inc.		95,118		6,774,304
Sherwin-Williams Co. (The)		13,568		5,563,423
				12,337,727
Construction Materials — 1.7%
Vulcan Materials Co.		53,861		6,914,137
Diversified Financial Services — 1.5%
Berkshire Hathaway, Inc., Class B(a)		30,605		6,066,523
Diversified Telecommunication Services — 0.5%
Zayo Group Holdings, Inc.(a)		49,281		1,813,541
Energy Equipment & Services — 1.5%
Halliburton Co.		127,455		6,228,726
Equity Real Estate Investment Trusts (REITs) — 1.0%
Equinix, Inc.		6,601		2,991,705
SBA Communications Corp.(a)		7,013		1,145,644
				4,137,349
Health Care Equipment & Supplies — 2.9%
Becton Dickinson and Co.		30,538		6,536,964
Boston Scientific Corp.(a)		208,981		5,180,639
				11,717,603
Health Care Providers & Services — 4.8%
UnitedHealth Group, Inc.		87,236		19,232,049
Hotels, Restaurants & Leisure — 1.3%
Domino’s Pizza, Inc.(b)		28,591		5,402,555
Industrial Conglomerates — 2.3%
Honeywell International, Inc.		33,996		5,213,627
Roper Technologies, Inc.		15,565		4,031,335
				9,244,962
Internet & Direct Marketing Retail — 12.7%(a)
Amazon.com, Inc.		25,733		30,093,971
Netflix, Inc.		47,681		9,152,845
Priceline Group, Inc. (The)		6,721		11,679,351
				50,926,167

Security	Shares		Value
Internet Software & Services — 14.3%
Alibaba Group Holding Ltd., ADR(a)(b)		17,189	$	2,963,899
Alphabet, Inc., Class A(a)		20,447		21,538,870
Facebook, Inc., Class A(a)		77,796		13,727,882
MercadoLibre, Inc.(b)		13,067		4,111,662
Tencent Holdings Ltd.		289,500		14,983,928
				57,326,241
IT Services — 6.3%
PayPal Holdings, Inc.(a)		89,167		6,564,474
Visa, Inc., Class A		164,634		18,771,569
				25,336,043
Life Sciences Tools & Services — 1.2%
Illumina, Inc.(a)		21,561		4,710,863
Machinery — 0.6%
Caterpillar, Inc.		16,093		2,535,935
Oil, Gas & Consumable Fuels — 0.4%
Pioneer Natural Resources Co.		10,109		1,747,341
Pharmaceuticals — 0.9%
Zoetis, Inc.		50,356		3,627,646
Professional Services — 1.7%
Equifax, Inc.		57,193		6,744,199
Road & Rail — 1.9%
Union Pacific Corp.		57,838		7,756,076
Semiconductors & Semiconductor Equipment — 4.9%
ASML Holding NV, NYRS(b)		33,908		5,893,888
Broadcom Ltd.		22,861		5,872,991
NVIDIA Corp.		26,892		5,203,602
Teradyne, Inc.		67,703		2,834,725
				19,805,206
Software — 11.4%
Activision Blizzard, Inc.		51,542		3,263,639
Adobe Systems, Inc.(a)		43,374		7,600,860
Autodesk, Inc.(a)		70,915		7,434,020
Electronic Arts, Inc.(a)		38,123		4,005,202
Microsoft Corp.		274,482		23,479,190
				45,782,911
Specialty Retail — 4.2%
Home Depot, Inc. (The)		47,328		8,970,076
Ulta Beauty, Inc.(a)		35,401		7,917,787
				16,887,863
Technology Hardware, Storage & Peripherals — 1.4%
Apple, Inc.		32,516		5,502,683
Textiles, Apparel & Luxury Goods — 1.4%
NIKE, Inc., Class B		89,451		5,595,160
Total Common Stocks — 98.9% (Cost: $288,228,553)				397,849,274
Preferred Stocks — 0.6%
Software — 0.6%
Palantir Technologies, Inc., Series I (Acquired 2/07/2014, cost $2,858,020), 0.00%(a)(c)(d)		466,235		2,643,552
Total Preferred Stocks — 0.6% (Cost: $2,858,020)				2,643,552
Total Long-Term Investments — 99.5% (Cost: $291,086,573)				400,492,826

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Capital Appreciation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Short-Term Securities — 4.5%(e)(g)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		2,708,926	$	2,708,926
SL Liquidity Series, LLC, Money Market Series, 1.48%(f)		15,258,256		15,256,731
Total Short-Term Securities — 4.5% (Cost: $17,965,657)				17,965,657
Total Investments — 104.0% (Cost: $309,052,230)				418,458,483
Liabilities in Excess of Other Assets — (4.0)%				(16,243,530	)
Net Assets — 100.0%			$	402,214,953

^(a)  Non-income producing security.

^(b) Security, or a portion of the security, is on loan.

^(c) Restricted security as to resale, excluding 144A securities. The Fund held restricted securities with a current value of $2,643,552, representing 0.70% of its net assets as of period end, and an original cost of $2,858,020.

^(d) Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

^(e) Annualized 7-day yield as of period end.

^(f) Security was purchased with the cash collateral from loaned securities.

^(g)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		3,707,694		(998,768	)		2,708,926	$	2,708,926	$	19,473		$	7		$	—
SL Liquidity Series, LLC, Money Market Series		4,725,932		10,532,324			15,258,256		15,256,731		143,268	(b)		(8,169	)		419
								$	17,965,657	$	162,741		$	(8,162	)	$	419

^(a) Includes net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Portfolio Abbreviations

ADR — American Depositary Receipts

NYRS — New York Registered Shares

REIT — Real Estate Investment Trust

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Aerospace & Defense	$	4,172,576	$	—	$	—	$	4,172,576
Airlines		2,049,043		—		—		2,049,043
Banks		20,907,577		—		—		20,907,577
Beverages		15,249,620		—		—		15,249,620
Biotechnology		14,070,243		—		—		14,070,243
Capital Markets		4,020,709		—		—		4,020,709
Chemicals		12,337,727		—		—		12,337,727
Construction Materials		6,914,137		—		—		6,914,137
Diversified Financial Services		6,066,523		—		—		6,066,523
Diversified Telecommunication Services		1,813,541		—		—		1,813,541
Energy Equipment & Services		6,228,726		—		—		6,228,726

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Capital Appreciation V.I. Fund (Percentages shown are based on Net Assets)

	Level 1		Level 2		Level 3		Total
Equity Real Estate Investment Trusts (REITs)	$	4,137,349	$	—	$	—	$	4,137,349
Health Care Equipment & Supplies		11,717,603		—		—		11,717,603
Health Care Providers & Services		19,232,049		—		—		19,232,049
Hotels, Restaurants & Leisure		5,402,555		—		—		5,402,555
Industrial Conglomerates		9,244,962		—		—		9,244,962
Internet & Direct Marketing Retail		50,926,167		—		—		50,926,167
Internet Software & Services		42,342,313		14,983,928		—		57,326,241
IT Services		25,336,043		—		—		25,336,043
Life Sciences Tools & Services		4,710,863		—		—		4,710,863
Machinery		2,535,935		—		—		2,535,935
Oil, Gas & Consumable Fuels		1,747,341		—		—		1,747,341
Pharmaceuticals		3,627,646		—		—		3,627,646
Professional Services		6,744,199		—		—		6,744,199
Road & Rail		7,756,076		—		—		7,756,076
Semiconductors & Semiconductor Equipment		19,805,206		—		—		19,805,206
Software		45,782,911		—		—		45,782,911
Specialty Retail		16,887,863		—		—		16,887,863
Technology Hardware, Storage & Peripherals		5,502,683		—		—		5,502,683
Textiles, Apparel & Luxury Goods		5,595,160		—		—		5,595,160
Preferred Stocks		—		—		2,643,552		2,643,552
Short-Term Securities		2,708,926		—		—		2,708,926
Subtotal	$	385,574,272	$	14,983,928	$	2,643,552	$	403,201,752
Investments valued at NAV(a)							$	15,256,731
Total Investments							$	418,458,483

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share, as no quoted market value was available, and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Preferred Securities
Investments:
Assets:
Opening Balance, as of December 31, 2016	$	3,771,841
Transfers into Level 3		—
Transfers out of Level 3		—
Accrued discounts/premiums		—
Net realized gain (loss)		—
Net change in unrealized appreciation (depreciation)(a)(b)		(1,128,289	)
Purchases		—
Sales		—
Closing Balance, as of December 31, 2017	$	2,643,552
Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017(b)	$	(1,128,289	)

^(a) Included in the related net change in unrealized appreciation (depreciation) in the Statement of Operations.

^(b) Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017 is generally due to investments no longer held or categorized as Level 3 at period end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 7

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Capital Appreciation V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $14,904,951) (cost — $291,086,573)	$	400,492,826
Investments at value — affiliated (cost — $17,965,657)		17,965,657
Foreign currency at value (cost — $83)		83
Receivables:
Securities lending income — affiliated		2,160
Capital shares sold		14,023
Dividends — affiliated		2,284
Dividends — unaffiliated		45,468
Prepaid expenses		1,895
Total assets		418,524,396
LIABILITIES
Bank overdraft		177,483
Cash collateral on securities loaned at value		15,261,552
Payables:
Capital shares redeemed		369,247
Investment advisory fees		252,576
Officer’s and Directors’ fees		4,486
Other accrued expenses		94,411
Other affiliates		867
Distribution fees		54,862
Transfer agent fees		93,959
Total liabilities		16,309,443
NET ASSETS	$	402,214,953
NET ASSETS CONSIST OF
Paid-in capital	$	282,192,962
Undistributed net investment income		62,282
Accumulated net realized gain		10,553,456
Net unrealized appreciation (depreciation)		109,406,253
NET ASSETS	$	402,214,953
NET ASSET VALUE
Class I — Based on net assets of $142,246,394 and 13,861,449 shares outstanding, 100 million shares authorized, $0.10 par value	$	10.26
Class III — Based on net assets of $259,968,559 and 25,573,448 shares outstanding, 100 million shares authorized, $0.10 par value	$	10.17

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock Capital Appreciation V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	19,473
Dividends — unaffiliated(a)		2,881,195
Securities lending income — affiliated — net		143,268
Foreign taxes withheld		(10,566	)
Total investment income		3,033,370
EXPENSES
Investment advisory		2,526,195
Transfer agent — class specific		791,950
Distribution — class specific		630,068
Accounting services		71,162
Printing		61,156
Professional		55,658
Custodian		33,659
Directors and Officer		25,213
Transfer agent		5,001
Registration		31
Miscellaneous		14,733
Total expenses		4,214,826
Less:
Transfer agent fees reimbursed — class specific		(494,679	)
Fees waived and/or reimbursed by the Manager		(1,369	)
Total expenses after fees waived and/or reimbursed		3,718,778
Net investment loss		(685,408	)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(8,169	)
Investments — unaffiliated		48,217,787
Capital gain distributions from investment companies — affiliated		7
Foreign currency transactions		447
		48,210,072
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		419
Investments — unaffiliated		62,728,324
		62,728,743
Net realized and unrealized gain		110,938,815
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	110,253,407

^(a)  Includes non-recurring dividends in the amount of $356,796.

See notes to financial statements.

FINANCIAL STATEMENTS 9

Statements of Changes in Net Assets

	BlackRock Capital Appreciation V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment loss	$	(685,408	)	$	(803,733	)
Net realized gain		48,210,072			11,433,518
Net change in unrealized appreciation (depreciation)		62,728,743			(9,402,200	)
Net increase in net assets resulting from operations		110,253,407			1,227,585
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net realized gain:
Class I		(15,570,061	)		(3,477,222	)
Class III		(28,079,992	)		(6,437,188	)
Decrease in net assets resulting from distributions to shareholders		(43,650,053	)		(9,914,410	)
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from capital share transactions		(20,276,483	)		(8,176,154	)
NET ASSETS
Total increase (decrease) in net assets		46,326,871			(16,862,979	)
Beginning of year		355,888,082			372,751,061
End of year	$	402,214,953		$	355,888,082
Undistributed net investment income, end of year	$	62,282		$	20,528

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Capital Appreciation V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	8.63		$	8.86		$	9.02		$	9.80		$	8.50
Net investment (loss)(a)		(0.00	)(b)(c)		(0.00	)(b)(d)		(0.01	)		(0.01	)		(0.00	)(b)
Net realized and unrealized gain		2.86			0.01			0.63			0.87			2.86
Net increase from investment operations		2.86			0.01			0.62			0.86			2.86
Distributions:(e)
From net investment income		—			—			—			—			(0.00	)(b)
From net realized gain		(1.23	)		(0.24	)		(0.78	)		(1.64	)		(1.56	)
Total distributions		(1.23	)		(0.24	)		(0.78	)		(1.64	)		(1.56	)
Net asset value, end of year	$	10.26		$	8.63		$	8.86		$	9.02		$	9.80
Total Return:(f)
Based on net asset value		33.22	%		0.10	%		6.73	%		9.02	%		33.82	%
Ratios to Average Net Assets:
Total expenses		0.92	%		0.92	%		0.93	%		0.91	%		0.93	%
Total expenses after fees waived and/or reimbursed		0.79	%		0.80	%		0.79	%		0.79	%		0.80	%
Net investment loss		(0.00	)(b)(c)		(0.06	)%(d)		(0.15	)%		(0.10	)%		(0.00	)%(b)
Supplemental Data:
Net assets, end of year (000)	$	142,246		$	124,752		$	139,045		$	166,586		$	180,580
Portfolio turnover rate		48	%		89	%		70	%		102	%		158	%

^(a)  Based on average shares outstanding.

^(b)  Amount is greater than $(0.005) per share.

^(c)  Net Investment Income per share and the ratio of net investment income to average net assets include $0.01 per share and 0.09%, respectively, resulting from a special dividend from TransDigm Group, Inc. in August 2017.

^(d)  Net investment income per share and the ratio of net investment income to average net assets include $0.01 per share and 0.07%, respectively, resulting from a special dividend from TransDigm Group, Inc. in October 2016.

^(e)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(f)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 11

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Capital Appreciation V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	8.56		$	8.81		$	8.97		$	9.76		$	8.48
Net investment (loss)(a)		(0.03	)(b)		(0.03	)(c)		(0.04	)		(0.03	)		(0.03	)
Net realized and unrealized gain		2.84			0.02			0.63			0.86			2.84
Net increase (decrease) from investment operations		2.81			(0.01	)		0.59			0.83			2.81
Distributions:(d)
From net investment income		—			—			—			—			(0.00	)(e)
From net realized gain		(1.20	)		(0.24	)		(0.75	)		(1.62	)		(1.53	)
Total distributions		(1.20	)		(0.24	)		(0.75	)		(1.62	)		(1.53	)
Net asset value, end of year	$	10.17		$	8.56		$	8.81		$	8.97		$	9.76
Total Return:(f)
Based on net asset value		32.94	%		(0.13	)%		6.49	%		8.68	%		33.40	%
Ratios to Average Net Assets:
Total expenses		1.17	%		1.18	%		1.17	%		1.18	%		1.19	%
Total expenses after fees waived and/or reimbursed		1.05	%		1.06	%		1.05	%		1.05	%		1.06	%
Net investment loss		(0.27	)%(b)		(0.32	)%(c)		(0.40	)%		(0.35	)%		(0.27	)%
Supplemental Data:
Net assets, end of year (000)	$	259,969		$	231,136		$	233,706		$	233,723		$	207,582
Portfolio turnover rate		48	%		89	%		70	%		102	%		158	%

^(a)  Based on average shares outstanding.

^(b)  Net investment income per share and the ratio of net investment income to average net assets include $0.01 per share and 0.09%, respectively, resulting from a special dividend from TransDigm Group, Inc. in August 2017.

^(c)  Net investment income per share and the ratio of net investment income to average net assets include $0.00 per share and 0.07%, respectively, resulting from a special dividend from TransDigm Group, Inc. in October 2016.

^(d)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(e)  Amount is greater than $(0.005) per share.

^(f)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds.

The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Capital Appreciation V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares. Class III Shares were redeemed on December 31, 2007 and sales of Class III Shares recommenced on June 15, 2010.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

NOTESTO FINANCIAL STATEMENTS 13

Notes to Financial Statements  (continued)

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach	(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii)   recapitalizations and other transactions across the capital structure; and (iii)  market multiples of comparable issuers.
Income approach	(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii)   quoted prices for similar investments or assets in active markets; and (iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach	(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii)  relevant news and other public sources; and (iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market — corroborated inputs)

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Recieved (a)			Net Amount
BNP Paribas S.A.	$	603,505	$	(603,505	)	$	—
JP Morgan Securities LLC		4,073,903		(4,073,903	)		—
Morgan Stanley		10,227,543		(10,227,543	)		—
	$	14,904,951	$	(14,904,951	)	$	—

^(a)  Cash collateral with a value of $15,261,552 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.65	%
$1 Billion — $3 Billion		0.61
$3 Billion — $5 Billion		0.59
$5 Billion — $10 Billion		0.57
Greater than $10 Billion		0.55

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $630,068.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III		Total
$	276,421	$	515,529	$	791,950

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $1,369.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $4,121 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.07	%
Class III	0.08

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	180,765	$	313,914	$	494,679

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class III
	1.25%		1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $53,231 for securities lending agent services.

lnterfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “lnterfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the lnterfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets, to any one borrowing fund through the lnterfund Lending Program. A borrowing BlackRock fund may not borrow through the lnterfund Lending Program or from any other source more than 33 ¹⁄₃% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the lnterfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	—
Sales		655,543
Net Realized Gain		145,995

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $186,614,650 and $252,147,161, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions and net operating losses were reclassified to the following accounts:

Undistributed net investment income	$	727,162
Accumulated net realized gain	$	(727,162	)

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	8,773,659	$	—
Long-term capital gains		34,876,394		9,914,410
	$	43,650,053	$	9,914,410

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	2,313,767
Undistributed long-term capital gains		8,387,081
Net unrealized gains(a)		109,321,143
	$	120,021,991

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	309,137,340
Gross unrealized appreciation	$	111,464,970
Gross unrealized depreciation		(2,143,827	)
Net unrealized appreciation	$	109,321,143

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the information technology sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		334,343		$	3,268,914			777,970		$	6,572,821
Shares issued in reinvestment of distributions		1,510,157			15,570,061			401,138			3,477,222
Shares redeemed		(2,438,122	)		(24,590,116	)		(2,421,144	)		(20,728,474	)
Net decrease		(593,622	)	$	(5,751,141	)		(1,242,036	)	$	(10,678,431	)
Class III
Shares sold		608,475		$	5,912,633			2,536,670		$	20,090,081
Shares issued in reinvestment of distributions		2,750,278			28,079,992			748,085			6,437,188
Shares redeemed		(4,789,157	)		(48,517,967	)		(2,810,719	)		(24,024,992	)
Net increase (decrease)		(1,430,404	)	$	(14,525,342	)		474,036		$	2,502,277
Total Net Decrease		(2,024,026	)	$	(20,276,483	)		(768,000	)	$	(8,176,154	)

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 19

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Capital Appreciation V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Capital Appreciation V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Equity Dividend V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Equity Dividend V.I. Fund

Investment Objective

BlackRock Equity Dividend V.I. Fund’s (the “Fund”) investment objective is to seek long-term total return and current income.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed its benchmark, the Russell 1000^® Value Index, and underperformed the broad-market S&P 500^® Index. The following discussion of relative performance pertains to the Russell 1000^® Value Index.

What factors influenced performance?

The largest contribution to performance for the 12-month period came from a combination of stock selection and allocation decisions within the energy sector. Notably, an underweight to U.S. integrated oil & gas operators and an overweight to their non-U.S.-domiciled peers proved beneficial within the oil, gas & consumable fuels industry. An underweight to the energy equipment & services industry also contributed. In health care, stock selection and an overweight to the health care providers & services industry and stock selection in pharmaceuticals added to relative performance. Lastly, a combination of stock selection within and an underweight to telecommunication services (“telecom”) contributed positively, as did an underweight to the real estate sector.

The largest detractor from relative return derived from the portfolio’s cash position, as the period saw rising U.S. stock prices. Within utilities, a combination of stock selection within and an underweight to the electric utilities industry negatively impacted returns. In financials, stock selection in the insurance segment and an underweight to the diversified financial services industry detracted. At the industry level, stock selection within food & staples retailing was unfavorable.

Describe recent portfolio activity.

During the 12-month period, the Fund significantly boosted exposure to the health care sector. Holdings within telecom and utilities also were increased. Conversely, the Fund significantly reduced its holdings in the industrials sector. The Fund also reduced exposure to information technology (“IT”) and consumer discretionary.

Describe portfolio positioning at period end.

The Fund’s largest allocations were in the financials, health care and energy sectors. Relative to the benchmark, the Fund’s largest overweight positions were in the health care, financials and IT sectors. The Fund’s largest relative underweights were in the real estate, consumer discretionary and consumer staples segments.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Financials		28	%
Health Care		18
Energy		11
Information Technology		9
Industrials		8
Consumer Staples		7
Utilities		5
Consumer Discretionary		4
Materials		3
Telecommunication Services		3
Short-Term Securities		5
Liabilities in Excess of Other Assets		(1	)

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub-classifications for reporting ease.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Equity Dividend V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses. The returns for Class III Shares prior to July 1, 2011, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

^(b)  The Fund seeks to achieve its objective by investing primarily in a diversified portfolio of equity securities. Under normal circumstances, the Fund will invest in at least 80% of its assets in equity securities and at least 80% of its assets in dividend paying securities. The Fund’s total returns prior to October 1, 2010 are the returns of the Fund when it followed a different objective and different investment strategies under the name BlackRock Utilities & Telecommunications V.I. Fund.

^(c)  An unmanaged index that is a subset of the Russell 1000^® Index that consists of those Russell 1000^® securities with lower price-to-book ratios and lower expected growth values.

^(d)  An unmanaged index that covers 500 leading companies and captures approximately 80% coverage of available market capitalization.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		9.77	%		16.74	%		12.95	%		6.24	%
Class III(a)		9.68			16.49			12.66			5.98	(c)
Russell 1000® Value Index		8.61			13.66			14.04			7.10
S&P 500® Index		11.42			21.83			15.79			8.50

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to October 1, 2010 are the returns of the Fund when it followed a different objective and different investment strategies under the name BlackRock Utilities & Telecommunications V.I. Fund.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The returns for Class III Shares prior to July 1, 2011, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustment made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,097.70	$	3.65	$	1,000.00	$	1,021.73	$	3.52		0.69	%
Class III		1,000.00		1,096.80		4.97		1,000.00		1,020.47		4.79		0.94

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365(to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock Equity Dividend V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Equity Dividend V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 95.7%
Aerospace & Defense — 2.1%
Lockheed Martin Corp.		8,080	$	2,594,084
Northrop Grumman Corp.		14,174		4,350,142
				6,944,226
Air Freight & Logistics — 0.3%
United Parcel Service, Inc., Class B		8,848		1,054,239
Banks — 17.9%
Bank of America Corp.		442,840		13,072,637
Citigroup, Inc.		159,510		11,869,139
JPMorgan Chase & Co.		123,410		13,197,465
KeyCorp		91,990		1,855,438
Regions Financial Corp.		18,820		325,210
SunTrust Banks, Inc.		51,767		3,343,631
US Bancorp		82,350		4,412,313
Wells Fargo & Co.		167,575		10,166,775
				58,242,608
Beverages — 2.4%
Diageo plc		118,500		4,343,541
Dr Pepper Snapple Group, Inc.		34,980		3,395,159
				7,738,700
Capital Markets — 4.0%
Charles Schwab Corp. (The)		34,770		1,786,135
Goldman Sachs Group, Inc. (The)		16,790		4,277,420
Invesco Ltd.		28,348		1,035,836
Morgan Stanley		110,780		5,812,627
				12,912,018
Chemicals — 2.1%
DowDuPont, Inc.		83,495		5,946,514
Praxair, Inc.		6,485		1,003,100
				6,949,614
Communications Equipment — 0.7%
Motorola Solutions, Inc.		26,350		2,380,459
Construction Materials — 0.5%
CRH plc		48,010		1,723,079
Containers & Packaging — 0.4%
International Paper Co.		20,450		1,184,873
Diversified Telecommunication Services — 2.3%
BCE, Inc.		19,235		923,472
Verizon Communications, Inc.		125,560		6,645,891
				7,569,363
Electric Utilities — 3.9%
Edison International		11,860		750,027
Exelon Corp.		35,450		1,397,085
FirstEnergy Corp.		110,670		3,388,715
NextEra Energy, Inc.		21,065		3,290,142
PG&E Corp.		83,300		3,734,339
				12,560,308
Electronic Equipment, Instruments & Components — 0.4%
CDW Corp.		17,210		1,195,923
Energy Equipment & Services — 0.4%
Halliburton Co.		27,510		1,344,414
Food & Staples Retailing — 0.8%
Kroger Co. (The)		98,540		2,704,923
Food Products — 1.2%
General Mills, Inc.		33,290		1,973,764
Kellogg Co.		28,320		1,925,194
				3,898,958

Security	Shares			Value
Health Care Equipment & Supplies — 3.0%
Koninklijke Philips NV		123,230		$	4,653,002
Medtronic plc		49,740			4,016,505
Smith & Nephew plc		68,318			1,182,114
					9,851,621
Health Care Providers & Services — 7.3%
Aetna, Inc.		34,793			6,276,309
Anthem, Inc.		36,121			8,127,586
Cardinal Health, Inc.		26,660			1,633,458
McKesson Corp.		19,030			2,967,729
Quest Diagnostics, Inc.		16,695			1,644,291
UnitedHealth Group, Inc.		13,552			2,987,674
					23,637,047
Household Products — 0.9%			��
Procter & Gamble Co. (The)		32,345			2,971,859
Industrial Conglomerates — 3.1%
3M Co.		8,305			1,954,748
General Electric Co.		204,195			3,563,203
Honeywell International, Inc.		29,310			4,494,981
					10,012,932
Insurance — 5.6%
American International Group, Inc.		108,390			6,457,876
Brighthouse Financial, Inc.(a)		6,994			410,128
Marsh & McLennan Cos., Inc.		29,460			2,397,749
MetLife, Inc.		92,914			4,697,732
Prudential Financial, Inc.		11,003			1,265,125
Travelers Cos., Inc. (The)		22,868			3,101,816
					18,330,426
Leisure Products — 0.5%
Mattel, Inc.(b)		99,316			1,527,480
Machinery — 0.4%
Pentair plc		19,480			1,375,678
Media — 2.2%
Comcast Corp., Class A		131,710			5,274,985
Interpublic Group of Cos., Inc. (The)		48,130			970,301
Publicis Groupe SA		14,620			991,050
					7,236,336
Multiline Retail — 0.5%
Dollar General Corp.		18,210			1,693,712
Multi-Utilities — 1.1%
Public Service Enterprise Group, Inc.		70,540			3,632,810
Oil, Gas & Consumable Fuels — 10.9%
Chevron Corp.		47,073			5,893,069
Enbridge, Inc.		29,497			1,153,628
Hess Corp.		64,609			3,066,989
Marathon Oil Corp.		160,570			2,718,450
Marathon Petroleum Corp.		34,830			2,298,083
Pioneer Natural Resources Co.		7,890			1,363,787
Royal Dutch Shell plc, ADR, Class A		113,080			7,543,567
Suncor Energy, Inc.		176,070			6,465,290
TOTAL SA, ADR		88,118			4,871,163
					35,374,026
Personal Products — 0.8%
Unilever NV, NYRS		42,825			2,411,904
Pharmaceuticals — 8.0%
AstraZeneca plc		87,786			6,057,726
Merck & Co., Inc.		93,940			5,286,004
Novo Nordisk A/S, ADR		51,090			2,742,000
Pfizer, Inc.		330,350			11,965,277
					26,051,007

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Equity Dividend V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Professional Services — 1.3%
Equifax, Inc.		3,840	$	452,813
Experian plc		74,710		1,646,809
Nielsen Holdings plc		54,660		1,989,624
				4,089,246
Road & Rail — 0.6%
Union Pacific Corp.		14,845		1,990,714
Semiconductors & Semiconductor Equipment — 1.6%
QUALCOMM, Inc.		52,980		3,391,780
Taiwan Semiconductor Manufacturing Co. Ltd., ADR		41,390		1,641,113
				5,032,893
Software — 5.6%
Constellation Software, Inc.		2,614		1,584,662
Microsoft Corp.		84,095		7,193,486
Oracle Corp.		198,180		9,369,951
				18,148,099
Specialty Retail — 0.6%
Lowe’s Cos., Inc.		19,580		1,819,765
Technology Hardware, Storage & Peripherals — 0.9%
Lenovo Group Ltd.		2,040,000		1,148,750
Samsung Electronics Co. Ltd., GDR(c)		1,399		1,676,002
				2,824,752
Tobacco — 1.0%
Altria Group, Inc.		30,675		2,190,501
Philip Morris International, Inc.		10,775		1,138,379
				3,328,880
Wireless Telecommunication Services — 0.4%
SK Telecom Co. Ltd., ADR(b)		51,160		1,427,876
Total Common Stocks — 95.7% (Cost: $258,350,052)				311,172,768
Total Long-Term Investments — 95.7% (Cost: $258,350,052)				311,172,768

Security	Shares		Value
Short-Term Securities — 4.8%(d)(f)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		14,132,925	$	14,132,925
SL Liquidity Series, LLC, Money Market Series, 1.48%(e)		1,608,659		1,608,498
Total Short-Term Securities — 4.8% (Cost: $15,741,678)				15,741,423
Total Investments — 100.5% (Cost: $274,091,730)				326,914,191
Liabilities in Excess of Other Assets — (0.5)%				(1,774,913	)
Net Assets — 100.0%			$	325,139,278

^(a)  Non-income producing security.

^(b)  Security, or a portion of the security, is on loan.

^(c)  Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(d)  Annualized 7-day yield as of period end.

^(e)  Security was purchased with the cash collateral from loaned securities.

^(f)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		11,807,360		2,325,565			14,132,925	$	14,132,925	$	104,826		$	58		$	—
SL Liquidity Series, LLC, Money Market Series		5,710,743		(4,102,084	)		1,608,659		1,608,498		33,615	(b)		(2,041	)		(188	)
								$	15,741,423	$	138,441		$	(1,983	)	$	(188	)

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Portfolio Abbreviations

ADR — American Depositary Receipts

GDR — Global Depositary Receipts

NYRS — New York Registered Shares

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Equity Dividend V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Aerospace & Defense	$	6,944,226	$	—	$	—	$	6,944,226
Air Freight & Logistics		1,054,239		—		—		1,054,239
Banks		58,242,608		—		—		58,242,608
Beverages		3,395,159		4,343,541		—		7,738,700
Capital Markets		12,912,018		—		—		12,912,018
Chemicals		6,949,614		—		—		6,949,614
Communications Equipment		2,380,459		—		—		2,380,459
Construction Materials		—		1,723,079		—		1,723,079
Containers & Packaging		1,184,873		—		—		1,184,873
Diversified Telecommunication Services		7,569,363		—		—		7,569,363
Electric Utilities		12,560,308		—		—		12,560,308
Electronic Equipment, Instruments & Components		1,195,923		—		—		1,195,923
Energy Equipment & Services		1,344,414		—		—		1,344,414
Food & Staples Retailing		2,704,923		—		—		2,704,923
Food Products		3,898,958		—		—		3,898,958
Health Care Equipment & Supplies		4,016,505		5,835,116		—		9,851,621
Health Care Providers & Services		23,637,047		—		—		23,637,047
Household Products		2,971,859		—		—		2,971,859
Industrial Conglomerates		10,012,932		—		—		10,012,932
Insurance		18,330,426		—		—		18,330,426
Leisure Products		1,527,480		—		—		1,527,480
Machinery		1,375,678		—		—		1,375,678
Media		6,245,286		991,050		—		7,236,336
Multiline Retail		1,693,712		—		—		1,693,712
Multi-Utilities		3,632,810		—		—		3,632,810
Oil, Gas & Consumable Fuels		35,374,026		—		—		35,374,026
Personal Products		2,411,904		—		—		2,411,904
Pharmaceuticals		19,993,281		6,057,726		—		26,051,007
Professional Services		2,442,437		1,646,809		—		4,089,246
Road & Rail		1,990,714		—		—		1,990,714
Semiconductors & Semiconductor Equipment		5,032,893		—		—		5,032,893
Software		18,148,099		—		—		18,148,099
Specialty Retail		1,819,765		—		—		1,819,765
Technology Hardware, Storage & Peripherals		—		2,824,752		—		2,824,752
Tobacco		3,328,880		—		—		3,328,880
Wireless Telecommunication Services		1,427,876		—		—		1,427,876
Short-Term Securities		14,132,925		—		—		14,132,925
Subtotal	$	301,883,620	$	23,422,073	$	—	$	325,305,693
Investments valued at NAV(a)							$	1,608,498
Total Investments							$	326,914,191

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 7

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Equity Dividend V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $1,551,881) (cost — $258,350,052)	$	311,172,768
Investments at value — affiliated (cost — $15,741,678)		15,741,423
Foreign currency at value (cost — $1,667)		1,692
Receivables:
Investments sold		40,575
Securities lending income — affiliated		683
Capital shares sold		67,281
Dividends — affiliated		13,482
Dividends — unaffiliated		352,486
From the Manager		5,504
Prepaid expenses		1,553
Total assets		327,397,447
LIABILITIES
Cash collateral on securities loaned at value		1,609,373
Payables:
Capital shares redeemed		73,377
Investment advisory fees		211,565
Investments purchased		96,390
Officer’s and Directors’ fees		4,293
Other accrued expenses		78,994
Other affiliates		734
Distribution fees		59,396
Transfer agent fees		124,047
Total liabilities		2,258,169
NET ASSETS	$	325,139,278
NET ASSETS CONSIST OF
Paid-in capital	$	268,781,483
Undistributed net investment income		12,724
Accumulated net realized gain		3,522,520
Net unrealized appreciation (depreciation)		52,822,551
NET ASSETS	$	325,139,278
NET ASSET VALUE
Class I — Based on net assets of $37,524,652 and 3,091,229 shares outstanding, 100 million shares authorized, $0.10 par value.	$	12.14
Class III — Based on net assets of $287,614,626 and 23,738,134 shares outstanding, 100 million shares authorized, $0.10 par value.	$	12.12

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock Equity Dividend V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	104,826
Dividends — unaffiliated		7,458,226
Securities lending income — affiliated — net		33,615
Foreign taxes withheld		(149,915	)
Total investment income		7,446,752
EXPENSES
Investment advisory		1,784,983
Distribution — class specific		652,834
Transfer agent — class specific		652,213
Printing		65,270
Accounting services		59,460
Professional		48,087
Custodian		35,790
Directors and Officer		24,641
Transfer agent		4,999
Miscellaneous		13,917
Total expenses		3,342,194
Less:
Transfer agent fees reimbursed — class specific		(652,213	)
Fees waived and/or reimbursed by the Manager		(8,593	)
Total expenses after fees waived and/or reimbursed		2,681,388
Net investment income		4,765,364
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(2,041	)
Investments — unaffiliated		18,275,157
Capital gain distributions from investment companies — affiliated		58
Foreign currency transactions		1,564
		18,274,738
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		(188	)
Investments — unaffiliated		22,925,812
Foreign currency translations		88
		22,925,712
Net realized and unrealized gain		41,200,450
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	45,965,814

See notes to financial statements.

FINANCIAL STATEMENTS 9

Statements of Changes in Net Assets

	BlackRock Equity Dividend V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	4,765,364		$	3,253,492
Net realized gain		18,274,738			8,682,192
Net change in unrealized appreciation (depreciation)		22,925,712			20,643,955
Net increase in net assets resulting from operations		45,965,814			32,579,639
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(645,417	)		(572,333	)
Class III		(4,129,646	)		(2,692,740	)
From net realized gain:
Class I		(1,906,002	)		(1,013,606	)
Class III		(14,552,840	)		(6,297,460	)
Decrease in net assets resulting from distributions to shareholders		(21,233,905	)		(10,576,139	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		41,813,020			120,900,587
NET ASSETS
Total increase in net assets		66,544,929			142,904,087
Beginning of year		258,594,349			115,690,262
End of year	$	325,139,278		$	258,594,349
Undistributed net investment income, end of year	$	12,724		$	11,132

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Equity Dividend V.I. Fund
	Class I
	Year Ended December 31,
��	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	11.15		$	10.04		$	10.90		$	10.78		$	8.95
Net investment income(a)		0.22			0.21			0.19			0.20			0.19
Net realized and unrealized gain (loss)		1.62			1.42			(0.25	)		0.80			1.99
Net increase (decrease) from investment operations		1.84			1.63			(0.06	)		1.00			2.18
Distributions:(b)
From net investment income		(0.21	)		(0.19	)		(0.18	)		(0.20	)		(0.20	)
From net realized gain		(0.64	)		(0.33	)		(0.62	)		(0.68	)		(0.15	)
Total distributions		(0.85	)		(0.52	)		(0.80	)		(0.88	)		(0.35	)
Net asset value, end of year	$	12.14		$	11.15		$	10.04		$	10.90		$	10.78
Total Return:(c)
Based on net asset value		16.74	%		16.40	%		(0.61	)%		9.34	%		24.52	%
Ratios to Average Net Assets:
Total expenses		0.89	%(d)		0.89	%(d)		1.00	%		0.99	%		1.04	%
Total expenses after fees waived and/or reimbursed		0.68	%(d)		0.70	%(d)		0.79	%		0.78	%		0.84	%
Net investment income		1.82	%(d)		1.98	%(d)		1.79	%		1.81	%		1.95	%
														��
Supplemental Data:
Net assets, end of year (000)	$	37,525		$	35,256		$	30,527		$	35,694		$	36,658
Portfolio turnover rate		37	%		23	%		25	%		18	%		18	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 11

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Equity Dividend V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	11.13		$	10.03		$	10.89		$	10.77		$	8.95
Net investment income(a)		0.19			0.18			0.17			0.17			0.17
Net realized and unrealized gain (loss)		1.62			1.42			(0.25	)		0.80			1.97
Net increase (decrease) from investment operations		1.81			1.60			(0.08	)		0.97			2.14
Distributions:(b)
From net investment income		(0.18	)		(0.17	)		(0.16	)		(0.17	)		(0.17	)
From net realized gain		(0.64	)		(0.33	)		(0.62	)		(0.68	)		(0.15	)
Total distributions		(0.82	)		(0.50	)		(0.78	)		(0.85	)		(0.32	)
Net asset value, end of year	$	12.12		$	11.13		$	10.03		$	10.89		$	10.77
Total Return:(c)
Based on net asset value		16.49	%		16.06	%		(0.82	)%		9.07	%		24.12	%
Ratios to Average Net Assets:
Total expenses		1.16	%(d)		1.13	%(d)		1.16	%		1.24	%		1.28	%
Total expenses after fees waived and/or reimbursed		0.93	%(d)		0.95	%(d)		1.03	%		1.03	%		1.09	%
Net investment income		1.57	%(d)		1.73	%(d)		1.59	%		1.56	%		1.71	%
Supplemental Data:
Net assets, end of year (000)	$	287,615		$	223,338		$	85,163		$	22,619		$	20,567
Portfolio turnover rate		37	%		23	%		25	%		18	%		18	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Equity Dividend V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares. Class III Shares were redeemed on December 31, 2007 and sales of Class III Shares recommenced on July 1, 2011.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

NOTESTO FINANCIAL STATEMENTS 13

Notes to Financial Statements  (continued)

     Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
JP Morgan Securities LLC	$	1,551,881	$	(1,551,881	)	$	—

^(a)  Cash collateral with a value of $1,609,373 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion	0.60%
$1 Billion — $3 Billion	0.56
$3 Billion — $5 Billion	0.54
$5 Billion — $10 Billion	0.52
Greater than $10 Billion	0.51

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $652,834.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III	Total
$	75,822	$576,391	$	652,213

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $8,593.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $3,346 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse all transfer agent fees for Class I and III. The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	75,822	$	576,391	$	652,213

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I	Class III
1.25%		1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $11,782 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 ¹⁄₃% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $127,900,683 and $104,096,465, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions and the reclassification of distributions were reclassified to the following accounts:

Undistributed net investment income	$	11,291
Accumulated net realized gain	$	(11,291	)

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	7,150,173	$	4,212,059
Long term capital gains		14,083,732		6,364,080
	$	21,233,905	$	10,576,139

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	622,664
Undistributed long-term capital gains		3,254,853
Net unrealized gains1		52,480,278
	$	56,357,795

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	274,434,003
Gross unrealized appreciation	$	57,933,956
Gross unrealized depreciation		(5,453,768	)
Net unrealized appreciation	$	52,480,188

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the financials sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		305,267		$	3,599,163			508,947		$	5,352,774
Shares issued in reinvestment of distributions		211,779			2,551,419			144,726			1,585,939
Shares redeemed		(588,300	)		(6,980,961	)		(530,755	)		(5,460,031	)
Net increase (decrease)		(71,254	)	$	(830,379	)		122,918		$	1,478,682
Class III
Shares sold		4,790,801		$	55,321,887			11,932,893		$	122,634,261
Shares issued in reinvestment of distributions		1,552,013			18,682,485			818,081			8,990,200
Shares redeemed		(2,671,545	)		(31,360,973	)		(1,174,386	)		(12,202,556	)
Net increase		3,671,269		$	42,643,399			11,576,588		$	119,421,905
Total Net Increase		3,600,015		$	41,813,020			11,699,506		$	120,900,587

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Equity Dividend V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Equity Dividend V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOFTHE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 19

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Global Allocation V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Global Allocation V.I. Fund

Investment Objective

BlackRock Global Allocation V.I. Fund’s (the “Fund”) investment objective is to seek high total investment return.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed both its Reference Benchmark and the broad based all-equity benchmark, the FTSE World Index. The Reference Benchmark is comprised as follows: 36% S&P 500^® Index; 24% FTSE World (ex-U.S.) Index; 24% ICE BofAML Current 5-Year U.S. Treasury Index; and 16% Citigroup Non-US Dollar World Government Bond Index. The Fund invests in both equities and bonds, and therefore, the Reference Benchmark provides a more accurate representation of the Fund’s composition and is a more comparable means for measurement. The following discussion of relative performance pertains to the Reference Benchmark. The following commentary (and referenced allocation percentages) are based on the economic exposures of the Fund, which reflect adjustments for futures, swaps and options (except with respect to fixed income securities), and convertible bonds, and may vary relative to the market value.

What factors influenced performance?

Within equities, an overweight to Japan and underweight to the United States detracted from performance. From a sector perspective, an underweight and stock selection in information technology (“IT”), as well as stock selection within industrials, financials and health care weighed on returns. Exposure to commodity-related securities and cash and cash equivalents detracted. Currency management, notably an overweight to the U.S. dollar and an underweight to the euro, negatively impacted returns.

Within equities, an overweight to India positively impacted performance. From a sector perspective, stock selection within consumer discretionary and utilities contributed to returns. Stock selection within energy and telecommunication services (“telecom”) was additive, but the benefit to performance was partially offset by overweights to both sectors. An underweight to consumer staples positively contributed to performance, but this was partially offset by stock selection within the sector. More broadly, an underweight to fixed income and exposure to corporate credit within that allocation positively contributed to performance.

The Fund uses derivatives, which may include options, futures, swaps and forward contracts both to seek to enhance returns of the Fund and to hedge (or protect) against adverse movements in currency exchange rates, interest rates and movements in the securities markets. During the period, the Fund’s use of derivatives detracted from the Fund’s performance.

Describe recent portfolio activity.

During the 12-month period, the Fund’s overall equity allocation increased from 57% to 62% of net assets. Within equities, the Fund increased exposure to the United States and Europe, and decreased exposure to Japan. From a sector perspective, the Fund increased exposure to IT, energy, materials, utilities, telecom, and consumer discretionary, and decreased exposure to financials, industrials, real estate and health care.

The Fund’s overall allocation to fixed income increased from 25% to 30% of net assets. Within fixed income, the Fund increased exposure to government bonds and decreased exposure to corporate bonds.

The Fund’s allocation to commodity-related securities increased from 3% to 4% of net assets.

Reflecting the above changes, the Fund’s cash and cash equivalents holdings decreased from 14% to 4% of net assets. During the 12-month period, the Fund’s cash position helped mitigate portfolio volatility and served as a source of funds for new investments and redemptions.

Describe portfolio positioning at period end.

Relative to its Reference Benchmark, the Fund was overweight equities, commodity-related securities and cash, and was underweight fixed income. Within equities, the Fund was overweight Japan and Europe, and underweight the United States. Within Europe, the Fund was overweight the Netherlands and France, and underweight Ireland. From a sector perspective, the Fund was overweight energy, consumer discretionary, telecom, IT, utilities and materials, and was underweight financials, consumer staples, industrials and healthcare. Within fixed income, the Fund was underweight developed market government bonds, and overweight corporate and convertible bonds. With respect to currency exposure, the Fund was overweight the U.S. dollar, Indian rupee and Brazilian real, and underweight the Canadian dollar and British pound sterling.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Global Allocation V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests in a portfolio of U.S. and foreign equity securities, debt and money market securities, the combination of which will be varied from time to time with respect to types of securities and markets in response to changing markets and economic trends.

^(c)  This unmanaged capitalization-weighted index is comprised of 2,582 equities from 35 countries in 4 regions, including the United States.

^(d)  The Reference Benchmark is an unmanaged weighted index comprised as follows: 36% S&P 500^® Index; 24% FTSE World (ex U.S.) Index; 24% ICE BofAML Current 5-Year U.S. Treasury Index; and 16% Citigroup Non-U.S. Dollar World Government Bond Index.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		5.68	%		13.86	%		6.64	%		4.67	%
Class II(a)		5.61			13.74			6.49			4.51
Class III(a)		5.65			13.71			6.39			4.41
FTSE World Index		11.19			24.09			11.67			5.45
Reference Benchmark		7.21			15.69			7.59			5.23
U.S. Stocks: S&P 500® Index(c)		11.42			21.83			15.79			8.50
Non-U.S. Stocks: FTSE World (ex-U.S.) Index(d)		10.92			26.57			7.52			2.52
U.S. Bonds: ICE BofAML Current 5-year U.S. Treasury Index(e)		(0.46	)		0.72			0.64			3.23
Non-U.S. Bonds: Citigroup Non-U.S. Dollar World Government Bond Index(f)		4.18			10.33			(0.29	)		2.44

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fees. Without such waiver, the Fund’s performance would have been lower.

^(c)  This unmanaged index covers 500 leading companies and captures approximately 80% coverage of available market capitalization.

^(d)  This unmanaged capitalization-weighted index is comprised of 1,969 equities from 34 countries, excluding the United States.

^(e)  This unmanaged index is designed to track the total return of the current coupon five-year U.S. Treasury bond.

^(f)  This unmanaged market capitalization-weighted index tracks 22 government bond indexes, excluding the United States.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock Global Allocation V.I. Fund

Expense Example

	Actual								Hypothetical (a)
					Including Dividend Expense and Broker Fees and Expenses on Short Sales		Excluding Dividend Expense and Broker Fees and Expenses on Short Sales				Including Dividend Expense and Broker Fees and Expenses on Short Sales				Excluding Dividend Expense and Broker Fees and Expenses on Short Sales
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Expenses Paid During the Period (c)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Ending Account Value (12/31/17)		Expenses Paid During the Period (c)
Class I	$	1,000.00	$	1,056.80	$	3.53	$	3.47	$	1,000.00	$	1,021.78	$	3.47	$	1,021.83	$	3.61
Class II		1,000.00		1,056.10		4.30		4.25		1,000.00		1,021.02		4.23		1,021.07		4.41
Class III		1,000.00		1,056.50		5.18		5.13		1,000.00		1,020.16		5.09		1,020.21		4.91

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.68% for Class I, 0.83% for Class II and 1.00% for Class III), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

^(c)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.67% for Class I, 0.82% for Class II and 0.99% for Class III), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

OVERALL ASSET EXPOSURE

	Percent of Fund’s Net Assets (a)						Reference Benchmark (b) Percentage
Portfolio Composition	12/31/2017			12/31/2016
US Equities		32	%		28	%		35	%
European Equities		15			14			12
Asia Pacific Equities		14			14			9
Other Equities		1			1			3
Total Equities		62			57			60
US Dollar Denominated Fixed Income Securities		21			16			24
U.S. Issuers		18			12			—
Non-U.S. Issuers		3			4			—
Non-U.S. Dollar Denominated Fixed Income Securities		8			9			16
Total Fixed Income Securities		30			25			40
Commodity-Related		4			3			—
Cash & Short-Term Securities		4			15			—

^(a)  Exposure based on market value and adjusted for the economic value of futures, swaps and options (except with respect to fixed income securities), and convertible bonds.

^(b)  The Reference Benchmark is an unmanaged weighted index comprised as follows: 36% of the S&P 500 Index^®; 24% FTSE World (ex U.S.) Index; 24% BofA Merrill Lynch Current 5-Year U.S. Treasury Index; and 16% Citigroup Non-U.S. Dollar World Government Bond Index. Descriptions of these indexes are found on page 5 of this report to shareholders in the “Performance Summary” section.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Consolidated Financial Statements.

DISCLOSUREOF EXPENSES / DERIVATIVE FINANCIAL INSTRUMENTS 5

Consolidated Schedule of Investments   December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 55.1%
Australia — 0.0%
AGL Energy Ltd.		1,889	$	35,797
Amcor Ltd.(a)		2,435		29,177
AMP Ltd.(a)		9,415		38,004
BHP Billiton Ltd.		7,243		166,378
National Australia Bank Ltd.		3,156		72,478
Rio Tinto Ltd.		2,415		141,990
Rio Tinto plc(a)		2,652		139,117
Stockland		21,585		75,296
Telstra Corp. Ltd.		10,555		29,837
Wesfarmers Ltd.		1,784		61,687
Woolworths Group Ltd.		8,630		183,356
				973,117
Belgium — 0.4%
Anheuser-Busch InBev SA		389,183		43,448,950
UCB SA		269		21,330
				43,470,280
Brazil — 0.2%
Azul SA, ADR(a)		892,637		21,271,540
Banco Bradesco SA(a)		909		8,785
Banco do Brasil SA(a)		13,591		130,375
JBS SA		30,216		89,361
Vale SA(a)		8,429		102,307
				21,602,368
Canada — 0.4%
Agrium, Inc.		824		94,776
Bank of Montreal		99		7,922
Bank of Nova Scotia (The)		2,910		187,796
Barrick Gold Corp.		3,313		47,916
Canadian National Railway Co.		2,023		166,813
Encana Corp.		3,460,483		46,128,238
Magna International, Inc.		4,942		280,086
Platinum Group Metals Ltd.(a)(b)		2,151,915		653,695
Royal Bank of Canada		3,304		269,814
Suncor Energy, Inc.(a)		161		5,911
Teck Resources Ltd., Class B		6,429		168,116
Thomson Reuters Corp.		6,298		274,517
Toronto-Dominion Bank (The)		1,180		69,138
				48,354,738
China — 0.3%
Agricultural Bank of China Ltd., Class H		391,000		181,713
Alibaba Group Holding Ltd., ADR(a)(b)		112,062		19,322,851
Bank of China Ltd., Class H		305,000		149,370
Bank of Communications Co. Ltd., Class H		73,000		54,031
Brilliance China Automotive Holdings Ltd.		3,616,000		9,609,170
China Communications Construction Co. Ltd., Class H		7,000		7,941
China Construction Bank Corp., Class H		315,000		289,974
China Mobile Ltd.		32,000		323,585
China Resources Power Holdings Co. Ltd.		82,000		152,516
China Telecom Corp. Ltd., Class H		128,000		60,712
CNOOC Ltd.		176,000		252,669
Country Garden Holdings Co. Ltd.		6,000		11,399
Dongfeng Motor Group Co. Ltd., Class H		66,000		79,664
Guangzhou Automobile Group Co. Ltd., Class H		14,000		33,068
Industrial & Commercial Bank of China Ltd., Class H		198,000		158,724
Longfor Properties Co. Ltd.(a)		21,500		53,882
New Oriental Education & Technology Group, Inc., ADR		2,328		218,832
PICC Property & Casualty Co. Ltd., Class H		4,000		7,663
Tencent Holdings Ltd.		1,800		93,164
Want Want China Holdings Ltd.		3,213,000		2,689,747

Security	Shares		Value
China (continued)
Wilmar International Ltd.		23,500	$	54,155
				33,804,830
Czech Republic — 0.0%
CEZ A/S(b)		190,490		4,441,567
Denmark — 0.0%
AP Moller - Maersk A/S, Class A		36		59,977
AP Moller - Maersk A/S, Class B		72		125,495
Carlsberg A/S, Class B		81		9,715
Danske Bank A/S		5,094		198,269
				393,456
Finland — 0.2%
Nokia OYJ		5,526,699		25,822,620
France — 2.7%
AXA SA		850,055		25,189,885
BNP Paribas SA		2,328		173,177
Cie de Saint-Gobain		282,791		15,563,758
Cie Generale des Etablissements Michelin		108,921		15,581,725
Danone SA		1,002,947		84,037,846
Dassault Aviation SA		11,640		18,098,690
Engie SA		1,144		19,667
LVMH Moet Hennessy Louis Vuitton SE		116		34,047
Safran SA		248,264		25,607,344
Sanofi		334,485		28,796,478
Societe Generale SA		2,543		131,106
Sodexo SA		134,588		18,042,683
Thales SA(a)		488		52,518
TOTAL SA		438,546		24,207,713
TOTAL SA, ADR		17,306		956,675
Unibail-Rodamco SE		66,851		16,823,188
Vinci SA		165,609		16,907,298
Vivendi SA		1,218		32,690
				290,256,488
Germany — 1.9%
adidas AG		403		80,596
Allianz SE (Registered)		1,244		284,687
BASF SE(a)		2,460		269,693
Bayer AG (Registered)		517,993		64,367,487
Deutsche Post AG (Registered)		6,276		298,321
Deutsche Telekom AG (Registered)		878,298		15,525,183
E.ON SE		20,770		225,067
Evonik Industries AG		380,722		14,299,602
GEA Group AG		265,476		12,701,480
Innogy SE(b)(c)		1,588,148		62,154,906
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered)		63		13,605
SAP SE		2,873		321,418
Siemens AG (Registered)		95,896		13,277,540
Vonovia SE(a)		376,287		18,644,007
				202,463,592
Hong Kong — 0.8%
AIA Group Ltd.		2,400		20,414
CK Infrastructure Holdings Ltd.		377,000		3,235,098
CLP Holdings Ltd.		391,000		4,001,158
Galaxy Entertainment Group Ltd.		7,000		55,886
Hang Lung Properties Ltd.		783,000		1,907,368
HKT Trust & HKT Ltd.(d)		2,089,000		2,663,105
Hong Kong Exchanges & Clearing Ltd.		2,600		79,529
Hongkong Land Holdings Ltd.		15,300		107,618
I-CABLE Communications Ltd.(a)		379,342		11,119
Jardine Matheson Holdings Ltd.		52,700		3,197,441
Link REIT		481,000		4,450,123

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Hong Kong (continued)
Power Assets Holdings Ltd.		344,000	$	2,899,548
Sino Land Co. Ltd.		1,440,000		2,547,516
Sun Hung Kai Properties Ltd.		2,889,083		48,100,511
Swire Pacific Ltd., Class A		310,000		2,868,221
Swire Properties Ltd.		17,800		57,413
WH Group Ltd.(c)		169,000		190,786
Wharf Holdings Ltd. (The)		488,000		1,682,864
Wharf Real Estate Investment Co. Ltd.(a)		503,000		3,347,818
				81,423,536
India — 1.5%
Coal India Ltd.		662,134		2,724,884
GAIL India Ltd.		8,385		65,531
HCL Technologies Ltd.(a)		5,100		71,154
Hero MotoCorp Ltd.(a)		67,802		4,016,020
Hindustan Petroleum Corp. Ltd.		10,700		70,167
Hindustan Unilever Ltd.		5,862		125,625
Housing Development Finance Corp. Ltd.		206,144		5,520,258
Indian Oil Corp. Ltd.		8,332		50,638
Infosys Ltd.		2,302,495		37,423,403
Kotak Mahindra Bank Ltd.		1,235,542		19,534,927
Maruti Suzuki India Ltd.		112,149		17,076,862
Oil & Natural Gas Corp. Ltd.		960,743		2,928,715
Reliance Industries Ltd.		3,281,302		47,297,875
SBI Life Insurance Co. Ltd.(a)(c)		122,880		1,338,680
State Bank of India		2,486,178		12,043,591
Tata Motors Ltd.(a)		2,233		15,067
Tata Motors Ltd., Class A(a)		12,916		49,243
Tech Mahindra Ltd.		8,485		67,007
Vedanta Ltd.		14,052		72,390
Yes Bank Ltd.		1,257,964		6,197,697
				156,689,734
Indonesia — 0.1%
Siloam International Hospitals Tbk. PT(a)		15,609,442		11,016,061
Ireland — 0.0%
Experian plc		735		16,201
Medtronic plc		39,012		3,150,219
				3,166,420
Israel — 0.0%
Check Point Software Technologies Ltd.(a)		2,757		285,680
Italy — 1.0%
Atlantia SpA		1,179		37,170
Ei Towers SpA		316,602		20,323,308
Enel SpA		4,396,388		27,034,591
Luxottica Group SpA		327,114		20,075,747
RAI Way SpA(c)		2,173,792		13,236,738
Snam SpA		387,263		1,896,614
Telecom Italia SpA(a)(b)		30,679,349		26,376,319
				108,980,487
Japan — 8.3%
Aisin Seiki Co. Ltd.		239,439		13,413,994
Ajinomoto Co., Inc.		1,201,600		22,607,173
Alfresa Holdings Corp.		104,700		2,452,333
Alpine Electronics, Inc.		72,900		1,505,706
Asahi Glass Co. Ltd.		3,500		151,286
Asahi Kasei Corp.		1,352,300		17,403,285
Astellas Pharma, Inc.		1,837,765		23,345,634
Bridgestone Corp.		877,632		40,618,777
Canon Marketing Japan, Inc.		88,700		2,394,199
COMSYS Holdings Corp.		106,600		3,090,619
Daicel Corp.		397,000		4,505,277
Dai-ichi Life Holdings, Inc.		800		16,442

Security	Shares		Value
Japan (continued)
Daikin Industries Ltd.		122,000	$	14,415,883
Denso Corp.		575,420		34,472,708
Dowa Holdings Co. Ltd.(a)		50,300		2,042,813
East Japan Railway Co.		530,551		51,738,399
Exedy Corp.		62,900		1,937,880
Fujitsu Ltd.		50,000		354,477
GS Yuasa Corp.(a)(b)		426,000		2,114,661
Hino Motors Ltd.(b)		185,000		2,389,527
Hitachi Chemical Co. Ltd.		400,700		10,260,295
Hitachi Ltd.		49,000		380,152
Hoya Corp.		464,574		23,137,268
Japan Airlines Co. Ltd.		1,055,900		41,253,865
Japan Aviation Electronics Industry Ltd.		126,000		2,124,379
Japan Tobacco, Inc.		2,500		80,508
Kamigumi Co. Ltd.		96,700		2,137,008
Kao Corp.		1,900		128,382
KDDI Corp.		143,400		3,561,989
Keyence Corp.		8,000		4,469,051
Kinden Corp.		323,100		5,260,648
Kintetsu Group Holdings Co. Ltd.		1,900		72,713
Kirin Holdings Co. Ltd.(a)		3,300		83,165
Koito Manufacturing Co. Ltd.		130,000		9,101,738
Komatsu Ltd.		724,900		26,197,682
Kubota Corp.		759,496		14,855,317
Kuraray Co. Ltd.(b)		133,300		2,509,764
Kyudenko Corp.		52,600		2,540,007
Kyushu Railway Co.		310,200		9,601,417
Mabuchi Motor Co. Ltd.		76,700		4,145,979
Maeda Road Construction Co. Ltd.		128,000		2,932,771
Marubeni Corp.		17,900		129,411
Mazda Motor Corp.		15,100		201,787
Medipal Holdings Corp.		119,900		2,340,880
Mitsubishi Electric Corp.		2,409,300		39,928,322
Mitsubishi Tanabe Pharma Corp.		3,100		63,891
Mitsubishi UFJ Financial Group, Inc.		15,500		112,808
MS&AD Insurance Group Holdings, Inc.		900		30,357
Murata Manufacturing Co. Ltd.(b)		168,628		22,577,284
Nichias Corp.(a)		136,000		1,807,268
Nippo Corp.(b)		125,000		2,920,263
Nippon Telegraph & Telephone Corp.		74,260		3,491,268
Nippon Television Holdings, Inc.		241,900		4,138,578
Nitto Denko Corp.		208,600		18,450,404
NTT DOCOMO, Inc.		900		21,280
Okumura Corp.		118,050		4,850,350
Olympus Corp.		2,700		103,289
Otsuka Holdings Co. Ltd.		53,700		2,355,132
Panasonic Corp.(a)		9,600		140,102
Rakuten, Inc.		4,200		38,391
Renesas Electronics Corp.(a)		742,300		8,608,778
Resona Holdings, Inc.		19,200		114,408
Rohm Co. Ltd.		299,753		33,021,320
Seino Holdings Co. Ltd.		136,800		2,170,265
Seven & i Holdings Co. Ltd.		35,300		1,462,352
Shimamura Co. Ltd.		18,500		2,032,403
Shin-Etsu Chemical Co. Ltd.		474,634		48,091,343
Shionogi & Co. Ltd.		5,600		302,595
Sony Corp.		6,300		282,762
Stanley Electric Co. Ltd.		62,900		2,545,092
Subaru Corp.		479,864		15,215,450
Sumitomo Electric Industries Ltd.		787,948		13,282,676
Sumitomo Mitsui Financial Group, Inc.		1,069,047		46,080,752
Suzuken Co. Ltd.		54,000		2,217,043
Suzuki Motor Corp.		957,689		55,434,540
Taisei Corp.		900		44,758

CONSOLIDATED SCHEDULE OF INVESTMENTS 7

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Japan (continued)
Toagosei Co. Ltd.(a)		128,900	$	1,636,256
Toda Corp.(b)		578,896		4,633,357
Toho Co. Ltd.		81,500		2,821,116
Tokio Marine Holdings, Inc.		503,223		22,888,117
Tokyo Electron Ltd.		700		126,273
Tokyo Gas Co. Ltd.		1,535,714		35,088,671
Tokyo Steel Manufacturing Co. Ltd.		366,200		3,281,337
Toray Industries, Inc.		1,457,300		13,716,561
Toshiba Corp.(a)		113,000		317,914
Toyota Industries Corp.		649,577		41,637,214
TV Asahi Holdings Corp.		175,900		3,528,493
Ube Industries Ltd.		370,434		10,851,316
Unicharm Corp.		4,800		124,642
West Japan Railway Co.		203,100		14,816,962
Yamato Kogyo Co. Ltd.(b)		74,700		2,163,710
				898,044,712
Mexico — 0.0%
Cemex SAB de CV(a)		415,945		311,179
Grupo Financiero Banorte SAB de CV, Class O		4,942		27,127
				338,306
Netherlands — 2.1%
ABN AMRO Group NV, CVA(a)(c)		767,504		24,745,007
ING Groep NV		1,945,463		35,712,354
Koninklijke Ahold Delhaize NV(a)		305		6,705
Koninklijke Philips NV		1,942,024		73,328,266
Randstad Holding NV		214,905		13,186,371
Royal Dutch Shell plc, Class A		984,743		32,816,721
Royal Dutch Shell plc, Class B		10,955		368,899
Royal Dutch Shell plc, ADR, Class A(b)		630,245		42,043,644
Unilever NV, CVA(a)		4,176		235,121
				222,443,088
Norway — 0.0%
DNB ASA		5,201		96,278
Telenor ASA		2,686		57,499
				153,777
Peru — 0.0%
Credicorp Ltd.		161		33,396
Poland — 0.0%
PGE Polska Grupa Energetyczna SA(a)		45,235		156,343
Polski Koncern Naftowy ORLEN SA		1,110		33,738
Polskie Gornictwo Naftowe i Gazownictwo SA		31,030		56,071
				246,152
Portugal — 0.1%
Jeronimo Martins SGPS SA		75,422		1,465,568
NOS SGPS SA		1,392,756		9,159,290
				10,624,858
Singapore — 0.3%
CapitaLand Ltd.		7,783,950		20,477,152
ComfortDelGro Corp. Ltd.		1,724,500		2,547,937
Genting Singapore plc		263,300		257,149
Singapore Telecommunications Ltd.		1,714,700		4,571,607
				27,853,845
South Africa — 0.0%
Barclays Africa Group Ltd.(b)		6,517		95,470
MTN Group Ltd.		664		7,331
RMB Holdings Ltd.		8,953		57,144
Tiger Brands Ltd.		3,541		131,652
				291,597

Security	Shares		Value
South Korea — 0.6%
Amorepacific Corp.(a)(b)		34,612	$	9,844,803
Coway Co. Ltd.		38,250		3,485,694
Doosan Bobcat, Inc.(a)(b)		521,724		17,417,139
Hana Financial Group, Inc.		2,442		113,508
Hotel Shilla Co. Ltd.(a)(b)		43,135		3,420,823
KT&G Corp.(b)		131,610		14,199,201
LG Chem Ltd.(b)		14,300		5,409,836
LG Display Co. Ltd.		1,540		42,865
LG Household & Health Care Ltd.(a)		4,673		5,190,040
Lotte Chemical Corp.(a)		153		52,536
POSCO		13,737		4,272,910
Samsung Electronics Co. Ltd.		225		534,580
SK Hynix, Inc.		1,880		133,530
SK Innovation Co. Ltd.		808		154,143
SK Telecom Co. Ltd.		16,630		4,147,597
Woori Bank		3,680		54,097
				68,473,302
Spain — 0.4%
Aena SME SA(c)		1,683		340,605
Amadeus IT Group SA(a)		305		21,949
CaixaBank SA(a)		27,145		126,192
Cellnex Telecom SA(c)		1,327,829		33,973,088
Gas Natural SDG SA(b)		328,310		7,576,898
Repsol SA		1,361		24,030
Telefonica SA		13,078		127,350
				42,190,112
Sweden — 0.2%
Nordea Bank AB		6,732		81,511
Sandvik AB(a)		4,279		74,903
Skandinaviska Enskilda Banken AB, Class A		8,416		98,824
SKF AB, Class B(a)(b)		856,569		19,029,342
Swedbank AB, Class A(a)		353		8,516
Volvo AB, Class B(a)		11,701		217,895
				19,510,991
Switzerland — 1.2%
ABB Ltd. (Registered)		3,984		106,709
Nestle SA (Registered)		828,154		71,201,587
Novartis AG (Registered)		2,600		218,796
Roche Holding AG		1,777		449,324
SGS SA (Registered)		72		187,707
Swatch Group AG (The) (Registered)(a)		2,009		153,233
Swiss Re AG		385		36,005
UBS Group AG (Registered)(a)		3,286,601		60,383,925
Zurich Insurance Group AG		904		274,855
				133,012,141
Taiwan — 0.6%
Catcher Technology Co. Ltd.		4,000		43,831
Cathay Financial Holding Co. Ltd.		1,948,000		3,489,930
Cheng Shin Rubber Industry Co. Ltd.		1,338,323		2,361,072
Chunghwa Telecom Co. Ltd.		5,156,000		18,340,537
Far EasTone Telecommunications Co. Ltd.		2,871,000		7,091,033
Formosa Chemicals & Fibre Corp.		823,000		2,839,354
Formosa Petrochemical Corp.		588,000		2,274,356
Formosa Plastics Corp.		878,000		2,905,195
Fubon Financial Holding Co. Ltd.		2,024,000		3,440,730
Hon Hai Precision Industry Co. Ltd.		1,047,200		3,329,666
Innolux Corp.		167,000		69,323
Nan Ya Plastics Corp.		1,101,000		2,876,600
Pegatron Corp.		95,000		228,894
Taiwan Mobile Co. Ltd.(a)		2,539,000		9,171,917
Taiwan Semiconductor Manufacturing Co. Ltd.		446,000		3,415,055

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Taiwan (continued)
Uni-President Enterprises Corp.		2,189,000	$	4,847,831
				66,725,324
Thailand — 0.2%
Advanced Info Service PCL		861,500		5,048,988
Intouch Holdings PCL, Class F		2,192,500		3,749,528
PTT Global Chemical PCL		1,824,300		4,754,776
Siam Cement PCL (The)		279,900		4,150,598
Thai Oil PCL		831,400		2,640,377
				20,344,267
Turkey — 0.0%
Eregli Demir ve Celik Fabrikalari TAS		14,659		38,678
Tupras Turkiye Petrol Rafinerileri A/S		6,025		193,079
				231,757
United Arab Emirates — 0.4%
NMC Health plc		1,026,768		39,994,489
United Kingdom — 2.7%
Anglo American plc		904		18,802
Aon plc		2,011		269,474
Associated British Foods plc		2,390		90,997
Aviva plc		7,114		48,520
BAE Systems plc		1,904,803		14,717,129
Barclays plc		51,773		141,722
Berkeley Group Holdings plc		285,242		16,163,464
BP plc(a)		1,377,853		9,666,033
BP plc, ADR(b)		854,785		35,926,613
Centrica plc		46,058		85,380
Compass Group plc		456		9,832
Diageo plc		1,135		41,603
GlaxoSmithKline plc		1,660,552		29,407,032
GW Pharmaceuticals plc, ADR(a)(b)		62,805		8,290,888
HSBC Holdings plc		5,601,576		57,853,480
Imperial Brands plc		4,455		190,026
Legal & General Group plc		44,110		162,395
Liberty Global plc, Class A(a)(b)		290,277		10,403,528
Liberty Global plc, Class C(a)		1,657		56,073
Lloyds Banking Group plc		375,513		344,339
Meggitt plc		1,869,168		12,137,178
National Grid plc		93,494		1,102,156
Prudential plc		1,348		34,523
Reckitt Benckiser Group plc		808		75,381
Smiths Group plc		766,202		15,377,285
SSE plc(a)		7,579		134,738
Vodafone Group plc		19,340,599		61,135,544
Vodafone Group plc, ADR		518,385		16,536,482
				290,420,617
United States — 28.5%
3M Co.		6,208		1,461,177
AbbVie, Inc.		21,259		2,055,958
Acadia Healthcare Co., Inc.(a)(b)		467,272		15,247,085
Accenture plc, Class A		13,280		2,033,035
Activision Blizzard, Inc.		257,451		16,301,797
Adobe Systems, Inc.(a)		14,152		2,479,996
Aetna, Inc.		13,474		2,430,575
Agilent Technologies, Inc.		1,386		92,820
Air Products & Chemicals, Inc.		393,358		64,542,181
Allergan plc		206		33,697
Alliance Data Systems Corp.		4,025		1,020,257
Allstate Corp. (The)		269,787		28,249,397
Ally Financial, Inc.		27,785		810,211
Alphabet, Inc., Class A(a)		628		661,535
Alphabet, Inc., Class C(a)		106,418		111,355,795

Security	Shares		Value
United States (continued)
Amazon.com, Inc.(a)		93,759	$	109,648,338
Amdocs Ltd.		27,552		1,804,105
American Express Co.		2,310		229,406
American International Group, Inc.		1,327		79,063
American Tower Corp.		15,995		2,282,007
Ameriprise Financial, Inc.		8,102		1,373,046
Amgen, Inc.		14,203		2,469,902
Anadarko Petroleum Corp.		900,272		48,290,590
Anthem, Inc.		142,580		32,081,926
Apple, Inc.		846,403		143,236,780
Applied Materials, Inc.		6,706		342,811
AT&T, Inc.		4,888		190,045
Autodesk, Inc.(a)		206		21,595
Automatic Data Processing, Inc.		439		51,446
Axalta Coating Systems Ltd.(a)		664,189		21,493,156
Bank of America Corp.		3,792,118		111,943,323
Bank of New York Mellon Corp. (The)		21,957		1,182,604
Baxter International, Inc.		81,532		5,270,228
Berkshire Hathaway, Inc., Class B(a)		23,206		4,599,893
Biogen, Inc.(a)		15,453		4,922,862
Boeing Co. (The)		9,273		2,734,700
Boston Scientific Corp.(a)		3,939		97,648
Bristol-Myers Squibb Co.		601		36,829
Broadcom Ltd.		45		11,561
Brown-Forman Corp., Class B		260		17,854
CA, Inc.		8,644		287,672
Capital One Financial Corp.		14,946		1,488,323
Carnival Corp.		5,819		386,207
Caterpillar, Inc.		6,598		1,039,713
Celgene Corp.(a)		2,901		302,748
CenterPoint Energy, Inc.		21,538		610,818
Charles Schwab Corp. (The)		744,257		38,232,482
Charter Communications, Inc., Class A(a)		112,048		37,643,646
Chevron Corp.		8,719		1,091,532
Chubb Ltd.		204,285		29,852,167
Cisco Systems, Inc.		3,411		130,641
Citigroup, Inc.		829,488		61,722,202
Cloudera, Inc.(a)(b)		1,436,239		23,726,668
Coca-Cola Co. (The)		6,911		317,077
Cognizant Technology Solutions Corp., Class A		1,182		83,946
Colgate-Palmolive Co.		38,757		2,924,216
Comcast Corp., Class A		2,519,407		100,902,250
CommScope Holding Co., Inc.(a)(b)		852,069		32,233,770
Conagra Brands, Inc.		9,030		340,160
ConocoPhillips		2,762		151,606
Constellation Brands, Inc., Class A		9,296		2,124,787
Corning, Inc.		3,107		99,393
Costco Wholesale Corp.		913		169,928
Crown Holdings, Inc.(a)		20,649		1,161,506
CSX Corp.		839		46,153
Cummins, Inc.		5,408		955,269
CVS Health Corp.		467,992		33,929,420
Dell Technologies, Inc., Class V(a)		2,605		211,734
Delta Air Lines, Inc.		18,236		1,021,216
Discover Financial Services		18,739		1,441,404
DISH Network Corp., Class A(a)		220,796		10,543,009
Dominion Energy, Inc.		53,991		4,376,510
DowDuPont, Inc.		1,187,391		84,565,987
DXC Technology Co.		1,517		143,963
Eaton Corp. plc		3,436		271,478
eBay, Inc.(a)		7,628		287,881
Edgewell Personal Care Co.(a)(b)		499,799		29,683,063
Electronic Arts, Inc.(a)		156,892		16,483,074

CONSOLIDATED SCHEDULE OF INVESTMENTS 9

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
United States (continued)
Emerson Electric Co.		627	$	43,696
EQT Corp.		250,815		14,276,390
Equity Residential		3,662		233,526
Expedia, Inc.		3,850		461,115
Express Scripts Holding Co.(a)		5,622		419,626
Exxon Mobil Corp.		8,869		741,803
Facebook, Inc., Class A(a)		394,957		69,694,112
Fifth Third Bancorp		38,742		1,175,432
FirstEnergy Corp.		331		10,135
FleetCor Technologies, Inc.(a)		242,500		46,664,275
Ford Motor Co.		6,115		76,376
Fortune Brands Home & Security, Inc.		277,052		18,961,439
Franklin Resources, Inc.		826		35,791
General Dynamics Corp.		8,184		1,665,035
General Electric Co.		2,406,220		41,988,539
General Motors Co.		1,871		76,692
Gilead Sciences, Inc.		632,999		45,348,048
Global Payments, Inc.		170,354		17,076,285
Goldman Sachs Group, Inc. (The)		141,855		36,138,980
Goodyear Tire & Rubber Co. (The)		19,273		622,711
Halliburton Co.		2,176		106,341
Hartford Financial Services Group, Inc. (The)		58,597		3,297,839
HCA Healthcare, Inc.(a)		638,577		56,092,604
HCP, Inc.		5,040		131,443
Helmerich & Payne, Inc.(b)		15,823		1,022,799
Hewlett Packard Enterprise Co.		11,078		159,080
Hilton Worldwide Holdings, Inc.		1,549		123,703
Home Depot, Inc. (The)		16,010		3,034,375
HP, Inc.		17,055		358,326
Huntsman Corp.		19,839		660,440
Illinois Tool Works, Inc.		8,604		1,435,577
Illumina, Inc.(a)		350		76,472
Ingersoll-Rand plc		2,197		195,950
Intel Corp.		43,740		2,019,038
International Business Machines Corp.		197,694		30,330,213
International Paper Co.		27,690		1,604,359
Intuit, Inc.		15,054		2,375,220
IQVIA Holdings, Inc.(a)		349		34,167
Jawbone Health Hub, Inc. (Acquired 01/24/17, cost $0)(a)(e)(f)		333,860		455,251
Johnson & Johnson		34,036		4,755,510
JPMorgan Chase & Co.		358,620		38,350,823
Kansas City Southern		322,081		33,889,363
Kimberly-Clark Corp.		985		118,850
Kinder Morgan, Inc.		5,388		97,361
KLA-Tencor Corp.		14,265		1,498,824
Kohl’s Corp.		11,318		613,775
Lam Research Corp.		1,173		215,914
Las Vegas Sands Corp.		5,539		384,905
Lear Corp.		8,124		1,435,186
Liberty Broadband Corp., Class A(a)		67,564		5,746,318
Liberty Broadband Corp., Class C(a)		213,686		18,197,500
Liberty Media Corp.-Liberty SiriusXM, Class A(a)		242,277		9,608,706
Liberty Media Corp.-Liberty SiriusXM, Class C(a)		405,971		16,100,810
Lookout, Inc. (Acquired 03/04/15, cost $936,169), 0.00%(a)(e)(f)		81,954		17,210
Lowe’s Cos., Inc.		57,712		5,363,753
LyondellBasell Industries NV, Class A		2,047		225,825
ManpowerGroup, Inc.		7,705		971,678
Marathon Petroleum Corp.		504,938		33,315,809
Marsh & McLennan Cos., Inc.		265,887		21,640,543
Masco Corp.		49,548		2,177,139
Mastercard, Inc., Class A		142,448		21,560,929

Security	Shares		Value
United States (continued)
McDonald’s Corp.		15,228	$	2,621,043
McKesson Corp.		4,846		755,734
Merck & Co., Inc.		2,301		129,477
MetLife, Inc.		644,058		32,563,572
MGM Resorts International		739,168		24,680,820
Micron Technology, Inc.(a)		4,244		174,513
Microsoft Corp.		2,240,289		191,634,321
Mohawk Industries, Inc.(a)		136,126		37,557,163
Mondelez International, Inc., Class A		78,244		3,348,843
Monsanto Co.		3,177		371,010
Moody’s Corp.		987		145,691
Morgan Stanley		1,388,516		72,855,435
Motorola Solutions, Inc.		458		41,376
NextEra Energy Partners LP(b)		362,276		15,617,718
NextEra Energy, Inc.		341,274		53,303,586
Norfolk Southern Corp.		539		78,101
Northern Trust Corp.		1,385		138,348
Northrop Grumman Corp.		6,789		2,083,612
NVIDIA Corp.		179		34,637
ONEOK, Inc.		1,271		67,935
Oracle Corp.		7,963		376,491
O’Reilly Automotive, Inc.(a)(b)		203,061		48,844,293
PACCAR, Inc.		3,214		228,451
Packaging Corp. of America		17,342		2,090,578
PepsiCo, Inc.		39,341		4,717,773
Pfizer, Inc.		2,028,426		73,469,590
PG&E Corp.		2,668		119,606
Philip Morris International, Inc.		3,483		367,979
Phillips 66		15,116		1,528,983
Pioneer Natural Resources Co.		249,512		43,128,149
Praxair, Inc.		574		88,786
Priceline Group, Inc. (The)(a)		170		295,416
Procter & Gamble Co. (The)		6,625		608,705
Progressive Corp. (The)		304		17,121
Prudential Financial, Inc.		12,983		1,492,785
Pure Storage, Inc., Class A(a)		1,171,166		18,574,693
PVH Corp.		6,366		873,479
QUALCOMM, Inc.		1,390,267		89,004,893
Raytheon Co.		7,734		1,452,832
Reinsurance Group of America, Inc.		9,407		1,466,834
Republic Services, Inc.		707		47,800
Rockwell Automation, Inc.		7,228		1,419,218
Ross Stores, Inc.		8,346		669,767
Royal Caribbean Cruises Ltd.		8,334		994,080
Schlumberger Ltd.		238,455		16,069,482
Sempra Energy		178,828		19,120,290
Snap, Inc., Class A(a)(b)		1,007,997		14,726,836
St Joe Co. (The)(a)		1,098,976		19,836,517
State Street Corp.		8,685		847,743
Stryker Corp.		21,346		3,305,215
SunTrust Banks, Inc.		266,713		17,226,993
Symantec Corp.		859		24,104
Sysco Corp.		170		10,324
Target Corp.		329,444		21,496,221
Tenet Healthcare Corp.(a)(b)		806,383		12,224,766
TESARO, Inc.(a)(b)		106,652		8,838,251
Texas Instruments, Inc.		3,456		360,945
Thermo Fisher Scientific, Inc.		18,588		3,529,489
Time Warner, Inc.		1,862		170,317
TJX Cos., Inc. (The)		218,242		16,686,783
Travelers Cos., Inc. (The)		31,254		4,239,293
TripAdvisor, Inc.(a)(b)		432,780		14,913,599
Tyson Foods, Inc., Class A		13,483		1,093,067

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security			Shares		Value
United States (continued)
Union Pacific Corp.				716	$	96,016
United Continental Holdings, Inc.(a)				719,907		48,521,732
United Rentals, Inc.(a)				11,147		1,916,281
United Technologies Corp.				394		50,263
UnitedHealth Group, Inc.				25,339		5,586,236
Valero Energy Corp.				34,599		3,179,994
VeriSign, Inc.(a)(b)				16,996		1,945,022
Verizon Communications, Inc.				586,679		31,052,919
Visa, Inc., Class A				183,099		20,876,948
Vistra Energy Corp.(a)(b)				275,021		5,038,385
VMware, Inc., Class A(a)(b)				138,966		17,415,219
Vornado Realty Trust				1,280		100,070
WABCO Holdings, Inc.(a)				8,893		1,276,146
Walgreens Boots Alliance, Inc.				3,859		280,241
Wal-Mart Stores, Inc.				2,972		293,485
Waste Management, Inc.				1,486		128,242
Wells Fargo & Co.				673		40,831
Western Digital Corp.				13,351		1,061,805
WestRock Co.				290,774		18,379,825
Weyerhaeuser Co.				3,818		134,623
Williams Cos., Inc. (The)				2,449,234		74,677,145
Williams-Sonoma, Inc.(b)				302,693		15,649,228
Wyndham Worldwide Corp.				17,042		1,974,657
Wynn Resorts Ltd.				10,204		1,720,292
Yum China Holdings, Inc.				1,813		72,556
Zimmer Biomet Holdings, Inc.				328,302		39,616,202
						3,075,566,622
Total Common Stocks — 55.1% (Cost: $4,900,942,057)						5,949,644,327
	Par (000)
Corporate Bonds — 3.1%
Australia — 0.2%
Quintis Ltd., 8.75%, 08/01/23(c)(g)		USD		28,698		20,088,600
Quintis Ltd. (Acquired 11/13/17, cost $2,077,220), 12.00%, 05/31/18(e)(f)(g)				2,159		2,075,584
						22,164,184
Brazil — 0.0%
Odebrecht Finance Ltd., 4.38%, 04/25/25(c)				5,283		1,558,485
Chile — 0.0%
Inversiones Alsacia SA, 8.00%, 12/31/18(c)(g)				7,809		195,219
China — 0.0%
China Milk Products Group Ltd., 0.00%, 01/05/12(f)(g)(h)(i)(j)				4,800		24,000
France — 0.1%
Danone SA, 2.59%, 11/02/23(c)				8,441		8,231,719
Germany — 0.2%
Bayer Capital Corp. BV, 5.63%, 11/22/19(c)(i)		EUR		16,000		21,574,455
India — 0.0%
REI Agro Ltd.(f)(g)(i):
5.50%, 11/13/14(c)		USD		6,148		1
5.50%, 11/13/14				2,291		—
						1
Italy — 0.1%
Telecom Italia SpA, 5.30%, 05/30/24(c)				7,219		7,706,282

Security	Par (000)			Value
Luxembourg — 0.1%
Intelsat Jackson Holdings SA:
7.50%, 04/01/21		USD	6,671	$	6,070,610
8.00%, 02/15/24(c)			2,264		2,382,860
					8,453,470
Mexico — 0.0%
Trust F/1401, 5.25%, 12/15/24(c)			3,282		3,483,022
Netherlands — 0.0%
Cooperatieve Rabobank UA, 3.95%, 11/09/22			2,236		2,331,251
Singapore — 0.1%
CapitaLand Ltd., 1.95%, 10/17/23(c)(i)		SGD	8,750		6,591,368
Switzerland — 0.1%
UBS Group Funding Switzerland AG, 4.13%, 09/24/25(c)		USD	5,294		5,555,808
Turkey — 0.1%
Bio City Development Co. BV, 8.00%, 07/06/18(c)(f)(g)(i)			21,400		5,604,660
United Arab Emirates — 0.1%
Dana Gas Sukuk Ltd., 7.00%, 10/31/17(a)(c)(g)(i)(j)			17,922		14,695,917
United States — 2.0%
Activision Blizzard, Inc., 2.30%, 09/15/21		USD	2,004		1,977,697
AliphCom (Acquired 04/27/15-07/21/15, cost $44,105,789), 15.00%, 04/28/20(a)(e)(f)(g)(i)(k)			44,575		655,253
AliphCom (Acquired 11/11/15, cost $3,000,000), 15.00%, 04/28/20(a)(e)(f)(g)(i)(k)			3,000		44,100
Allergan Funding SCS, 3.45%, 03/15/22			7,672		7,795,167
Ally Financial, Inc., 3.50%, 01/27/19			5,076		5,101,380
Apple, Inc.:
3.35%, 02/09/27			13,596		13,927,384
3.20%, 05/11/27			13,065		13,230,928
AT&T, Inc.:
3.00%, 06/30/22			12,198		12,219,669
2.85%, 02/14/23			12,040		12,087,739
4.45%, 04/01/24			1,939		2,051,097
3.40%, 08/14/24			21,444		21,554,100
Bank of America Corp.:
3.30%, 01/11/23			8,853		9,056,619
4.00%, 01/22/25			4,152		4,319,582
Becton Dickinson and Co.:
3.13%, 11/08/21			7,784		7,849,635
2.89%, 06/06/22			6,370		6,330,153
3.36%, 06/06/24			3,461		3,470,669
Citigroup, Inc.:
2.70%, 03/30/21			7,992		8,016,276
2.90%, 12/08/21			3,808		3,833,059
eBay, Inc., 2.75%, 01/30/23			4,090		4,050,151
Edgewell Personal Care Co.:
4.70%, 05/19/21 - 05/24/22			8,214		8,452,305
Forest Laboratories LLC, 5.00%, 12/15/21(c)			3,723		3,981,660
General Motors Financial Co., Inc., 3.45%, 04/10/22			3,200		3,242,660
Hughes Satellite Systems Corp., 7.63%, 06/15/21			1,337		1,477,385
JPMorgan Chase & Co.:
4.35%, 08/15/21			3,482		3,693,065
(LIBOR USD 3 Month + 1.00%), 2.36%, 01/15/23(j)			9,000		9,121,098
Santander Holdings USA, Inc., 3.70%, 03/28/22(c)			2,205		2,231,535
Sherwin-Williams Co. (The), 2.75%, 06/01/22			2,965		2,953,490

CONSOLIDATED SCHEDULE OF INVESTMENTS 11

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
United States (continued)
Synchrony Financial, 3.75%, 08/15/21		USD	2,199	$	2,254,877
Verizon Communications, Inc.:
3.13%, 03/16/22			38,930		39,471,356
2.63%, 08/15/26			3,830		3,607,434
					218,057,523
Total Corporate Bonds — 3.1% (Cost: $417,370,932)				326,227,364
Floating Rate Loan Interests — 0.4%(l)
United States — 0.4%
Fieldwood Energy LLC, 2nd Lien Term Loan, (LIBOR USD 3 Month + 7.13%), 8.82%, 09/30/20			4,979		1,597,446
Fieldwood Energy LLC, Term Loan:
(LIBOR USD 3 Month + 7.00%), 8.69%, 08/31/20(g)			2,191		1,972,277
(LIBOR USD 3 Month + 7.13%), 8.82%, 12/31/2100(g)			2,958		2,031,456
Hilton Worldwide Finance LLC, Term Loan B-2, (LIBOR USD 3 Month + 2.00%), 3.55%, 10/25/23			14,413		14,479,903
Seadrill Operating LP, Term Loan, (LIBOR USD 3 Month + 3.00%), 4.69%, 02/21/21			13,985		11,258,035
Sheridan Investment Partners II LP, Term Loan, (LIBOR USD 3 Month + 3.50%), 4.98%, 12/16/20			11,649		10,057,317
Sheridan Investment Partners II-A LP, Term Loan, (LIBOR USD 3 Month + 3.50%), 4.98%, 12/16/20			1,621		1,399,129
Sheridan Investment Partners II-M LP, Term Loan, (LIBOR USD 3 Month + 3.50%), 4.98%, 12/16/20			604		521,839
					43,317,402
Total Floating Rate Loan Interests — 0.4% (Cost: $50,617,950)					43,317,402
Foreign Agency Obligations — 0.5%
Brazil — 0.1%
Petrobras Global Finance BV:
6.13%, 01/17/22			7,510		7,969,988
7.38%, 01/17/27			8,682		9,558,882
					17,528,870
Mexico — 0.3%
Petroleos Mexicanos:
(LIBOR USD 3 Month + 3.65%), 5.19%, 03/11/22(c)(j)			8,570		9,409,800
4.63%, 09/21/23			19,444		20,003,015
					29,412,815
South Korea — 0.1%
Export-Import Bank of Korea:
2.88%, 09/17/18			3,344		3,352,521
2.63%, 12/30/20			6,819		6,758,781
					10,111,302
Total Foreign Agency Obligations — 0.5% (Cost: $55,589,417)					57,052,987

Security	Par (000)			Value
Foreign Government Obligations — 9.4%
Argentina — 0.8%
Republic of Argentina:
6.88%, 04/22/21		USD	9,941	$	10,825,749
3.88%, 01/15/22		EUR	5,376		6,789,233
5.63%, 01/26/22		USD	20,152		21,260,360
3.38%, 01/15/23		EUR	10,510		12,855,570
7.50%, 04/22/26		USD	18,591		21,047,801
6.88%, 01/26/27			12,979		14,179,557
					86,958,270
Australia — 2.0%
Commonwealth of Australia:
5.75%, 05/15/21		AUD	48,801		42,455,908
5.50%, 04/21/23			54,568		49,147,199
2.75%, 04/21/24			129,045		102,328,562
3.00%, 03/21/47			32,794		23,874,741
					217,806,410
Brazil — 1.6%
Federative Republic of Brazil:
6.00%, 08/15/22		BRL	89		28,634,495
10.00%, 01/01/23			179		54,533,028
10.00%, 01/01/27			128		38,111,396
4.63%, 01/13/28		USD	27,695		27,819,628
5.00%, 01/27/45			20,006		18,645,592
5.63%, 02/21/47			7,600		7,763,400
					175,507,539
Canada — 0.9%
Canadian Government Bond:
0.50%, 08/01/18		CAD	103,555		81,984,749
0.75%, 03/01/21			26,087		20,101,102
					102,085,851
Germany — 0.5%
Federal Republic of Germany, 0.00%, 08/15/26		EUR	45,299		53,019,736
Hungary — 0.2%
Republic of Hungary, 6.38%, 03/29/21		USD	22,384		24,848,031
Indonesia — 0.1%
Republic of Indonesia:
4.88%, 05/05/21			2,427		2,588,405
3.70%, 01/08/22(c)			3,549		3,647,545
					6,235,950
Italy — 0.2%
Republic of Italy, 1.85%, 05/15/24		EUR	13,627		16,916,928
Japan — 1.1%
Government of Japan (2 Year), 0.10%, 03/15/18		JPY	6,086,800		54,046,786
Government of Japan (2 Year), 0.10%, 10/15/18			7,006,100		62,299,727
					116,346,513
Mexico — 0.7%
United Mexican States:
8.50%, 12/13/18		MXN	7,488		38,353,866
6.50%, 06/09/22			7,337		35,718,117
					74,071,983
Poland — 1.3%
Republic of Poland:
5.00%, 03/23/22		USD	3,654		4,001,130
3.25%, 07/25/25		PLN	95,041		27,532,525

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)				Value
Poland (continued)
Republic of Poland (continued):
2.50%, 07/25/26		PLN		95,635	$	25,984,741
2.50%, 07/25/27				316,102		84,957,742
						142,476,138
Total Foreign Government Obligations — 9.4% (Cost: $997,561,965)						1,016,273,349
	Shares
Investment Companies — 3.8%(a)(m)
ETFS Physical Platinum Shares				67,020		5,929,259
ETFS Physical Swiss Gold Shares				230,215		29,037,018
ETFS Physical Palladium Shares				80,940		8,219,457
iShares Gold Trust(t)				2,098,037		26,246,443
SPDR Gold Shares				2,724,874		336,930,670
Total Investment Companies — 3.8% (Cost: $398,057,183)						406,362,847
			Par (000)
Non-Agency Mortgage-Backed Securities — 0.1%
Commercial Mortgage-Backed Securities — 0.1%
United Kingdom — 0.1%
Logistics UK plc, Series 2015-1A, Class F, 4.13%, 08/20/25(c)(n)		GBP		6,637		8,970,802
Total Non-Agency Mortgage-Backed Securities — 0.1% (Cost: $10,174,225)						8,970,802
Preferred Securities — 2.9%
Capital Trusts — 0.8%
Netherlands — 0.0%
ING Groep NV, 6.00%(a)(k)(n)		USD		3,944		4,087,956
United Kingdom — 0.3%(k)
HSBC Holdings plc, (USD Swap Rate 5 Year + 3.71%), 6.38%(j)				14,896		15,864,240
Lloyds Bank plc, (U.K. Government Bonds 5 Year Note Generic Bid Yield + 13.40%), 13.00%(j)		GBP		8,180		20,691,359
						36,555,599
United States — 0.5%(a)
American Express Co., Series C, 4.90%(k)(n)				5,135		5,237,700
Citigroup, Inc., Series O, 5.87%(k)(n)				9,567		9,925,762
General Electric Co., (LIBOR USD 3 Month + 3.33%), 5.00%(j)(k)				8,146		8,395,268
Goldman Sachs Group, Inc. (The), Series M, 5.38%(k)(n)				8,271		8,519,130
Morgan Stanley, Series H, 5.45%(k)(n)				5,940		6,097,410
NBCUniversal Enterprise, Inc., 5.25%(c)(k)				6,235		6,624,687
Prudential Financial, Inc.:(n)
5.63%, 06/15/43				2,954		3,199,182
5.87%, 09/15/42				4,447		4,858,348
USB Capital IX, 3.50%(k)(n)				2,096		1,896,880
						54,754,367
Total Capital Trusts — 0.8% (Cost: $86,871,864)						95,397,922

Security		Shares		Value
Preferred Stocks — 1.6%
Brazil — 0.0%
Banco Bradesco SA (Preference), 0.00%(a)			5,864	$	59,841
Itau Unibanco Holding SA (Preference), 0.00%			8,128		104,335
Petroleo Brasileiro SA (Preference), 0.00%(a)			9,168		44,498
					208,674
South Korea — 0.0%
Samsung Electronics Co. Ltd. (Preference), 0.00%			116		225,900
United States — 1.6%
Anthem, Inc., 5.25%(i)			407,836		22,838,816
Crown Castle International Corp., Series A, 6.88%(b)(i)			13,602		14,276,523
Dominion Energy, Inc., Series A, 6.75%(i)			328,925		16,992,266
Domo, Inc., Series D-2 (Acquired 04/01/15-04/12/17, cost $23,596,895), 0.00%(a)(e)(f)			2,798,626		17,547,385
Dropbox, Inc., Series C (Acquired 01/28/14, cost $28,835,783), 0.00%(a)(e)(f)			1,509,632		21,436,774
Grand Rounds, Inc., Series C (Acquired 03/31/15, cost $5,939,231), 0.00%(a)(e)(f)			2,139,107		6,096,455
Lookout, Inc. (Acquired 09/19/14-10/22/14, cost $10,936,522), 0.00%(a)(e)(f)			957,404		8,932,579
Palantir Technologies, Inc., Series I (Acquired 03/27/14, cost $11,447,321), 0.00%(a)(e)(f)			1,867,426		10,588,306
Uber Technologies, Inc., Series D (Acquired 06/10/14, cost $17,574,548), 0.00%(a)(e)(f)			1,132,888		37,351,317
Wells Fargo & Co., Series L, 7.50%(i)			3,211		4,206,378
Welltower, Inc., Series I, 6.50%(i)(k)			154,397		9,243,748
					169,510,547
Total Preferred Stocks — 1.6% (Cost: $159,327,908)					169,945,121
Trust Preferreds — 0.5%
China — 0.3%
Mandatory Exchangeable Trust, 5.75%, 06/03/19(c)(i)			159,574		31,078,632
United States — 0.2%
Citigroup Capital XIII, 7.75%, 10/30/40(b)(n)			362,772		9,968,975
GMAC Capital Trust I, Series 2, 7.20%, 02/15/40(b)(n)			405,551		10,524,049
					20,493,024
Total Trust Preferreds — 0.5% (Cost: $35,835,157)					51,571,656
Total Preferred Securities — 2.9% (Cost: $282,034,929)					316,914,699
		Par (000)
U.S. Treasury Obligations — 15.0%
U.S. Treasury Notes:
1.25%, 12/15/18(m)	USD		30,000		29,842,969
1.13%, 07/31/21			22,358		21,620,401
2.00%, 10/31/22 - 11/30/22			702,447		696,187,062
2.13%, 09/30/24(p)			261,200		257,914,595
2.25%, 10/31/24 - 11/15/27			625,603		619,355,676
Total U.S. Treasury Obligations — 15.0% (Cost: $1,634,363,138)					1,624,920,703

CONSOLIDATED SCHEDULE OF INVESTMENTS 13

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security		Shares		Value
Warrants — 0.0%
Australia — 0.0%(a)(f)
Quintis Ltd. (issued/exercisable 01/08/2011, 2 share for 1 warrant, Expires 07/15/2018, Strike Price AUD 1.28)	3,767,700			$	29
Total Warrants — 0.0%					29
Total Long-Term Investments — 90.3% (Cost: $8,746,711,796)					9,749,684,509
Short-Term Securities — 11.5%
		Shares
Money Market Funds — 2.3%(q)(t)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%	USD		10,574,106		10,574,106
SL Liquidity Series, LLC, Money Market Series, 1.48%(r)			235,838,442		235,814,858
Total Money Market Funds — 2.3% (Cost: $246,403,657)					246,388,964
		Par (000)
Time Deposits — 0.0%
Canada — 0.0%
Brown Brothers Harriman & Co., 0.33%, 01/02/18	CAD		3		2,377
United Kingdom — 0.0%
Citibank NA, 0.16%, 01/02/18	GBP		104		140,667
Total Time Deposits — 0.0% (Cost: $143,044)					143,044
U.S. Treasury Obligations — 9.2%
U.S. Treasury Bills:
1.15%, 01/02/18	USD		198,000		198,000,000
1.13%, 01/04/18			205,000		204,987,087
1.21%, 01/11/18(p)			33,000		32,990,285
1.17%, 01/18/18			115,000		114,936,686
1.14%, 01/25/18			165,000		164,870,338
1.24%, 02/01/18			80,000		79,915,638
1.23%, 02/08/18			75,000		74,903,549
1.25%, 02/15/18			119,000		118,820,013
Total U.S. Obligations — 9.2% (Cost $989,404,918)					989,423,596
Total Short-Term Securities — 11.5% (Cost: $1,235,951,619)					1,235,955,604
Total Options Purchased — 0.3% (Cost: $36,800,490)					43,312,386
Total Investments — 102.1% (Cost: $10,019,463,905)					11,028,952,499
Liabilities in Excess of Other Assets — (2.1)%					(230,739,311	)
Net Assets — 100.0%				$	10,798,213,188

^(a)  Non-income producing security.

^(b)  Security, or a portion of the security, is on loan.

^(c)  Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(d)  A security contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately.

^(e)  Restricted security as to resale, excluding 144A securities. The Fund held restricted securities with a current value of $105,200,214 , representing 1.00% of its net assets as of period end, and an original cost of $148,417,899.

^(f)  Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

^(g)  Issuer filed for bankruptcy and/or is in default.

^(h)  Zero-coupon bond.

⁽ⁱ⁾  Convertible security.

^(j)  Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

^(k)  Perpetual security with no stated maturity date.

^(l)  Variable rate security. Rate shown is the rate in effect as of period end.

^(m)  All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

⁽ⁿ⁾  Variable or floating rate security, which interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.

^(o)  Rates are discount rates or a range of discount rates at the time of purchase.

^(p)  All or a portion of security has been pledged as collateral in connection with outstanding OTC derivatives.

^(q)  Annualized 7-day yield as of period end.

^(r)  Security was purchased with the cash collateral from loaned securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

^(t)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the fund were as follows:

Affiliates	Shares Held at 12/31/16		Shares Purchased			Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		3,489,583		7,084,523	(b)		—			10,574,106	$	10,574,106	$	51,448		$	—		$	—
SL Liquidity Series, LLC, Money Market Series		304,751,698		—			(68,913,256	)(c)		235,838,442		235,814,858		2,573,563	(d)		(30,958	)		222
iShares Gold Trust		2,098,037		—			—			2,098,037		26,246,443		—			—			3,000,193
iShares iBoxx $ High Yield Corporate Bond ETF		122,665		—			(122,665	)		—		—		93,976			368,124			(353,624	)
											$	272,635,407	$	2,718,987		$	337,166		$	2,646,791

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents net shares purchased.

^(c)  Represents net shares sold.

^(d)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation/ (Depreciation)
Short Contracts
Yen Denominated Nikkei 225 Index		138		03/08/18	$	13,901	$	(118,210	)
EURO STOXX 50 Index		89		03/16/18		3,730		76,458
NASDAQ 100 E-Mini Index		168		03/16/18		21,533		(70,135	)
S&P 500 E-Mini Index		210		03/16/18		28,098		(279,124	)
							$	(391,011	)

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
JPY	131,108,687	USD	1,161,951	BNP Paribas SA		01/04/18	$	1,709
USD	76,642	JPY	8,624,999	Barclays Bank plc		01/04/18		90
USD	26,525,000	MXN	492,932,643	UBS AG		01/11/18		1,493,650
USD	21,261,000	MXN	405,957,534	Deutsche Bank AG		01/18/18		676,421
USD	62,453,233	AUD	79,763,000	Goldman Sachs International		01/25/18		217,513
GBP	20,413,000	USD	26,846,157	JP Morgan Chase Bank NA		02/08/18		748,544
GBP	20,413,000	USD	26,852,281	JP Morgan Chase Bank NA		02/16/18		748,816
NZD	34,135,000	USD	23,523,282	JP Morgan Chase Bank NA		02/22/18		652,374
USD	24,413,693	NZD	34,135,000	JP Morgan Chase Bank NA		02/22/18		238,037
GBP	20,345,000	USD	26,768,425	JP Morgan Chase Bank NA		02/23/18		746,304
EUR	42,096,000	USD	49,698,538	UBS AG		03/15/18		1,025,521
JPY	3,573,985,000	USD	31,654,013	Goldman Sachs International		03/15/18		178,896
EUR	32,446,000	USD	38,417,524	UBS AG		03/16/18		681,300
SEK	225,145,264	EUR	22,773,000	Deutsche Bank AG		03/22/18		124,269
SEK	225,224,970	EUR	22,773,000	BNP Paribas SA		03/29/18		133,536
EUR	42,213,000	USD	49,933,758	UBS AG		04/12/18		1,027,462
								8,694,442
JPY	184,203,375	USD	1,636,912	Barclays Bank plc		01/05/18		(1,926	)
NOK	171,746,000	USD	21,520,976	Morgan Stanley & Co., Inc.		01/26/18		(588,300	)
USD	17,172,294	EUR	14,481,000	UBS AG		02/26/18		(258,152	)
JPY	2,982,565,000	USD	26,572,510	Barclays Bank plc		03/08/18		(19,098	)
EUR	22,639,000	PLN	95,959,929	Deutsche Bank AG		03/16/18		(292,141	)
USD	10,109,060	AUD	13,000,000	Citibank NA		04/06/18		(32,261	)
USD	27,396,612	AUD	36,024,000	Deutsche Bank AG		04/13/18		(705,489	)
								(1,897,367	)
	Net Unrealized Appreciation						$	6,797,075

CONSOLIDATED SCHEDULE OF INVESTMENTS 15

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

OTC Options Purchased

Description	Counterparty	Number of Contracts		Expiration Date		Exercise Price			Notional Amount (000)			Value
Call
Tokyo Stock Price Index	Morgan Stanley & Co. International plc		3,384,276		01/12/18		JPY	1,785.00		JPY	6,151,125	$	1,183,646
Franklin Resources, Inc.	Goldman Sachs International		267,940		01/19/18		USD	45.00		USD	11,610		46,889
S&P 500 Index	Deutsche Bank AG		34,284		01/19/18		USD	2,685.00		USD	91,662		443,978
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		138,888		01/19/18		USD	126.00		USD	17,174		55,555
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		138,890		01/19/18		USD	125.00		USD	17,174		88,195
Synchrony Financial	Goldman Sachs International		296,775		01/19/18		USD	35.00		USD	11,458		1,142,584
Travelers Cos., Inc. (The)	Goldman Sachs International		106,866		01/19/18		USD	135.00		USD	14,495		237,777
Tokyo Stock Price Index	Citibank NA		2,460,020		02/09/18		JPY	1,785.00		JPY	4,471,234		1,178,602
S&P 500 Index	BNP Paribas SA		41,080		02/16/18		USD	2,690.00		USD	109,832		944,840
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		345,955		02/16/18		USD	130.00		USD	42,777		119,354
Tokyo Stock Price Index	Morgan Stanley & Co. International plc		2,733,462		03/09/18		JPY	1,800.00		JPY	4,968,231		1,491,972
S&P 500 Index	Bank of America NA		23,291		03/16/18		USD	2,675.00		USD	62,271		1,038,779
S&P 500 Index	UBS AG		23,293		03/16/18		USD	2,670.00		USD	62,276		1,115,735
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		345,988		03/16/18		USD	127.00		USD	42,781		413,456
EUR Currency	UBS AG		—		03/27/18		USD	1.20		EUR	268,091		5,599,965
S&P 500 Index	Societe Generale SA		16,433		03/29/18		USD	2,675.00		USD	43,935		903,629
S&P 500 Index	Citibank NA		13,681		04/20/18		USD	2,700.00		USD	36,578		682,012
S&P 500 Index	Morgan Stanley & Co. International plc		11,982		04/20/18		USD	2,695.00		USD	32,035		633,595
EUR Currency	Barclays Bank plc		—		05/18/18		USD	1.19		EUR	135,126		4,552,691
EURO STOXX 50 Index	Deutsche Bank AG		3,336		09/21/18		EUR	3,426.55		EUR	11,689		658,198
BP plc	UBS AG		869,910		01/18/19		USD	40.00		USD	36,562		3,088,181
Chevron Corp.	UBS AG		275,840		01/18/19		USD	125.00		USD	34,532		2,475,664
ConocoPhillips	UBS AG		458,581		01/18/19		USD	52.50		USD	25,172		2,717,092
Exxon Mobil Corp.	UBS AG		187,537		01/18/19		USD	95.00		USD	15,686		213,792
Occidental Petroleum Corp.	UBS AG		403,026		01/18/19		USD	75.00		USD	29,687		2,146,113
Royal Dutch Shell plc	UBS AG		496,555		01/18/19		USD	60.00		USD	33,125		3,798,646
Schlumberger Ltd.	UBS AG		271,460		01/18/19		USD	90.00		USD	18,294		145,231
Schneider Electric SE	UBS AG		585,698		01/18/19		USD	35.00		USD	21,507		2,416,004
TOTAL SA	UBS AG		598,145		01/18/19		USD	60.00		USD	33,065		1,001,893
													40,534,068
Put
USD Currency	BNP Paribas SA		—		01/12/18		JPY	111.75		USD	137,396		272,686
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		277,778		01/19/18		USD	117.00		USD	34,347		17,959
													290,645
												$	40,824,713

^(a)  All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

OTC Interest Rate Swaptions Purchased

Paid by the Fund

Received by the Fund

Counterparty

Expiration Date

Exercise Rate

Notional Amount (000)

Value

Description

Rate

Frequency

Rate

Frequency

Call

5-Year Interest Rate Swap, 04/24/18

3 month LIBOR

Quarterly

2.15%

Semi Annual

Goldman Sachs International

04/24/18

2.15

%

USD

692,291

$

1,903,807

Put

10-Year Interest Rate Swap, 01/04/18

2.46%

Semi Annual

3 month LIBOR

Quarterly

Goldman Sachs International

01/04/18

2.46

%

USD

138,646

55,056

5-Year Interest Rate Swap, 04/04/18

1.07%

Semi Annual

3 month LIBOR

Quarterly

Deutsche Bank AG

04/04/18

1.07

%

JPY

2,370,178

55

30-Year Interest Rate Swap, 05/02/18

2.75%

Semi Annual

3 month LIBOR

Quarterly

Goldman Sachs International

05/02/18

2.75

%

USD

31,963

406,086

461,197

$

2,365,004

OTC Interest Rate Caps Purchased

Description	Exercise Rate	Counterparty	Expiration Date	Notional Amount (000)		Value		Premiums Paid		Unrealized Appreciation/ (Depreciation)
5Y-30Y CMS Index Cap	0.60%	Goldman Sachs International	11/06/18	USD	215,050	$	122,669	$	659,487	$	(536,818	)

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

OTC Barrier Options Written

Description

Type of Option

Counterparty

Number of Contracts

Expiration Date

Exercise Price

Barrier Price/Range

Notional Amount (000)

Value

Put

EURO STOXX 50 Index

Down-and-In

Deutsche Bank AG

(3,336

)

09/21/18

EUR  2,586.07

EUR

2,165.83

EUR

(11,689

)

$

(76,447

)

OTC Options Written

Description	Counterparty	Number of Contracts		Expiration Date		Exercise Price			Notional Amount (000)			Value
Call
USD Currency	BNP Paribas SA		—		01/12/18		JPY	115.00		USD	137,396	$	(26,112	)
Synchrony Financial	Bank of America NA		296,775		01/19/18		USD	35.00		USD	11,458		(1,142,584	)
USD Currency	BNP Paribas SA		—		01/26/18		ZAR	15.25		USD	34,324		(15	)
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		345,988		03/16/18		USD	140.00		USD	42,781		(41,519	)
Flight Centre Travel Group Ltd.	Barclays Bank plc		34,069		01/18/19		USD	180.00		USD	6,556		(1,008,442	)
Pioneer Natural Resources Co.	UBS AG		72,530		01/18/19		USD	165.00		USD	12,537		(2,063,479	)
United Continental Holdings, Inc.	Deutsche Bank AG		90,361		01/18/19		USD	75.00		USD	6,090		(582,828	)
													(4,864,979	)
Put
USD Currency	BNP Paribas SA		—		01/12/18		JPY	108.00		USD	137,396		(1,334	)
S&P 500 Index	Deutsche Bank AG		17,142		01/19/18		USD	2,500.00		USD	45,831		(48,426	)
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		277,778		01/19/18		USD	120.00		USD	34,347		(44,217	)
Tokyo Stock Price Index	Citibank NA		2,460,020		02/09/18		JPY	1,675.00		JPY	4,471,234		(97,213	)
S&P 500 Index	BNP Paribas SA		20,540		02/16/18		USD	2,450.00		USD	54,916		(117,078	)
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		241,806		02/16/18		USD	115.00		USD	29,899		(25,092	)
Tokyo Stock Price Index	Morgan Stanley & Co. International plc		2,733,462		03/09/18		JPY	1,650.00		JPY	4,968,231		(131,002	)
SPDR Gold Shares(a)	Morgan Stanley & Co. International plc		145,105		03/16/18		USD	115.00		USD	17,942		(10,440	)
BP plc	UBS AG		869,910		01/18/19		USD	25.00		USD	36,562		(173,982	)
Chevron Corp.	UBS AG		275,840		01/18/19		USD	80.00		USD	34,532		(205,501	)
ConocoPhillips	UBS AG		458,581		01/18/19		USD	35.00		USD	25,172		(311,835	)
Exxon Mobil Corp.	UBS AG		187,537		01/18/19		USD	60.00		USD	15,686		(128,463	)
Occidental Petroleum Corp.	UBS AG		403,026		01/18/19		USD	45.00		USD	29,687		(253,906	)
Royal Dutch Shell plc	UBS AG		496,555		01/18/19		USD	40.00		USD	33,125		(86,897	)
Schlumberger Ltd.	UBS AG		271,460		01/18/19		USD	60.00		USD	18,294		(916,178	)
Schneider Electric SE	UBS AG		585,698		01/18/19		USD	25.00		USD	21,507		(307,492	)
TOTAL SA	UBS AG		598,145		01/18/19		USD	40.00		USD	33,065		(284,119	)
													(3,143,175	)
												$	(8,008,154	)

^(a)  All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

OTC Interest Rate Swaptions Written

	Paid by the Fund				Received by the Fund			Counterparty	Expiration Date		Exercise Rate				Notional Amount (000)		Value
Description	Rate			Frequency	Rate		Frequency
Call
5-Year Interest Rate Swap, 04/24/18		1.90	%	Semi Annual		3 month LIBOR	Quarterly	Goldman Sachs International		04/26/23		1.90	%	USD		692,291	$	(466,743	)
Put
10-Year Interest Rate Swap, 01/04/18		2.61	%	Semi Annual		3 month LIBOR	Quarterly	Goldman Sachs International		01/08/28		2.61		USD		138,646		(61	)
5-Year Interest Rate Swap, 04/24/18		2.40	%	Semi Annual		3 month LIBOR	Quarterly	Goldman Sachs International		04/26/23		2.40		USD		346,146		(1,127,344	)
5-Year Interest Rate Swap, 05/02/18		2.50	%	Semi Annual		3 month LIBOR	Quarterly	Goldman Sachs International		05/04/23		2.50		USD		146,213		(317,831	)
																		(1,445,236	)
																	$	(1,911,979	)

CONSOLIDATED SCHEDULE OF INVESTMENTS 17

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

Centrally Cleared Credit Default Swaps — Buy Protection

Reference Obligation/Index	Financing Rate Paid by the Fund			Payment Frequency		Termination Date	Notional Amount (000)		Value	Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
CDX.NA.HY.29.V1		5.00	%		Quarterly	12/20/22	USD	8,975	$(756,013)	$	—	$	(756,013	)

Centrally Cleared Interest Rate Swaps

Paid by the Fund		Received by the Fund		Effective Date			Termination Date		Notional Amount (000)		Value			Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Rate	Frequency	Rate	Frequency
3 month LIBOR	Quarterly	2.40%	Semi-Annual		03/07/2018	(a)		03/07/23	USD	134,710	$	850,507		$	—	$	850,507
0.42%	Annual	6 month EURIBOR	Semi-Annual		03/07/2018	(a)		03/07/23	EUR	119,219		(380,044	)		—		(380,044	)
0.34%	Annual	6 month EURIBOR	Semi-Annual		06/14/2018	(a)		06/14/23	EUR	118,086		651,804			—		651,804
3 month LIBOR	Quarterly	2.33%	Semi-Annual		06/14/2018	(a)		06/14/23	USD	147,260		167,932			—		167,932
0.37%	Annual	6 month EURIBOR	Semi-Annual		N/A			08/15/26	EUR	45,313		1,590,492			—		1,590,492
											$	2,880,691		$	—	$	2,880,691

^(a) Forward Swap

OTC Credit Default Swaps — Buy Protection

Reference Obligation/Index	Financing Rate Paid by the Fund			Payment Frequency		Counterparty	Termination Date		Notional Amount (000)			Value			Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
Airbus SE		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	3,449	$	(134,857	)	$	(122,411	)	$	(12,446	)
Airbus SE		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(269,510	)		(229,159	)		(40,351	)
Akzo Nobel NV		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(200,378	)		(156,127	)		(44,251	)
BASF SE		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(285,049	)		(247,605	)		(37,444	)
Bayer AG		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(253,717	)		(221,802	)		(31,915	)
BP plc		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(227,497	)		(156,214	)		(71,283	)
Compagnie de Saint-Gobain SA		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(239,866	)		(192,494	)		(47,372	)
Royal Dutch Shell plc		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	3,449		(136,598	)		(109,308	)		(27,290	)
Royal Dutch Shell plc		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(272,987	)		(199,803	)		(73,184	)
Statoil ASA		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(324,888	)		(251,303	)		(73,585	)
Volkswagen AG		1.00	%		Quarterly	Barclays Bank plc		06/20/22		EUR	6,893		(204,200	)		(134,448	)		(69,752	)
												$	(2,549,547	)	$	(2,020,674	)	$	(528,873	)

OTC Currency Swaps

Paid by the Fund				Received by the Fund				Notional Amount (000)						Counterparty	Termination Date (a)		Value			Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Rate		Frequency		Rate		Frequency		Delivered			Received
0.10	JPY		Semi-Annual		1.96%		Semi-Annual		JPY	3,652,350		USD	32,208	Bank of America NA		03/15/18	$	(40,406	)	$	—	$	(40,406	)
0.10	JPY		Semi-Annual		1.84%		Semi-Annual		JPY	2,434,450		USD	21,624	Bank of America NA		03/15/18		116,351			—		116,351
0.10	JPY		Semi-Annual		2.01%		Semi-Annual		JPY	7,006,100		USD	67,725	Bank of America NA		10/15/18		5,666,874			—		5,666,874
																	$	5,742,819		$	—		5,742,819

^(a)  At expiration date, the notional amount delivered will be exchanged for the notional amount received.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

OTC Total Return Swaps

Reference Entity	Fixed Amount Paid / (Received) by the Fund (a)			Counterparty	Termination Date		Notional Amount (000)			Value		Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Nikkei Dividend Future December 2017		JPY	600,750,000	BNP Paribas SA		04/02/18		JPY	600,750	$	583,892	$	—	$	583,892
Nikkei Dividend Future December 2017		JPY	594,918,000	BNP Paribas SA		04/02/18		JPY	594,918		635,651		—		635,651
S&P 500 Index Annual Dividend Future December 2018		USD	7,094,313	BNP Paribas SA		12/21/18		USD	7,094		842,212		—		842,212
Nikkei Dividend Future December 2018		JPY	316,800,000	BNP Paribas SA		04/01/19		JPY	316,800		619,836		—		619,836
Nikkei Dividend Future December 2018		JPY	618,839,000	BNP Paribas SA		04/01/19		JPY	618,839		1,408,804		—		1,408,804
Nikkei Dividend Future December 2018		JPY	309,375,000	BNP Paribas SA		04/01/19		JPY	309,375		685,733		—		685,733
Euro Stoxx 50 Index Dividend Future December 2019		EUR	3,589,050	BNP Paribas SA		12/20/19		EUR	3,589		1,137,278		—		1,137,278
Euro Stoxx 50 Index Dividend Future December 2019		EUR	1,688,400	BNP Paribas SA		12/20/19		EUR	1,688		550,299		—		550,299
Euro Stoxx 50 Index Dividend Future December 2019		EUR	3,305,250	BNP Paribas SA		12/20/19		EUR	3,305		1,017,773		—		1,017,773
Euro Stoxx 50 Index Dividend Future December 2019		EUR	2,608,580	BNP Paribas SA		12/20/19		EUR	2,609		764,952		—		764,952
Nikkei Dividend Future December 2019		JPY	314,640,000	BNP Paribas SA		04/01/20		JPY	314,640		943,333		—		943,333
Nikkei Dividend Future December 2019		JPY	510,000,000	BNP Paribas SA		04/01/20		JPY	510,000		1,700,022		—		1,700,022
Nikkei Dividend Future December 2019		JPY	418,800,000	BNP Paribas SA		04/01/20		JPY	418,800		1,264,167		—		1,264,167
Euro Stoxx 50 Index Dividend Future December 2020		EUR	2,800,780	BNP Paribas SA		12/18/20		EUR	2,801		619,291		—		619,291
Euro Stoxx 50 Index Dividend Future December 2020		EUR	720,000	BNP Paribas SA		12/18/20		EUR	720		275,366		—		275,366
Euro Stoxx 50 Index Dividend Future December 2020		EUR	970,000	BNP Paribas SA		12/18/20		EUR	970		355,156		—		355,156
Euro Stoxx 50 Index Dividend Future December 2020		EUR	1,810,440	BNP Paribas SA		12/18/20		EUR	1,810		683,483		—		683,483
Euro Stoxx 50 Index Dividend Future December 2020		EUR	836,940	BNP Paribas SA		12/18/20		EUR	837		317,336		—		317,336
Euro Stoxx 50 Index Dividend Future December 2020		EUR	964,000	BNP Paribas SA		12/18/20		EUR	964		362,355		—		362,355
Euro Stoxx 50 Index Dividend Future December 2020		EUR	2,919,700	BNP Paribas SA		12/18/20		EUR	2,920		1,069,018		—		1,069,018
S&P 500 Index Annual Dividend Future December 2020		USD	2,914,481	Goldman Sachs International		12/18/20		USD	2,914		621,169		—		621,169
Nikkei Dividend Future December 2020		JPY	104,085,000	BNP Paribas SA		04/01/21		JPY	104,085		234,835		—		234,835
Nikkei Dividend Future December 2020		JPY	89,240,000	BNP Paribas SA		04/01/21		JPY	89,240		194,941		—		194,941
Nikkei Dividend Future December 2020		JPY	143,310,000	BNP Paribas SA		04/01/21		JPY	143,310		187,087		—		187,087
Nikkei Dividend Future December 2020		JPY	191,375,000	BNP Paribas SA		04/01/21		JPY	191,375		447,082		—		447,082
Nikkei Dividend Future December 2020		JPY	384,120,000	BNP Paribas SA		04/01/21		JPY	384,120		839,095		—		839,095
Euro Stoxx 50 Index Dividend Future December 2021		EUR	1,524,150	BNP Paribas SA		12/17/21		EUR	1,524		168,459		—		168,459
Euro Stoxx 50 Index Dividend Future December 2021		EUR	1,353,230	BNP Paribas SA		12/17/21		EUR	1,353		314,361		—		314,361
Euro Stoxx 50 Index Dividend Future December 2021		EUR	1,637,150	BNP Paribas SA		12/17/21		EUR	1,637		62,464		—		62,464
Euro Stoxx 50 Index Dividend Future December 2021		EUR	833,520	BNP Paribas SA		12/17/21		EUR	834		20,697		—		20,697
Euro Stoxx 50 Index Dividend Future December 2021		EUR	1,409,760	BNP Paribas SA		12/17/21		EUR	1,410		261,327		—		261,327
S&P 500 Index Annual Dividend Future December 2021		USD	3,726,213	BNP Paribas SA		12/17/21		USD	3,726		936,350		—		936,350
Nikkei Dividend Future December 2021		JPY	199,250,000	BNP Paribas SA		04/01/22		JPY	199,250		411,360		—		411,360
Nikkei Dividend Future December 2021		JPY	198,750,000	BNP Paribas SA		04/01/22		JPY	198,750		415,798		—		415,798
Nikkei Dividend Future December 2021		JPY	144,840,000	BNP Paribas SA		04/01/22		JPY	144,840		196,743		—		196,743
Nikkei Dividend Future December 2021		JPY	389,070,000	BNP Paribas SA		04/01/22		JPY	389,070		862,818		—		862,818
Euro Stoxx 50 Index Dividend Future December 2022		EUR	744,600	BNP Paribas SA		12/16/22		EUR	745		81,590		—		81,590
Euro Stoxx 50 Index Dividend Future December 2022		EUR	3,130,720	BNP Paribas SA		12/16/22		EUR	3,131		143,598		—		143,598
Euro Stoxx 50 Index Dividend Future December 2022		EUR	1,495,800	BNP Paribas SA		12/16/22		EUR	1,496		140,922		—		140,922
Euro Stoxx 50 Index Dividend Future December 2022		EUR	1,481,040	BNP Paribas SA		12/16/22		EUR	1,481		172,970		—		172,970
Nikkei Dividend Future December 2022		JPY	143,820,000	BNP Paribas SA		04/03/23		JPY	143,820		227,823		—		227,823
Nikkei Dividend Future December 2022		JPY	145,520,000	JP Morgan Chase Bank NA		04/03/23		JPY	145,520		212,736		—		212,736
Euro Stoxx 50 Index Dividend Future December 2023		EUR	2,147,040	BNP Paribas SA		12/15/23		EUR	2,147		29,480		—		29,480
										$	23,019,662	$	—	$	23,019,662

^(a)  At termination, the fixed amount paid (received) will be exchanged for the total return of the reference entity.

Balances reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps and OTC Derivatives

	Swap Premiums Paid		Swap Premiums Received			Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swaps(a)	$	—	$	—		$	3,260,735	$	(1,136,057	)
OTC Derivatives		—		(2,020,674	)		28,802,887		(569,279	)

^(a) Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Consolidated Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

CONSOLIDATED SCHEDULE OF INVESTMENTS 19

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Consolidated Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Futures Contracts
Net unrealized appreciation(a)	$	—	$	—	$	76,458	$	—	$	—	$	—	$	76,458
Forward foreign currency exchange contracts
Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		8,694,442		—		—		8,694,442
Options purchased
Investments at value — unaffiliated(b)		—		—		30,399,371		10,425,342		2,487,673		—		43,312,386
Swaps — centrally cleared
Net unrealized appreciation(a)		—		—		—		—		3,260,735		—		3,260,735
Swaps — OTC
Net unrealized appreciation on OTC swaps; Swap premiums paid		—		—		23,019,662		—		5,783,225		—		28,802,887
	$	—	$	—	$	53,495,491	$	19,119,784	$	11,531,633	$	—	$	84,146,908
Liabilities — Derivative Financial Instruments
Futures Contracts
Net unrealized depreciation(a)	$	—	$	—	$	467,469	$	—	$	—	$	—	$	467,469
Forward foreign currency exchange contracts
Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		1,897,367		—		—		1,897,367
Options written
Options written, at value		—		—		8,057,140		27,461		1,911,979		—		9,996,580
Swaps — centrally cleared
Net unrealized depreciation(a)		—		756,013		—		—		380,044		—		1,136,057
Swaps — OTC
Net unrealized depreciation on OTC swaps; Swap premiums received		—		2,549,547		—		—		40,406		—		2,589,953
	$	—	$	3,305,560	$	8,524,609	$	1,924,828	$	2,332,429	$	—	$	16,087,426

^(a)  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

^(b)  Includes options purchased at value as reported in the Consolidated Schedule of Investments.

For the year ended 31 December, 2017, the effect of derivative financial instruments in the Consolidated Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts			Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts		Total
Net realized Gain (Loss) from:
Futures Contracts	$	—	$	—		$	(42,141,232	)	$	—		$	—		$	—	$	(42,141,232	)
Forward foreign currency exchange contracts		—		—			—			30,891,297			—			—		30,891,297
Options purchased(a)		—		—			26,002,437			(7,072,173	)		(1,774,993	)		—		17,155,271
Options written		—		—			6,779,692			16,894,630			(3,570,758	)		—		20,103,564
Swaps		—		1,741,429			3,943,981			688,831			(6,081,676	)		—		292,565
	$	—	$	1,741,429		$	(5,415,122	)	$	41,402,585		$	(11,427,427	)	$	—	$	26,301,465
Net Change in Unrealized Appreciation (Depreciation)
Futures Contracts	$	—	$	—		$	107,675		$	—		$	—		$	—	$	107,675
Forward foreign currency exchange contracts		—		—			—			(62,539,435	)		—			—		(62,539,435	)
Options purchased(b)		—		—			(51,079,760	)		(2,972,692	)		(12,343,564	)		—		(66,396,016	)
Options written		—		—			3,223,314			3,774,150			12,822,488			—		19,819,952
Swaps		—		(3,187,077	)		14,719,447			—			8,318,460			—		19,850,830
	$	—	$	(3,187,077	)	$	(33,029,324	)	$	(61,737,977	)	$	8,797,384		$	—	$	(89,156,994	)

^(a)  Options purchased are included in net realized gain (loss) from investments — unaffiliated.

^(b)  Options purchased are included in net change in unrealized appreciation (depreciation) on investments — unaffiliated.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	8,740,606
Average notional value of contracts — short	$	131,867,584
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	307,112,927
Average amounts sold — in USD	$	257,297,493
Options:
Average value of option contracts purchased	$	47,788,652
Average value of option contracts written	$	11,166,837
Average notional value of swaption contracts purchased	$	1,128,088,207
Average notional value of swaption contracts written	$	1,394,399,196
Credit default swaps:
Average notional value — buy protection	$	46,271,989
Interest rate swaps:
Average notional value — pays fixed rate	$	355,446,735
Average notional value — receives fixed rate	$	322,428,750
Currency swaps:
Average notional value — pays	$	60,778,500
Average notional value — receives	$	119,281,405
Total return swaps:
Average notional value	$	114,336,691

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	402,371		$	—
Forward foreign currency exchange contracts		8,694,442			1,897,367
Options(a)		43,189,717			10,533,398
Swaps — Centrally cleared		904,629			—
Swaps — OTC(b)		28,802,887			2,589,953
Total derivative assets and liabilities in the Consolidated Statement of Assets and Liabilities	$	81,994,046		$	15,020,718
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(1,307,000	)		—
Total derivative assets and liabilities subject to an MNA	$	80,687,046		$	15,020,718

^(a)  Includes options purchased at value which is included in Investments at value — unaffiliated in the Consolidated Statements of Assets and Liabilities and reported in the Consolidated Schedule of Investments.

^(b)  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Consolidated Statement of Assets and Liabilities.

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Received			Cash Collateral Received (b)			Net Amount of Derivative Assets (c)
Bank of America NA	$	6,822,004	$	(1,182,990	)	$	—		$	(5,639,014	)	$	—
Barclays Bank plc		4,552,781		(3,579,013	)		—			—			973,768
BNP Paribas SA		23,538,527		(144,539	)		—			(23,380,000	)		13,988
Citibank NA		1,860,614		(129,474	)		—			(1,731,140	)		—
Deutsche Bank AG		1,902,921		(1,705,331	)		—			(197,590	)		—
Goldman Sachs International		4,809,777		(2,448,797	)		—			(2,360,980	)		—
JP Morgan Chase Bank NA		3,346,811		—			—			—			3,346,811
Morgan Stanley & Co. International plc(e)		4,003,732		(840,570	)		—			(3,163,162	)		—
Societe Generale SA		903,629		—			—			(903,629	)		—
UBS AG		28,946,249		(4,990,004	)	$	(15,857,675	)		(4,050,000	)		4,048,570
	$	80,687,045	$	(15,020,718	)	$	(15,857,675	)	$	(41,425,515	)	$	8,383,137

CONSOLIDATED SCHEDULE OF INVESTMENTS 21

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

Counterparty	Derivative Liabilities Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities  (d)
Bank of America NA	$	1,182,990	$	(1,182,990	)	$	—	$	—	$	—
Barclays Bank plc		3,579,013		(3,579,013	)		—		—		—
BNP Paribas SA		144,539		(144,539	)		—		—		—
Citibank NA		129,474		(129,474	)		—		—		—
Deutsche Bank AG		1,705,331		(1,705,331	)		—		—		—
Goldman Sachs International		2,448,797		(2,448,797	)		—		—		—
Morgan Stanley & Co. International plc(e)		840,570		(840,570	)		—		—		—
UBS AG		4,990,004		(4,990,004	)		—		—		—
	$	15,020,718	$	(15,020,718	)	$	—	$	—	$	—

^(a)  The amount of derivatives available for offset is limited to the amount of assets and/or liabilities that are subject to an MNA.

^(b)  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

^(c)  Net amount represents the net amount receivable from the counterparty in the event of default.

^(d)  Net amount represents the net amount payable from the counterparty in the event of default.

^(e)  Includes derivatives owned by the BlackRock Cayman Global Allocation V.I. Fund I, Ltd., a wholly owned subsidiary of the Fund. See Note 1.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Consolidated Financial Statements.

The following table summarizes the Fund’s investments and derivative instruments categorized in the disclosure hierarchy.

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia	$	—	$	973,117	$	—	$	973,117
Belgium		—		43,470,280		—		43,470,280
Brazil		21,602,368		—		—		21,602,368
Canada		48,354,738		—		—		48,354,738
China		19,595,565		14,209,265		—		33,804,830
Czech Republic		4,441,567		—		—		4,441,567
Denmark		—		393,456		—		393,456
Finland		—		25,822,620		—		25,822,620
France		956,675		289,299,813		—		290,256,488
Germany		—		202,463,592		—		202,463,592
Hong Kong		10,271,399		71,152,137		—		81,423,536
India		1,602,466		155,087,268		—		156,689,734
Indonesia		11,016,061		—		—		11,016,061
Ireland		3,150,219		16,201		—		3,166,420
Israel		285,680		—		—		285,680
Italy		53,635,793		55,344,694		—		108,980,487
Japan		317,914		897,726,798		—		898,044,712
Mexico		338,306		—		—		338,306
Netherlands		42,043,644		180,399,444		—		222,443,088
Norway		—		153,777		—		153,777
Peru		33,396		—		—		33,396
Poland		56,071		190,081		—		246,152
Portugal		10,624,858		—		—		10,624,858
Singapore		—		27,853,845		—		27,853,845
South Africa		131,652		159,945		—		291,597
South Korea		42,212,300		26,261,002		—		68,473,302
Spain		—		42,190,112		—		42,190,112
Sweden		—		19,510,991		—		19,510,991
Switzerland		—		133,012,141		—		133,012,141
Taiwan		18,624,022		48,101,302		—		66,725,324
Thailand		7,689,365		12,654,902		—		20,344,267
Turkey		—		231,757		—		231,757
United Arab Emirates		39,994,489		—		—		39,994,489
United Kingdom		87,822,899		202,597,718		—		290,420,617
United States		3,075,094,161		—		472,461		3,075,566,622

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

	Level 1			Level 2			Level 3		Total
Corporate Bonds:
Australia	$	—		$	20,088,600		$	2,075,584	$	22,164,184
Brazil		—			1,558,485			—		1,558,485
Chile		—			195,219			—		195,219
China		—			—			24,000		24,000
France		—			8,231,719			—		8,231,719
Germany		—			21,574,455			—		21,574,455
India		—			—			1		1
Italy		—			7,706,282			—		7,706,282
Luxembourg		—			8,453,470			—		8,453,470
Mexico		—			3,483,022			—		3,483,022
Netherlands		—			2,331,251			—		2,331,251
Singapore		—			6,591,368			—		6,591,368
Switzerland		—			5,555,808			—		5,555,808
Turkey		—			—			5,604,660		5,604,660
United Arab Emirates		—			14,695,917			—		14,695,917
United States		—			217,358,170			699,353		218,057,523
Floating Rate Loan Interests		—			43,317,402			—		43,317,402
Foreign Agency Obligations		—			57,052,987			—		57,052,987
Foreign Government Obligations		—			1,016,273,349			—		1,016,273,349
Investment Companies		406,362,847			—			—		406,362,847
Non-Agency Mortgage-Backed Securities		—			8,970,802			—		8,970,802
Preferred Securities		88,259,429			126,702,454			101,952,816		316,914,699
U.S. Treasury Obligations		—			1,624,920,703			—		1,624,920,703
Warrants		—			—			29		29
Short-Term Securities:
Money Market Funds		10,574,106			—			—		10,574,106
Time Deposits		—			143,044			—		143,044
U.S. Treasury Obligations		—			989,423,596			—		989,423,596
Options Purchased:
Equity contracts		—			30,399,371			—		30,399,371
Foreign currency exchange contracts		—			10,425,342			—		10,425,342
Interest rate contracts		—			2,365,004			—		2,365,004
Subtotal	$	4,005,091,990		$	6,677,094,078		$	110,828,904	$	10,793,014,972
Investments valued at NAV(a)									$	235,814,858
Total Investments									$	11,028,829,830
Derivative Financial Instruments(b)
Assets:
Equity contracts	$	76,458		$	23,019,662		$	—	$	23,096,120
Foreign currency exchange contracts		—			8,694,442			—		8,694,442
Interest rate contracts		—			9,043,960			—		9,043,960
Liabilities:
Credit contracts		—			(1,284,886	)		—		(1,284,886	)
Equity contracts		(467,469	)		(8,057,140	)		—		(8,524,609	)
Foreign currency exchange contracts		—			(1,924,828	)		—		(1,924,828	)
Interest rate contracts		—			(2,332,429	)		—		(2,332,429	)
	$	(391,011	)	$	27,158,781		$	—	$	26,767,770

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(b)  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts, and options written. Swaps, futures contracts, and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

During the year ended December 31, 2017, there were no transfers between Levels 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

CONSOLIDATED SCHEDULE OF INVESTMENTS 23

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock Global Allocation V.I. Fund

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

	Common Stocks			Corporate Bonds			Floating Rate Loan Interests			Preferred Securities			Rights			Warrants		Total
Investments:
Assets:
Opening Balance, as of December 31, 2016	$	1,126,894		$	24,183,817		$	16,176,802		$	119,783,830		$	3		$	—	$	161,271,346
Transfers into Level 3		—			25			—			—			—			—		25
Transfers out of Level 3		—			—			(3,485,372	)		—			—			—		(3,485,372	)
Other1		—			(29	)		—			—			—			29		—
Accrued discounts/premiums		—			(65	)		1,367			—			—			—		1,302
Net realized gain (loss)		(5,538,430	)		(8,953,056	)		60,673			—			—			—		(14,430,813	)
Net change in unrealized appreciation (depreciation)1,2		7,640,913			2,391,520			29,690			(23,603,480	)		—			—		(13,541,357	)
Purchases		—			50,600,834			—			5,772,466			—			—		56,373,300
Sales		(2,756,916	)		(59,819,448	)		(12,783,160	)		—			(3	)		—		(75,359,527	)
Closing Balance, as of December 31, 2017	$	472,461		$	8,403,598		$	—		$	101,952,816		$	—		$	29	$	110,828,904
Net change in unrealized appreciation (depreciation) on investments still held at December 31, 20172	$	17,616		$	(3,240,605	)	$	—		$	(23,603,481	)	$	—		$	5	$	(26,826,465	)

⁽¹⁾  Included in the related net change in unrealized appreciation (depreciation) in the Consolidated Statement of Operations.

⁽²⁾  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017 is generally due to investments no longer held or categorized as Level 3 at period end.

The following table summarizes the valuation approaches used and unobservable inputs utilized by the BlackRock Global Valuation Methodologies Committee (“Global Valuation Committee”) to determine the value of certain of the Fund’s Level 3 investments as of period end. The table does not include Level 3 investments with values based upon unadjusted third party pricing information in the amount of $24,030. A significant change in such third party pricing information could result in significantly lower or higher value of such Level 3 investments.

	Value		Valuation Approach		Unobservable Inputs		Range of Unobservable Inputs Utilized		Weighted Average of Unobservable Inputs
Common Stocksc	$	472,461		Market		Revenue Multiplea		5.75x		—
						Time to Exita		1 year		—
						Volatilitya		24%		—
						Estimated Recovery Valuea		—		—
Corporate Bonds		8,379,597		Income		Discount Rateb		19%-24%		20.35	%
				Market		Estimated Recovery Valuea		—		—
Preferred Stocksc		101,952,816		Market		Discount Rateb		20%		—
						Revenue Multiplea		5.75x- 12.25x		9.11x
						Time to Exita,b		1-2 years		—
						Volatilitya,b		24%-43%		29.71	%
						Recent Transactionsa		—		—
	$	110,804,874

^(a)  Increase in unobservable input may result in a significant increase to value, while a decrease in unobservable input may result in a significant decrease to value.

^(b)  Decrease in unobservable input may result in a significant increase to value, while an increase in unobservable input may result in a significant decrease to value.

^(c)  For the year ended December 31, 2017, the valuation technique changed for certain investments in common stocks and preferred stocks with a total value of $8,949,789 from a hybrid model using Probability-Weighted Expected Return Model (“PWERM”) and Option Pricing Model (“OPM”) to using only OPM. The change was due to consideration of liquidation preferences and exit strategy.

See notes to consolidated financial statements.

24 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Statement of Assets and Liabilities

December 31, 2017

	BlackRock Global Allocation V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $224,291,034) (cost — $9,744,056,799)	$	10,756,317,092
Investments at value — affiliated (cost — $275,407,106)		272,635,407
Cash		3,427,024
Cash pledged:
Futures contracts		2,285,000
Centrally cleared swaps		4,926,000
Foreign currency at value (cost — $3,470,317)		3,470,345
Receivables:
Investments sold		8,017,662
Securities lending income — affiliated		93,638
Capital shares sold		1,280,029
Tax reclaims		1,847,703
Dividends — affiliated		7,074
Dividends — unaffiliated		5,055,277
Interest — unaffiliated		21,168,847
Variation margin on futures contracts		402,371
Variation margin on centrally cleared swaps		904,629
Unrealized appreciation on:
Forward foreign currency exchange contracts		8,694,442
OTC swaps		28,802,887
Prepaid expenses		49,256
Total assets		11,119,384,683
LIABILITIES
Cash received:
Collateral — OTC derivatives		43,255,796
Cash collateral on securities loaned at value		235,809,728
Options written at value (premium received $21,822,116)		9,996,580
Payables:
Investments purchased		10,244,223
Capital shares redeemed		5,218,351
Deferred foreign capital gain tax		1,123,280
Distribution fees		1,790,069
Transfer agent fees		2,124,038
Investment advisory fees		5,566,339
Officer’s and Directors’ fees		37,783
Other affiliates		60,477
Other accrued expenses		1,457,511
Swap premiums received		2,020,674
Unrealized depreciation on:
Forward foreign currency exchange contracts		1,897,367
OTC swaps		569,279
Total liabilities		321,171,495
NET ASSETS	$	10,798,213,188
NET ASSETS CONSIST OF
Paid-in capital	$	9,759,088,792
Distributions in excess of net investment income		(47,766,850	)
Accumulated net realized gain		29,857,028
Net unrealized appreciation (depreciation)		1,057,034,218
NET ASSETS	$	10,798,213,188
NET ASSET VALUE
Class I — Based on net assets of $2,306,033,946 and 133,569,869 shares outstanding, 400 million shares authorized, $0.10 par value.	$	17.26
Class II — Based on net assets of $258,564,202 and 15,026,467 shares outstanding, 200 million shares authorized, $0.10 par value.	$	17.21
Class III — Based on net assets of $8,233,615,040 and 554,721,124 shares outstanding, 1.5 billion shares authorized, $0.10 par value.	$	14.84

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS 25

Consolidated Statements of Operations

Year Ended December 31, 2017

	BlackRock Global Allocation V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	145,424
Dividends — unaffiliated		133,429,157
Interest — unaffiliated		98,860,427
Securities lending income — affiliated — net		2,573,563
Foreign taxes withheld		(7,426,746	)
Total investment income		227,581,825
EXPENSES
Investment advisory		66,867,241
Distribution — class specific		20,927,743
Transfer agent — class specific		18,350,616
Custodian		1,439,871
Accounting services		691,746
Professional		550,479
Printing		287,873
Directors and Officer		161,827
Transfer agent		5,687
Registration		386
Miscellaneous		295,541
Total expenses excluding dividend expense		109,579,010
Dividends expense — unaffiliated		2,230,034
Total expenses		111,809,044
Less:
Fees waived and/or reimbursed by the Manager		(279,705	)
Transfer agent fees reimbursed — class specific		(10,930,117	)
Total expenses after fees waived and/or reimbursed		100,599,222
Net investment income		126,982,603
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		337,166
Investments — unaffiliated		414,616,611
Forward foreign currency exchange contracts		30,891,297
Foreign currency transactions		5,788,473
Futures contracts		(42,141,232	)
Options written		20,103,564
Short sales — unaffiliated		(15,814,184	)
Swaps . . . . .		292,565
		414,074,260
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		2,646,791
Investments — unaffiliated (net of $(734,576) foreign capital gain tax)		850,215,516
Forward foreign currency exchange contracts		(62,539,435	)
Foreign currency translations		(1,496,782	)
Futures contracts		107,675
Options written		19,819,952
Short sales — unaffiliated		3,050,449
Swaps . . . . .		19,850,830
		831,654,996
Net realized and unrealized gain		1,245,729,256
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	1,372,711,859

See notes to consolidated financial statements.

26 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Statements of Changes in Net Assets

	BlackRock Global Allocation V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	126,982,603		$	136,433,324
Net realized gain (loss)		414,074,260			(175,975,483	)
Net change in unrealized appreciation (depreciation)		831,654,996			445,816,308
Net increase in net assets resulting from operations		1,372,711,859			406,274,149
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(29,375,286	)		(26,933,124	)
Class II		(2,933,651	)		(2,573,765	)
Class III		(102,989,429	)		(99,994,504	)
From net realized gain:
Class I		(22,847,673	)		—
Class II		(2,565,922	)		—
Class III		(94,602,394	)		—
Decrease in net assets resulting from distributions to shareholders		(255,314,355	)		(129,501,393	)
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from capital share transactions		(795,038,529	)		(921,542,124	)
NET ASSETS
Total increase (decrease) in net assets		322,358,975			(644,769,368	)
Beginning of year		10,475,854,213			11,120,623,581
End of year	$	10,798,213,188		$	10,475,854,213
Distributions in excess of net investment income, end of year	$	(47,766,850	)	$	(54,431,232	)

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS 27

Consolidated Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Global Allocation V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	15.51		$	15.09		$	16.26		$	17.61		$	16.10
Net investment income(a)		0.22			0.22			0.22			0.29			0.22
Net realized and unrealized gain (loss)		1.92			0.40			(0.35	)		0.12			2.14
Net increase (decrease) from investment operations		2.14			0.62			(0.13	)		0.41			2.36
Distributions:(b)
From net investment income		(0.22	)		(0.20	)		(0.19	)		(0.39	)		(0.20	)
From net realized gain		(0.17	)		—			(0.84	)		(1.37	)		(0.65	)
From return of capital		—			—			(0.01	)		—			—
Total distributions		(0.39	)		(0.20	)		(1.04	)		(1.76	)		(0.85	)
Net asset value, end of year	$	17.26		$	15.51		$	15.09		$	16.26		$	17.61
Total Return:(c)
Based on net asset value		13.86	%		4.11	%		(0.89	)%		2.30	%		14.76	%
Ratios to Average Net Assets:
Total expenses		0.72	%(d)		0.74	%		0.75	%		0.74	%		0.72	%
Total expenses after fees waived and/or reimbursed		0.72	%(d)		0.74	%		0.73	%		0.72	%		0.72	%
Total expenses after fees waived and/or reimbursed and excluding dividend expense, interest expense and broker fees and expenses on short sales		0.70	%(d)		0.73	%		0.73	%		0.72	%		0.72	%
Net investment income		1.32	%(d)		1.47	%		1.32	%		1.64	%		1.26	%
Supplemental Data:
Net assets, end of year (000)	$	2,306,034		$	2,107,145		$	1,994,371		$	1,708,903		$	2,426,154
Portfolio turnover rate		118	%		135	%		90	%(e)		72	%		53	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

^(e)  Includes mortgage dollar roll transactions (“MDRs”). Excluding these transactions the portfolio turnover would have been 88%.

See notes to consolidated financial statements.

28 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Global Allocation V.I. Fund
	Class II
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	15.46		$	15.04		$	16.21		$	17.56		$	16.07
Net investment income(a)		0.19			0.20			0.19			0.25			0.19
Net realized and unrealized gain (loss)		1.93			0.40			(0.35	)		0.14			2.14
Net increase (decrease) from investment operations		2.12			0.60			(0.16	)		0.39			2.33
Distributions:(b)
From net investment income		(0.20	)		(0.18	)		(0.16	)		(0.37	)		(0.19	)
From net realized gain		(0.17	)		—			(0.84	)		(1.37	)		(0.65	)
From return of capital		—			—			(0.01	)		—			—
Total distributions		(0.37	)		(0.18	)		(1.01	)		(1.74	)		(0.84	)
Net asset value, end of year	$	17.21		$	15.46		$	15.04		$	16.21		$	17.56
Total Return:(c)
Based on net asset value		13.74	%		3.96	%		(1.05	)%		2.16	%		14.55	%
Ratios to Average Net Assets:
Total expenses		1.00	%(d)		1.02	%		1.02	%		1.01	%		1.00	%
Total expenses after fees waived and/or reimbursed		0.87	%(d)		0.89	%		0.88	%		0.88	%		0.87	%
Total expenses after fees waived and/or reimbursed and excluding dividend expense, interest expense and broker fees and expenses on short sales		0.85	%(d)		0.88	%		0.88	%		0.87	%		0.87	%
Net investment income		1.17	%(d)		1.33	%		1.17	%		1.39	%		1.07	%
Supplemental Data:
Net assets, end of year (000)	$	258,564		$	229,492		$	256,964		$	260,312		$	216,395
Portfolio turnover rate		118	%		135	%		90	%(e)		72	%		53	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

^(e)  Includes mortgage dollar roll transactions (“MDRs”). Excluding these transactions the portfolio turnover would have been 88%.

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL HIGHLIGHTS 29

Consolidated Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Global Allocation V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	13.37		$	13.04		$	14.19		$	15.58		$	14.34
Net investment income(a)		0.17			0.16			0.15			0.21			0.16
Net realized and unrealized gain (loss)		1.66			0.34			(0.30	)		0.12			1.89
Net increase (decrease) from investment operations		1.83			0.50			(0.15	)		0.33			2.05
Distributions:(b)
From net investment income		(0.19	)		(0.17	)		(0.15	)		(0.35	)		(0.16	)
From net realized gain		(0.17	)		—			(0.84	)		(1.37	)		(0.65	)
From return of capital		—			—			(0.01	)		—			—
Total distributions		(0.36	)		(0.17	)		(1.00	)		(1.72	)		(0.81	)
Net asset value, end of year	$	14.84		$	13.37		$	13.04		$	14.19		$	15.58
Total Return:(c)
Based on net asset value		13.71	%		3.81	%		(1.14	)%		2.08	%		14.42	%
Ratios to Average Net Assets:
Total expenses		1.13	%(d)		1.12	%		1.12	%		1.11	%		1.11	%
Total expenses after fees waived and/or reimbursed		1.00	%(d)		0.99	%		0.98	%		0.98	%		0.97	%
Total expenses after fees waived and/or reimbursed and excluding dividend expense, interest expense and broker fees and expenses on short sales		0.98	%(d)		0.98	%		0.98	%		0.97	%		0.97	%
Net investment income		1.15	%(d)		1.22	%		1.07	%		1.32	%		1.02	%
Supplemental Data:
Net assets, end of year (000)	$	8,233,615		$	8,139,218		$	8,869,288		$	9,780,007		$	10,014,301
Portfolio turnover rate(e)		118	%		135	%		90	%(e)		72	%		53	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

^(e)  Includes mortgage dollar roll transactions (“MDRs”). Excluding these transactions the portfolio turnover would have been 88%.

See notes to consolidated financial statements.

30 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The consolidated financial statements presented are for BlackRock Global Allocation V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I, Class II and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class II and Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

Basis of Consolidation: The accompanying consolidated financial statements of the Fund include the accounts of BlackRock Cayman Global Allocation V.I. Fund I, Ltd. (the “Subsidiary”), which is a wholly-owned subsidiary of the Fund and primarily invests in commodity-related instruments. The Subsidiary enables the Fund to hold these commodity-related instruments while allowing its investors to satisfy regulated investment company tax requirements. The Fund may invest up to 25% of its total assets in the Subsidiary. The net assets of the Subsidiary as of period end were $436,796,581, which is 4.1% of the Fund’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. The Subsidiary is subject to the same investment policies and restrictions that apply to the Fund, except that the Subsidiary may invest without limitation in commodity-related instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Consolidated Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts, forward foreign currency exchange contracts, options written, swaps and short sales) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Net income and realized gains from investments held by the Subsidiary are treated as ordinary income for tax purposes. If a net loss is realized by the Subsidiary in any taxable year, the loss will generally not be available to offset the Fund’s ordinary income and/or capital gains for that year.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities”, which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Fund.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 31

Notes to Consolidated Financial Statements  (continued)

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the consolidated financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Futures contracts traded on exchanges are valued at their last sale price.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

• Swap agreements are valued utilizing quotes received daily by the Fund’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

32 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach.	(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii)   recapitalizations and other transactions across the capital structure; and (iii)  market multiples of comparable issuers.
Income approach.	(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii)   quoted prices for similar investments or assets in active markets; and (iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach.	(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii)  relevant news and other public sources; and (iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 33

Notes to Consolidated Financial Statements  (continued)

investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed- income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Consolidated Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a fund’s initial investment in the IOs may not fully recoup.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

34 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Warrants: Warrants entitle a fund to purchase a specified number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any. If the price of the underlying stock does not rise above the strike price before the warrant expires, the warrant generally expires without any value and a fund will lose any amount it paid for the warrant. Thus, investments in warrants may involve 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.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result in proceeds from the sale not being readily available for a fund to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a fund to the extent that it invests in floating rate loan interests. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a fund’s investment policies.

When a fund purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A fund may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a fund having a contractual relationship only with the lender, not with the borrower. A fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, a fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a fund assumes the credit risk of both the borrower and the lender that is selling the Participation. A fund’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a fund having a direct contractual relationship with the borrower, and a fund may enforce compliance by the borrower with the terms of the loan agreement.

Forward Commitments and When-Issued Delayed Delivery Securities: A fund may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a fund may be required to pay more at settlement than the security is worth. In addition, a fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a fund mitigate their counterparty risk, TBA commitments may be entered into by a fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a fund and cash collateral received from the counterparty, if any, is reported separately on the Consolidated Statement of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a fund, if any, is noted in the Consolidated Schedule of Investments. Typically, a fund is permitted to sell, re-pledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a fund is not fully collateralized, contractually or otherwise, a fund bears the risk of loss from counterparty non-performance.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 35

Notes to Consolidated Financial Statements  (continued)

Mortgage Dollar Roll Transactions: A fund may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realizes gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a fund is required to purchase may decline below the agreed upon repurchase price of those securities.

Short Sale Transactions: In short sale transactions, a fund sells a security it does not hold in anticipation of a decline in the market price of that security. When a fund makes a short sale, it will borrow the security sold short from a broker/counterparty and deliver the security to the purchaser. To close out a short position, a fund delivers the same security to the broker and records a liability to reflect the obligation to return the security to the broker. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. A fund maintains a segregated account of securities or deposits cash with the broker-dealer as collateral for the short sales. Cash deposited with the broker is recorded as an asset in the Consolidated Statement of Assets and Liabilities. Securities segregated as collateral are denoted in the Consolidated Schedule of Investments. A fund may pay a financing fee for the difference between the market value of the short position and the cash collateral deposited with the broker which would be recorded as interest expense. A fund is required to repay the counterparty any dividends received on the security sold short, which, if applicable, is shown as dividend expense in the Consolidated Statement of Operations. A fund may pay a fee on the assets borrowed from the counterparty, which, if applicable, is shown as broker fees and expenses on short sales in the Consolidated Statement of Operations. A fund is exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of an unlimited loss since there is an unlimited potential for the market price of the security sold short to increase. A gain is limited to the price at which a fund sold the security short. A realized gain or loss is recognized upon the termination of a short sale if the market price is either less than or greater than the proceeds originally received. There is no assurance that a fund will be able to close out a short position at a particular time or at an acceptable price.

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common or preferred stocks in the Fund’s Consolidated Schedule of Investments, and the value of any related collateral are shown separately in the Consolidated Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Consolidated Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Barclays Capital, Inc.	$	202,891	$	(202,891	)	$	—
BNP Paribas S.A.		40,122,900		(40,122,900	)		—
Citigroup Global Markets, Inc.		48,083,210		(48,083,210	)		—
Credit Suisse Securities (USA) LLC		18,726		(18,726	)		—
Deutsche Bank Securities Inc.		10,324,923		(10,324,923	)		—
Goldman Sachs & Co.		8,861,141		(8,861,141	)		—
JP Morgan Securities LLC		5,850,381		(5,850,381	)		—
Merrill Lynch, Pierce, Fenner & Smith		4,692,321		(4,692,321	)		—
Morgan Stanley		78,254,303		(78,254,303	)		—
State Street Bank & Trust Co.		1,732,622		(1,732,622	)		—
UBS Securities LLC		26,147,616		(26,147,616	)		—
	$	224,291,034	$	(224,291,034	)	$	—

^(a)  Cash collateral with a value of $235,809,728 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes.

36 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g. inflation risk). Derivative financial instruments categorized by risk exposure are included in the Consolidated Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Consolidated Schedule of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Consolidated Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Consolidated Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Consolidated Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Consolidated Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Consolidated Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Fund purchases and writes call and put options to increase or decrease its exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Consolidated Statement of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Consolidated Statement of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Consolidated Statement of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Fund writes a call option, such option is typically “covered,” meaning that it holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation. As of period end, the value of portfolio securities subject to covered call options written was $67,964,456.

• Swaptions — The Fund purchases and writes options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Fund’s holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

• Interest rate caps and floors — Interest rate caps and floors are entered into to gain or reduce exposure to interest rates (interest rate risk and/or other risk). Caps are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that interest rate indexes exceed a specified rate, or “cap.” Floors are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that interest rate indexes fall below a specified rate, or “floor.”

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 37

Notes to Consolidated Financial Statements  (continued)

• Foreign currency options — The Fund purchases and writes foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

• Barrier options — The Fund may purchase and write a variety of options with non-standard payout structures or other features (“barrier options”) that are generally traded OTC.

The Fund may invest in various types of barrier options, including down-and-out options, down-and-in options, double no-touch options, one-touch options, up-and-out options and up-and-in options. Down-and-out options expire worthless to the purchaser if the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Down-and-in options expire worthless to the purchaser unless the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Double no-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument reaches or surpasses predetermined barrier price levels prior to the expiration date. Up-and-out options expire worthless to the purchaser if the price of the underlying instrument increases beyond a predetermined barrier price level prior to the expiration date. Up-and-in options can only be exercised when the price of the underlying instrument increases beyond a predetermined barrier price level.

In purchasing and writing options, the Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that it may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Consolidated Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Consolidated Statement of Assets and Liabilities. Payments received or paid are recorded in the Consolidated Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Consolidated Statement of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Consolidated Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Consolidated Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Consolidated Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Consolidated Statement of Operations.

• Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk).

The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Fund will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• Total return swaps — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed-income) with another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Fund receives payment from or makes a payment to the counterparty.

• Interest rate swaps — Interest rate swaps are entered into to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

38 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

• Currency swaps — Currency swaps are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

Currency swaps are interest rate swaps in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Currency swaps may also involve an exchange of notional amounts at the start, during and/or at expiration of the contract, either at the current spot rate or another specified rate.

• Forward swaps — The Fund enters into forward interest rate swaps and forward total return swaps. In a forward swap, the Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Consolidated Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Consolidated Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Consolidated Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Consolidated Statement of Assets and Liabilities.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $6 Billion		0.65	%
$6 Billion — $8 Billion		0.61
$8 Billion — $10 Billion		0.59
$10 Billion — $15 Billion		0.57
Greater than $15 Billion		0.55

The Manager provides investment management and other services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, the Fund pays the Manager based on the Fund’s net assets, which includes the assets of the Subsidiary.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 39

Notes to Consolidated Financial Statements  (continued)

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

	Class II			Class III
Distribution Fee		0.15	%		0.25	%

For the year ended December 31, 2017, the following table shows the class specific distribution fees borne directly by each share class of the Fund:

	Class II		Class III		Total
Distribution Fees	$	367,328	$	20,560,415	$	20,927,743

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Consolidated Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I	Class II	Class III	Total
$1,577,420	$479,436	$16,293,760	$18,350,616

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived by the Manager in the Consolidated Statement of Operations. For the year ended December 31, 2017, the amount waived was $4,908.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. This amount is included in fees waived by the Manager in the Consolidated Statement of Operations. For the year ended December 31, 2017, the Fund waived $274,797 in investment advisory fees pursuant to these arrangements.

For the year ended December 31, 2017, the Fund reimbursed the Manager $120,595 for certain accounting services, which is included in accounting services in the Consolidated Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.07	%
Class II	0.07
Class III	0.07

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed—class specific in the Consolidated Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements are as follows:

	Class I		Class II		Class III		Total
Transfer Agent Fees Reimbursed	$	70,182	$	308,213	$	10,551,722	$	10,930,117

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I	Class II	Class III
1.25%	1.40%	1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the twelve months ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

40 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Consolidated Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $546,844 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program. A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the fund’s investment restrictions. If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Consolidated Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	3,674,765
Sales		31,783
Net Realized Gain		5,712

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:

	Purchases		Sales
Non-U.S. Government Securities	$	4,076,350,513	$	5,290,478,317
U.S. Government Securities		7,391,337,262		6,468,911,414

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 41

Notes to Consolidated Financial Statements  (continued)

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the accounting for swap agreements, amortization methods on fixed income securities, the classification of investments, foreign currency transactions, the sale of stock of passive foreign investment companies, net paydown gains, the characterization of expenses and income recognized from a wholly owned subsidiary and dividends recognized for tax purposes were reclassified to the following accounts:

Paid-in capital	$	1,087,651
Distributions in excess of net investment income	$	14,980,145
Accumulated net realized gain	$	(16,067,796	)

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income	$	237,849,708	$	129,501,393
Long-term capital gains		17,464,647		—
Total	$	255,314,355	$	129,501,393

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	13,450,130
Undistributed long-term capital gains		76,679,275
Net unrealized gains*		948,994,991
Total	$	1,039,124,396

* The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies, the realization for tax purposes of unrealized gains / losses on certain futures and foreign currency contracts, the timing and recognition of partnership income, the accounting for swap agreements, the classification of investments, investment in a wholly owned subsidiary and dividends recognized for tax purposes.

During the year ended December 31, 2017, the Fund utilized $174,593,093 of its capital loss carryforward.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	10,075,866,909
Gross unrealized appreciation		1,270,603,176
Gross unrealized depreciation		(276,181,309	)
Net unrealized depreciation	$	994,421,867

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Consolidated Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that

42 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed- income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Consolidated Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

For OTC options purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by such Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty, to perform. The Fund may be exposed to counterparty credit risk with respect to options written to the extent the Fund deposits collateral with its counterparty to a written option.

With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

The Fund invests a significant portion of its assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of, several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of the Fund’s investments.

The United Kingdom voted on June 23, 2016 to withdraw from the European Union, which may introduce significant new uncertainties and instability in the financial markets across Europe.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 43

Notes to Consolidated Financial Statements  (continued)

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		8,584,248		$	143,679,674			16,192,343		$	244,305,933
Shares issued in reinvestment of distributions		2,672,740			46,050,926			1,521,201			23,578,615
Shares redeemed		(13,573,580	)		(224,416,668	)		(14,033,328	)		(214,313,552	)
Net increase (decrease)		(2,316,592	)	$	(34,686,068	)		3,680,216		$	53,570,996
Class II
Shares sold		1,384,696		$	23,128,223			789,548		$	11,986,829
Shares issued in reinvestment of distributions		320,419			5,499,573			166,479			2,573,765
Shares redeemed		(1,525,356	)		(25,239,075	)		(3,198,273	)		(48,293,049	)
Net increase (decrease)		179,759		$	3,388,721			(2,242,246	)	$	(33,732,455	)
Class III
Shares sold		10,049,191		$	144,899,286			13,153,930		$	171,434,340
Shares issued in reinvestment of distributions		13,347,588			197,591,823			7,479,020			99,994,504
Shares redeemed		(77,304,864	)		(1,106,232,291	)		(92,373,623	)		(1,212,809,509	)
Net decrease		(53,908,085	)	$	(763,741,182	)		(71,740,673	)	$	(941,380,665	)
Total Net Decrease		(56,044,918	)	$	(795,038,529	)		(70,302,703	)	$	(921,542,124	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

44 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Global Allocation V.I. Fund and the Board of Directors of

BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of BlackRock Global Allocation V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the consolidated financial statements and consolidated financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOFTHE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 45

Glossary of Terms Used in this Report

Currency
AUD	Australian Dollar
BRL	Brazilian Real
CAD	Canadian Dollar
EUR	Euro
GBP	British Pound
JPY	Japanese Yen
MXN	Mexican Peso
NOK	Norwegian Krone
NZD	New Zealand Dollar
PLN	Polish Zloty
SEK	Swedish Krona
USD	United States Dollar
ZAR	South African Rand
Portfolio Abbreviations
ADR	American Depositary Receipts
CDX	Credit Default Swap Index
CVA	Certification Van Aandelon (Dutch Certificate)
ETF	Exchange Traded Fund
LIBOR	London Interbank Offered Rate
NASDAQ	National Association of Securities Dealers Automated Quotations
OTC	Over-The-Counter
PCL	Public Company Limited
REIT	Real Estate Investment Trust
S&P	Standard & Poor’s
SPDR	S&P Depository Receipt

46 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

▶ BlackRock Global Opportunities V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary   as of December 31, 2017 BlackRock Global Opportunities V.I. Fund

Investment Objective

BlackRock Global Opportunities V.I. Fund’s (the “Fund”) investment objective is to seek long-term growth of capital.

On March 27, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) approved a proposal to close the Fund to new investors and thereafter to liquidate the Fund. Effective May 30, 2017, the Fund no longer accepts purchase orders from new investors. The liquidation is expected to occur on or about March 30, 2018.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed its benchmark, the MSCI All Country World Index.

What factors influenced performance?

Strong relative performance for the 12-month period was seen within six of the 11 market sectors, led by the information technology (“IT”) and financials sectors. Within IT, stock selection in the internet software and services sub-industry contributed as the Fund’s position in Alibaba Group Holding Ltd. (China) performed well based on healthy earnings momentum, driven by the company’s aggressive expansion of users and increased commerce revenue. Within the financials sector, stock selection within the insurance sub-industry helped performance after shares of Ping An Insurance Group Co. of China Ltd. traded higher. The company has made additional investments in online services and has seen insurance demand rise along with China’s expanding middle class.

Conversely, stock selection in private holdings weighed on performance as the e-commerce firm Snapdeal (India) was hurt by its failure to maintain growth and control costs, as well as by declining sales volume. Similarly, the Fund’s position in Uber Technologies, Inc. also a private holding, detracted as the company dealt with turmoil in its upper management along with regulatory challenges.

Describe recent portfolio activity.

During the 12-month period, the Fund’s holdings in the financials and industrials sectors were increased, while exposure to consumer discretionary and materials was reduced. These sector decisions resulted in increased exposure to the emerging markets and Asia, and decreased exposure to North America and Europe.

Describe portfolio positioning at period end.

At period end, from a sector perspective, the Fund was most overweight in the financials and health care sectors, funded by underweights in the consumer staples and consumer discretionary sectors. Regionally, the Fund was most overweight in Europe and the emerging markets, with underweights to North America and the Pacific Basin.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

GEOGRAPHIC ALLOCATION

Country	Percent of Net Assets
United States		47	%
China		7
Japan		6
United Kingdom		6
France		4
India		3
South Korea		3
Switzerland		3
Italy		3
Netherlands		2
Other(a)		13
Short-Term Securities		10
Liabilities in Excess of Other Assets		(7	)

^(a) Includes holdings within countries that are 1% or less of net assets. Please refer to the Schedule of Investments for such countries.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Global Opportunities V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses. The returns for Class III Shares prior to June 23, 2008, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

^(b)  Under normal conditions, the Fund will invest at least 75% of its total assets in global equity securities of any market capitalization, selected for their above-average return potential. The returns prior to October 1, 2011 are the returns of the Fund when it followed different investment strategies.

^(c)  A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The index consists of 47 country indexes comprising 23 developed and 24 emerging market country indexes.

Performance Summary for the Period Ended December 31, 2017

				Average Annual Total Returns
	6-Month Total Returns(e)			1 Year(e)			5 Years(e)			10 Years(e)
Class I(d)		10.12	%		25.19	%		10.21	%		2.90	%
Class III(d)	9.98			24.89			9.93			2.65(f)
MSCI All Country World Index		11.21			23.97			10.80			4.65

^(d)  Average annual and cumulative total returns are based on changes in net asset value (“NAV”) for the periods shown, and assume reinvestment of all distributions at NAV on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. The returns prior to October 1, 2011 are the returns of the Fund when it followed different investment strategies.

^(e)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(f)  The returns for Class III Shares prior to June 23, 2008, the recommencement of operations of Class III Shares, are based upon performance of the Fund’s Class I Shares, as adjusted to reflect the distribution (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual									Hypothetical(b)
	Beginning Account Value (07/01/17)			Ending Account Value (12/31/17)			Expenses Paid During the Period(a)			Beginning Account Value (07/01/17)			Ending Account Value (12/31/17)			Expenses Paid During the Period(a)			Annualized Expense Ratio
Class I		$	1,000.00		$	1,101.20		$	5.14		$	1,000.00		$	1,020.32		$	4.94		0.97	%
Class III			1,000.00			1,100.40			6.46			1,000.00			1,019.06			6.21		1.22

^(a)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

^(b)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock Global Opportunities V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock Global Opportunities V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 92.5%
Australia — 0.0%
Ensogo Ltd. (a)(b)		18,821	$	—
Belgium — 1.2%
Anheuser-Busch InBev SA		3,208		358,145
Brazil — 0.6%
Embraer SA — ADR		7,347		175,814
Canada — 0.6%
Encana Corp.		12,878		171,809
China — 6.5%
AIA Group Ltd.		40,089		340,983
Alibaba Group Holding Ltd. — ADR (a)(c)		1,189		205,019
Anhui Conch Cement Co. Ltd., H Shares		42,500		199,484
Baidu, Inc. — ADR (a)		902		211,257
China Construction Bank Corp., H Shares		255,000		234,741
Ping An Insurance Group Co. of China Ltd., H Shares		45,500		471,929
Weichai Power Co. Ltd., H Shares		281,000		306,982
				1,970,395
France — 4.0%
AXA SA		11,682		346,174
Dassault Aviation SA		174		270,547
Iliad SA		1,302		311,980
Renault SA		2,856		286,679
				1,215,380
Germany — 0.9%
KION Group AG (c)		3,054		262,891
Hong Kong — 0.5%
Melco Resorts & Entertainment Ltd. — ADR (c)		4,938		143,399
India — 3.3%
Dish TV India Ltd. (a)		72,147		92,479
Federal Bank Ltd.		85,884		145,690
HDFC Bank Ltd. (b)		9,443		279,417
ICICI Bank Ltd.		82,758		405,602
Srei Infrastructure Finance Ltd.		38,989		60,852
				984,040
Indonesia — 1.4%
Bank Negara Indonesia Persero Tbk PT		418,400		305,300
Matahari Department Store Tbk PT		173,289		127,304
				432,604
Ireland — 0.5%
Medtronic PLC		1,767		142,685
Italy — 2.6%
Azimut Holding SpA (c)		14,128		270,284
Eni SpA		14,348		237,429
UniCredit SpA (a)		14,438		269,329
				777,042
Japan — 6.0%
Alps Electric Co. Ltd.		5,718		162,651
FANUC Corp.		1,264		303,229
Nintendo Co. Ltd.		937		337,410
Nippon Yusen KK (a)(c)		7,700		187,353
SMC Corp.		500		205,192
SoftBank Group Corp.		3,035		240,283
Sumitomo Mitsui Financial Group, Inc.		8,781		378,501
				1,814,619
Mexico — 0.8%
Fomento Economico Mexicano SAB de CV — ADR		2,454		230,431
Netherlands — 1.6%
Aalberts Industries NV		5,241		266,272

Security	Shares		Value
Netherlands (continued)
Euronext NV (d)		3,740	$	231,987
				498,259
New Zealand — 0.5%
Xero Ltd. (a)		7,540		167,957
Norway — 1.0%
Statoil ASA		14,682		314,319
Peru — 1.5%
Credicorp Ltd.		2,152		446,389
Portugal — 1.0%
Galp Energia SGPS SA		16,410		301,496
South Korea — 2.7%
Amorepacific Corp.		634		180,331
LG Chem Ltd.		898		339,723
Samsung SDI Co. Ltd. (a)		1,597		304,461
				824,515
Spain — 0.9%
Cellnex Telecom SAU (d)		11,202		286,607
Sweden — 1.3%
Atlas Copco AB, A Shares		9,019		389,225
Switzerland — 2.6%
Nestle SA, Registered Shares		4,816		414,062
UBS Group AG, Registered Shares (a)		20,044		368,264
				782,326
Taiwan — 0.9%
Taiwan Semiconductor Manufacturing Co. Ltd.		34,577		264,759
United Kingdom — 6.4%
Aptiv PLC		3,145		266,790
AstraZeneca PLC		2,525		174,239
CNH Industrial NV (c)		26,871		359,494
Delphi Technologies PLC		1,048		54,988
GlaxoSmithKline PLC		8,129		143,958
Imperial Brands PLC		6,404		273,160
Metro Bank PLC (a)		4,017		193,918
Unilever PLC		8,199		454,766
				1,921,313
United States — 43.2%
Adobe Systems, Inc. (a)		2,233		391,311
Allergan PLC		711		116,305
Alphabet, Inc., Class C (a)		433		453,091
Amazon.com, Inc. (a)		489		571,871
American International Group, Inc.		5,112		304,573
Amgen, Inc.		1,093		190,073
Apple Inc.		5,125		867,304
Assured Guaranty Ltd.		4,297		145,539
Biogen, Inc. (a)		496		158,011
Boston Scientific Corp. (a)		10,302		255,387
Calpine Corp. (a)		15,420		233,305
Centene Corp. (a)		2,784		280,850
Cigna Corp.		1,241		252,035
Comcast Corp., Class A		4,357		174,498
Concho Resources, Inc. (a)		1,913		287,371
Crown Holdings, Inc. (a)		3,500		196,875
Duke Energy Corp.		3,097		260,489
E*TRADE Financial Corp. (a)(c)		3,574		177,163
Eastman Chemical Co.		2,894		268,100
Eli Lilly & Co.		3,237		273,397
EOG Resources, Inc.		3,651		393,979
Facebook, Inc., Class A (a)		2,871		506,617
Humana, Inc.		1,275		316,289
Intercontinental Exchange, Inc.		2,716		191,641
Kennedy-Wilson Holdings, Inc. (c)		9,179		159,256
Lowe’s Cos., Inc.		2,883		267,946
Mastercard, Inc., Class A		3,063		463,616

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Global Opportunities V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
United States (continued)
Merck & Co., Inc.		3,880	$	218,328
Mosaic Co.		12,631		324,111
PayPal Holdings, Inc. (a)		3,593		264,517
Pfizer, Inc.		5,025		182,005
Pioneer Natural Resources Co.		1,403		242,508
PPL Corp.		4,503		139,368
RSP Permian, Inc. (a)		3,895		158,449
salesforce.com, Inc. (a)		2,118		216,523
ServiceMaster Global Holdings, Inc. (a)		5,673		290,855
Skyworks Solutions, Inc.		1,736		164,833
Starbucks Corp.		4,446		255,334
Summit Materials, Inc., Class A (a)(c)		7,405		232,813
SVB Financial Group (a)		1,275		298,057
Union Pacific Corp.		2,022		271,150
UnitedHealth Group, Inc.		1,174		258,820
VEREIT, Inc.		19,425		151,321
Walt Disney Co.		2,842		305,543
Wells Fargo & Co.		9,270		562,411
WestRock Co.		3,350		211,753
Wynn Resorts Ltd.		797		134,366
				13,039,957
Total Common Stocks — 92.5% (Cost: $21,086,352)				27,916,376
Investment Companies — 3.0%
WisdomTree Japan Hedged Equity Fund (c)		15,386		912,851
(Cost: $903,120)				912,851

Security	Shares		Value
Preferred Stocks — 1.3%
India — 0.1%
Jasper Infotech Private Ltd., Series F (Acquired 5/07/14, cost $85,441) (a)(b)(e)		12	$	18,913
Jasper Infotech Private Ltd., Series G (Acquired 10/29/14, cost $33,723) (a)(b)(e)		4		7,674
				26,587
United States — 1.2%
Uber Technologies, Inc., Series D (Acquired 6/10/14, cost $172,691) (a)(b)(e)		11,132		367,022
Total Preferred Stocks — 1.3% (Cost: $291,855)				393,609
Total Long-Term Investments — 96.8% (Cost: $22,281,327)				29,222,836
Short-Term Securities — 10.4%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17% (f)(h)		1,060,023		1,060,023
SL Liquidity Series, LLC, Money Market Series, 1.53% (f)(g)(h)		2,057,187		2,056,981
Total Short-Term Securities — 10.4% (Cost: $3,117,004)				3,117,004
Total Investments — 107.2% (Cost: $25,398,331)				32,339,840
Liabilities in Excess of Other Assets — (7.2)%				(2,158,707)
Net Assets — 100.0%			$	30,181,133

^(a)  Non-income producing security.

^(b)  Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

^(c)  Security, or a portion of the security, is on loan.

^(d)  Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(e)  Restricted security as to resale, excluding 144A securities. As of period end, the Fund held restricted securities with a current value of $393,609 and an original cost of $291,855, which was 1.3% of its net assets.

^(f)  Annualized 7-day yield as of period end.

^(g)  Security was purchased with the cash collateral from loaned securities.

^(h)  During the period ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity		Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		705,384		354,639		1,060,023	$	1,060,023	$	5,485			$   3			$—
SL Liquidity Series, LLC, Money Market Series		1,399,283		657,904		2,057,187		2,056,981		17,526	(a)		(73	)		83
							$	3,117,004	$	23,011			$(70	)		$83

^(a)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Global Opportunities V.I. Fund

Derivative Financial Instruments Outstanding as of Period End

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	1,006,300		USD	773,602	Australia & New Zealand Bank Group		01/11/18	$	11,570
CAD	977,000		USD	763,383	Australia & New Zealand Bank Group		01/11/18		14,023
CHF	81,400		USD	82,728	Northern Trust Corp.		01/11/18		886
DKK	1,344,900		USD	214,358	Barclays Bank PLC		01/11/18		2,583
GBP	497,600		USD	661,320	National Australia Bank Ltd.		01/11/18		10,822
NZD	21,000		USD	14,522	Australia & New Zealand Bank Group		01/11/18		358
RUB	7,635,800		USD	130,515	BNP Paribas S.A.		01/11/18		1,799
SGD	201,600		USD	148,204	HSBC Bank PLC		01/11/18		2,564
USD	5,316		NOK	42,600	Credit Suisse International		01/11/18		125
USD	248,526		NOK	1,991,200	Standard Chartered Bank		01/11/18		5,912
ZAR	2,441,000		USD	178,500	Goldman Sachs International		01/11/18		18,365
ZAR	768,500		USD	53,844	National Australia Bank Ltd.		01/11/18		8,135
									77,142
NOK	80,000		USD	9,807	Goldman Sachs International		01/11/18		(59	)
USD	142,005		CAD	181,500	Goldman Sachs International		01/11/18		(2,416	)
USD	753,608		EUR	635,500	Royal Bank of Canada		01/11/18		(9,521	)
USD	136,192		GBP	103,300	Royal Bank of Canada		01/11/18		(3,342	)
USD	129,815		NZD	189,200	HSBC Bank PLC		01/11/18		(4,248	)
USD	45,213		NZD	65,900	National Australia Bank Ltd.		01/11/18		(1,482	)
USD	111,990		SEK	936,000	Royal Bank of Canada		01/11/18		(2,209	)
									(23,277	)
Net Unrealized Appreciation								$	53,865

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Global Opportunities V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		$77,142		—		—		$77,142
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		$23,277		—		—		$23,277

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Net Realized Gain from:
Forward foreign currency exchange contracts		—		—		—	$	58,221		—		—	$	58,221
Options written		—		—	$	15,170		—		—		—		15,170
		—		—	$	15,170	$	58,221		—		—	$	73,391
Net Change in Unrealized Appreciation (Depreciation) on:
Forward foreign currency exchange contracts		—		—		—	$	117,569		—		—	$	117,569
Options written		—		—	$	58		—		—				58
		—		—	$	58	$	117,569		—		—	$	117,627

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	2,119,069
Average amounts sold — in USD		4,190,205
Options:
Average value of option contracts written		1,846

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Global Opportunities V.I. Fund

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	77,142	$	23,277
Total derivative assets and liabilities in the Statement of Assets and Liabilities		77,142		23,277
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		—
Total derivative assets and liabilities subject to an MNA	$	77,142	$	23,277

The following table presents the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA by Counterparty			Derivatives Available for Offset(a)				Non-cash Collateral Received			Cash Collateral Received			Net Amount of Derivative Assets(b)
Australia & New Zealand Bank Group		$	25,951			$—				$—			$—		$	25,951
Barclays Bank PLC			2,583			—				—			—			2,583
BNP Paribas S.A.			1,799			—				—			—			1,799
Credit Suisse International			125			—				—			—			125
Goldman Sachs International			18,365			(2,475	)			—			—			15,890
HSBC Bank PLC			2,564			(2,564	)			—			—			—
National Australia Bank Ltd.			18,957			(1,482	)			—			—			17,475
Northern Trust Corp.			886			—				—			—			886
Standard Chartered Bank			5,912			—				—			—			5,912
		$	77,142		$	(6,521	)			—			—		$	70,621
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty			Derivatives Available for Offset(a)				Non-cash Collateral Pledged			Cash Collateral Pledged			Net Amount of Derivative  Liabilities(c)
Goldman Sachs International		$	2,475		$	(2,475	)		$	—		$	—			$—
HSBC Bank PLC			4,248			(2,564	)			—			—			1,684
National Australia Bank Ltd.			1,482			(1,482	)			—			—			—
Royal Bank of Canada			15,072			—				—			—			15,072
		$	23,277		$	(6,521	)			—			—		$	16,756

^(a)  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

^(b)  Net amount represents the net amount receivable from the counterparty in the event of default.

^(c)  Net amount represents the net amount payable due to the counterparty in the event of default.

SCHEDULE OF INVESTMENTS 9

Schedule of Investments   (continued) December 31, 2017 BlackRock Global Opportunities V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia	$	—	$	—		$	—	$	—
Belgium		—		358,145			—		358,145
Brazil		175,814		—			—		175,814
Canada		171,809		—			—		171,809
China		416,276		1,554,119			—		1,970,395
France		—		1,215,380			—		1,215,380
Germany		—		262,891			—		262,891
Hong Kong		143,399		—			—		143,399
India		—		704,623			279,417		984,040
Indonesia		305,300		127,304			—		432,604
Ireland		142,685		—			—		142,685
Italy		—		777,042			—		777,042
Japan		—		1,814,619			—		1,814,619
Mexico		230,431		—			—		230,431
Netherlands		—		498,259			—		498,259
New Zealand		—		167,957			—		167,957
Norway		—		314,319			—		314,319
Peru		446,389		—			—		446,389
Portugal		—		301,496			—		301,496
South Korea		520,054		304,461			—		824,515
Spain		—		286,607			—		286,607
Sweden		—		389,225			—		389,225
Switzerland		—		782,326			—		782,326
Taiwan		—		264,759			—		264,759
United Kingdom		321,778		1,599,535			—		1,921,313
United States		13,039,957		—			—		13,039,957
Investment Companies		912,851		—			—		912,851
Preferred Stocks:
India		—		—			26,587		26,587
United States		—		—			367,022		367,022
Short-Term Securities		1,060,023		—			—		1,060,023
Subtotal	$	17,886,766	$	11,723,067		$	673,026	$	30,282,859
Investments Valued at NAV(a)									2,056,981
Total Investments								$	32,339,840
Derivative Financial Instruments(b)
Assets:
Foreign currency exchange contracts	$	—	$	77,142		$	—	$	77,142
Liabilities:
Foreign currency exchange contracts		—		(23,277	)		—		(23,277	)
	$	—	$	53,865		$	—	$	53,865

^(a)  As of December 31, 2017, certain of the Fund’s investments were valued using NAV per share (or its equivalent) as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(b)  Derivative financial instruments are forward foreign currency exchange contracts. Forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments   (continued) December 31, 2017 BlackRock Global Opportunities V.I. Fund

Transfers between Level 1 and Level 2 were as follows:

	Transfers into Level 1(a)		Transfers out of Level 1(b)		Transfers into Level 2(b)		Transfers out of Level 2(a)
Assets:
Long-Term Investments:
Belgium	$	—	$	729,903	$	729,903	$	—
India								287,133
South Korea		529,279						529,279
	$	529,279	$	729,903	$	729,903	$	816,412

^(a)  Systematic Fair Value Prices were not utilized at period end for these investments.

^(b)  External pricing service used to reflect any significant market movements between the time the Fund valued such foreign securities and the earlier closing of foreign markets.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Common Stocks			Preferred Stocks			Total
Assets:
Opening balance, as of December 31, 2016	$	200,290		$	1,123,247		$	1,323,537
Transfers into Level 3		287,133			—			287,133
Transfers out of Level 3		—			—			—
Accrued discounts/premiums		—			—			—
Net realized gain (loss)		(33,011	)		(14,267	)		(47,278	)
Net change in unrealized appreciation (depreciation)(a)(b)		89,792			(590,824	)		(501,032	)
Purchases		89,629			—			89,629
Sales		(354,416	)		(124,547	)		(478,963	)
Closing Balance, as of December 31, 2017	$	279,417		$	393,609		$	673,026
Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017(b)	$	42,700		$	(546,440	)	$	(503,740	)

^(a)  Included in the related net change in unrealized appreciation (depreciation) in the Statement of Operations.

^(b)  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017 is generally due to investments no longer held or categorized as Level 3 at year end.

The following table summarizes the valuation approaches used and unobservable inputs utilized by the BlackRock Global Valuation Methodologies Committee (“Global Valuation Committee”) to determine the value of certain of the Fund’s Level 3 investments as of period end. The table does not include Level 3 investments with values based upon unadjusted third party pricing information in the amount of $279,417. A significant change in such third party pricing information could result in significantly lower or higher value of such Level 3 investments.

	Value		Valuation Approach	Unobservable Inputs		Range of Unobservable Inputs Utilized
Assets:
Preferred Stocks(c)	$	393,609	Market		Revenue Multiple(a)		7.75x
					Time to Exit(b)		3 years
					Volatility(b)		41%
					Recent Transactions(a)		—
	$	393,609

^(a)  Increase in unobservable input may result in a significant increase to value, while a decrease in unobservable input may result in a significant decrease to value.

^(b)  Decrease in unobservable input may result in a significant increase to value, while an increase in unobservable input may result in a significant decrease to value.

^(c)  For the year ended December 31, 2017, the valuation technique for investments classified as preferred stocks with a total value of $26,587 changed to an Option Pricing Model. The investments were previously valued utilizing Probability-Weighted Expected Return Model. The change was due to consideration of liquidation preferences and exit strategy.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 11

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Global Opportunities V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $2,000,580) (cost — $22,281,327)	$	29,222,836
Investments at value — affiliated (cost — $3,117,004)		3,117,004
Foreign currency at value (cost — $6,961)		7,039
Receivables:
Securities lending income — affiliated		220
Capital shares sold		3,754
Dividends — affiliated		1,085
Dividends — unaffiliated		47,991
From the Manager		13,998
Unrealized appreciation on forward foreign currency exchange contracts		77,142
Prepaid expenses		190
Total assets		32,491,259
LIABILITIES
Cash collateral on securities loaned at value		2,056,900
Payables:
Capital shares redeemed		32,905
Distribution fees		743
Investment advisory fees		29,214
Deferred foreign capital gain tax		19,114
Directors’ and Officer’s fees		3,696
Other accrued expenses		144,041
Other affiliates		236
Unrealized depreciation on forward foreign currency exchange contracts		23,277
Total liabilities		2,310,126
NET ASSETS	$	30,181,133
NET ASSETS CONSIST OF
Paid-in capital	$	22,506,238
Distribution in excess of net investment income		(86,053	)
Accumulated net realized gain		783,387
Net unrealized appreciation (depreciation)		6,977,561
NET ASSETS	$	30,181,133
NET ASSET VALUE
Class I — Based on net assets of $26,507,658 and 1,518,711 shares outstanding, 100 million shares authorized, $0.10 par value	$	17.45
Class III — Based on net assets of $3,673,475 and 211,430 shares outstanding, 100 million shares authorized, $0.10 par value	$	17.37

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock Global Opportunities V.I. Fund
INVESTMENT INCOME
Dividends — unaffiliated	$	651,588
Dividends — affiliated		5,485
Securities lending — affiliated — net		17,526
Foreign taxes withheld		(39,062	)
Total investment income		635,537
EXPENSES
Investment advisory		293,195
Professional		102,293
Transfer agent		5,012
Transfer agent — class specific		78,042
Printing		18,493
Directors and Officer		20,758
Accounting services		17,078
Custodian		37,988
Distribution — class specific		10,162
Pricing		24,390
Miscellaneous		8,772
Total expenses		616,183
Less:
Fees waived and/or reimbursed by the Manager		(148,702	)
Transfer agent fees reimbursed — class specific		(78,042	)
Total expenses after fees waived and/or reimbursed		389,439
Net investment income		246,098
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — unaffiliated		4,632,884
Investments — affiliated		(73	)
Capital gain distributions from investment companies — affiliated		3
Forward foreign currency exchange contracts		58,221
Foreign currency transactions		(3,370	)
Options written		15,170
		4,702,835
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated(a)		3,947,193
Investments — affiliated		83
Forward foreign currency exchange contracts		117,569
Foreign currency translations		3,348
Options written		58
		4,068,251
Net realized and unrealized gain		8,771,086
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	9,017,184

^(a)  Net of $19,114 foreign capital gain tax.

See notes to financial statements.

FINANCIAL STATEMENTS 13

Statements of Changes in Net Assets

	BlackRock Global Opportunities V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income	$	246,098		$	447,233
Net realized gain		4,702,835			618,110
Net change in unrealized appreciation (depreciation)		4,068,251			266,548
Net increase in net assets resulting from operations		9,017,184			1,331,891
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(405,685	)		(628,394	)
Class III		(44,315	)		(62,238	)
From net realized gain:
Class I		(3,347,622	)		(135,347	)
Class III		(448,415	)		(15,821	)
Decrease in net assets resulting from distributions to shareholders		(4,246,037	)		(841,800	)
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from capital share transactions		(14,211,850	)		(3,367,104	)
NET ASSETS
Total decrease in net assets		(9,440,703	)		(2,877,013	)
Beginning of year		39,621,836			42,498,849
End of year	$	30,181,133		$	39,621,836
Undistributed (distribution in excess of) net investment income	$	(86,053	)	$	4,466

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Global Opportunities V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	16.22		$	16.00		$	16.35		$	17.98		$	13.89
Net investment income(a)		0.12			0.18			0.12			0.14			0.07
Net realized and unrealized gain (loss)		3.97			0.40			(0.07	)		(0.81	)		4.08
Net increase (decrease) from investment operations		4.09			0.58			0.05			(0.67	)		4.15
Distributions:(b)
From net investment income		(0.31	)		(0.30	)		(0.17	)		(0.20	)		(0.06	)
From net realized gain		(2.55	)		(0.06	)		(0.23	)		(0.76	)		—
Total distributions		(2.86	)		(0.36	)		(0.40	)		(0.96	)		(0.06	)
Net asset value, end of year	$      17.45			$      16.22			$      16.00			$      16.35			$      17.98
Total Return(c)
Based on net asset value		25.19	%		3.59	%(d)		0.28	%		(3.74	)%		29.87	%(e)
Ratios to Average Net Assets
Total expenses		1.55	%		1.42	%		1.35	%		1.33	%		1.33	%
Total expenses after fees waived and/or reimbursed		0.97	%		0.97	%		1.03	%		1.12	%		1.14	%
Net investment income		0.66	%		1.14	%		0.72	%		0.82	%		0.44	%
Supplemental Data
Net assets, end of year (000)	$	26,508		$	35,524		$	38,686		$	44,136		$	52,175
Portfolio turnover rate		33	%		65	%		69	%		87	%		135	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Includes the litigation settlement amount. Excluding this amount, the Fund’s total return is 3.27%.

^(e)  Includes the litigation settlement amount. Excluding this amount, the Fund’s total return is 29.72%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 15

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Global Opportunities V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	16.15		$	15.93		$	16.29		$	17.93		$	13.86
Net investment income(a)		0.08			0.14			0.08			0.06			0.03
Net realized and unrealized gain (loss)		3.94			0.40			(0.08	)		(0.77	)		4.06
Net increase (decrease) from investment operations		4.02			0.54			—			(0.71	)		4.09
Distributions:(b)
From net investment income		(0.25	)		(0.26	)		(0.13	)		(0.17	)		(0.02	)
From net realized gain		(2.55	)		(0.06	)		(0.23	)		(0.76	)		—
Total distributions		(2.80	)		(0.32	)		(0.36	)		(0.93	)		(0.02	)
Net asset value, end of year	$    17.37			$    16.15			$    15.93			$    16.29			$    17.93
Total Return(c)
Based on net asset value		24.89	%		3.36	%(d)		0.02	%		(4.00	)%		29.51	%(e)
Ratios to Average Net Assets
Total expenses		1.81	%		1.68	%		1.63	%		1.57	%		1.58	%
Total expenses after fees waived and/or reimbursed		1.22	%		1.22	%		1.27	%		1.39	%		1.39	%
Net investment income		0.41	%		0.89	%		0.45	%		0.32	%		0.16	%
Supplemental Data
Net assets, end of year (000)	$	3,673		$	4,098		$	3,813		$	2,972		$	1,404
Portfolio turnover rate		33	%		65	%		69	%		87	%		135	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Includes the litigation settlement amount. Excluding this amount, the Fund’s total return is 3.04%.

^(e)  Includes the litigation settlement amount. Excluding this amount, the Fund’s total return is 29.37%.

See notes to financial statements.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements BlackRock Global Opportunities V.I. Fund

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Global Opportunities V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares also bear certain expenses related to the distribution of such shares.

On March 27, 2017, the Board of Directors of the Company (the “Board”) approved a proposal to close the Fund to new investors and thereafter to liquidate the Fund. Effective May 30, 2017, the Fund no longer accepts purchase orders from new investors. The liquidation is expected to occur on or about March 30, 2018.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., forward foreign currency exchange contracts) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements (continued) BlackRock Global Opportunities V.I. Fund

The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC options are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately-held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach	(i)	recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers;
	(ii)	recapitalizations and other transactions across the capital structure; and
	(iii)	market multiples of comparable issuers.
Income approach	(i)	future cash flows discounted to present and adjusted as appropriate for liquidity, credit and/or market risks;
	(ii)	quoted prices for similar investments or assets in active markets; and
	(iii)	other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach	(i)	audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company;
	(ii)	changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company;
	(iii)	relevant news and other public sources; and
	(iv)	known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements (continued) BlackRock Global Opportunities V.I. Fund

Investments in series of preferred stock issued by Private Companies are typically valued utilizing Market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 – Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 – Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 – Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. SECURITIES AND OTHER INVESTMENTS

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued) BlackRock Global Opportunities V.I. Fund

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received(a)		Net Amount
Citigroup Global Markets, Inc.		$   198,613		$   (198,613)		$—
Deutsche Bank Securities		932,755		(932,755)		—
Goldman Sachs & Co.		433,958		(433,958)		—
Morgan Stanley		277,595		(277,595)		—
State Street Bank & Trust Co.		157,659		(157,659)		—
		$2,000,580		$(2,000,580)		$—

^(a)  Cash collateral with a value of $2,056,900 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Fund purchases and writes call and put options to increase or decrease its exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statement of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statement of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statement of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Fund writes a call option, such option is typically “covered,” meaning that it holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

In purchasing and writing options, the Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that it may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements. The result would cause the Fund to accelerate payment of any net liability owed to the counterparty.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued) BlackRock Global Opportunities V.I. Fund

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.75	%
$1 Billion - $3 Billion		0.71
$3 Billion - $5 Billion		0.68
$5 Billion - $10 Billion		0.65
Greater than $10 Billion		0.64

With respect to the Fund, the Manager entered into a separate sub-advisory agreement with BlackRock International Limited (“BIL”), an affiliate of the Manager. The Manager pays BIL, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Fund to the Manager.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at the annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III is $10,162.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each class of the Fund:

Class I	Class III	Total
$69,766	$8,276	$78,042

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps, will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $538.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the directors of the Fund who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”)or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

NOTESTO FINANCIAL STATEMENTS 21

Notes to Financial Statements  (continued) BlackRock Global Opportunities V.I. Fund

For the year ended December 31, 2017, the Fund reimbursed the Manager $464 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse all transfer agent fees for Class I and Class III. The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements are as follows:

	Class I		Class III		Total
Transfer agent fees reimbursed	$	69,766		$8,276	$	78,042

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I	0.97	%
Class III	1.22	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018 unless approved by the Board, including a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived $148,164, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $3,785 for securities lending agent services.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $12,470,552 and $30,828,262, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued) BlackRock Global Opportunities V.I. Fund

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions, income recognition from pass-through entities, and the sale of stock of passive foreign investment companies were reclassified to the following accounts:

Paid-in Capital	$	(7	)
Distribution in excess of net investment income		113,383
Accumulated net realized gain		(113,376	)

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	1,719,813	$	690,632
Long-term capital gains		2,526,224		151,168
	$	4,246,037	$	841,800

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	112,101
Undistributed long-term capital gains		768,031
Net unrealized gains(a)		6,794,763
	$	7,674,895

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies, income recognized from pass-through entities, and the realization for tax purposes of unrealized gains/losses on certain foreign currency contracts.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	25,532,412
Gross unrealized appreciation	$	7,373,102
Gross unrealized depreciation		(560,527	)
Net unrealized appreciation	$	6,812,575

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Fund may decline in response to certain events, including those directly involving the issuers of securities owned by the Fund. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

NOTESTO FINANCIAL STATEMENTS 23

Notes to Financial Statements (continued) BlackRock Global Opportunities V.I. Fund

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

For OTC options purchased, the Fund bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty, to perform. The Fund may be exposed to counterparty credit risk with respect to options written to the extent the Fund deposits collateral with its counterparty to a written option.

Concentration Risk: The Fund invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in U.S. securities. Investment percentages in specific countries are presented in the Schedule of Investments.

24 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements (continued) BlackRock Global Opportunities V.I. Fund

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017							Year Ended 12/31/2016
		Shares			Amount				Shares			Amount
Class I
Shares sold			137,934		$	2,490,496				89,720		$	1,430,156
Shares issued in reinvestment of distributions			214,809			3,753,307				47,029			763,742
Shares redeemed			(1,024,348	)		(19,601,826	)			(364,840	)		(5,759,871	)
Net decrease			(671,605	)	$	(13,358,023	)			(228,091	)	$	(3,565,973	)
Class III
Shares sold			90,354		$	1,652,578				95,967		$	1,502,836
Shares issued in reinvestment of distributions			28,333			492,731				4,827			78,060
Shares redeemed			(161,003	)		(2,999,136	)			(86,426	)		(1,382,027	)
Net increase (decrease)			(42,316	)	$	(853,827	)			14,368		$	198,869
Total Net Decrease			(713,921	)	$	(14,211,850	)			(213,723	)	$	(3,367,104	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 25

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Global Opportunities V.I. Fund and the Board of Directors

of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Global Opportunities V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 1 to the financial statements, on March 27, 2017, the Board of Directors approved a proposal to close the Fund to new investors and thereafter liquidate the Fund on or about March 30, 2018.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

26 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Glossary of Terms Used in this Report BlackRock Global Opportunities V.I. Fund

Currency Abbreviations

AUD	Australian Dollar
CAD	Canadian Dollar
CHF	Swiss Franc
DKK	Danish Krone
EUR	EURO
GBP	British Pound
NOK	Norwegian Krone
NZD	New Zealand Dollar
RUB	Russian Ruble
SEK	Swedish Krona
SGD	Singapore Dollar
USD	US Dollar
ZAR	South African Rand
Portfolio Abbreviation
ADR	American Depositary Receipts

GLOSSARY 27

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc

^Ø  BlackRock Government Money Market V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Money Market Overview  For the 12-Month Period Ended December 31, 2017

Notable conditions during 2017 included the continued gradual removal of monetary accommodation by the Federal Open Market Committee (“FOMC”), the nomination of a new chairman of the FOMC, pronounced demand for U.S. dollar funding heading into year end, a series of short-term spending agreements to keep the government open, and the passage of U.S. tax reform. In December, the FOMC delivered on what was basically a foregone conclusion with a 0.25% increase in the federal funds target range to 1.25% — 1.50%. This was the fifth rate rise since “lifting off” of zero. It was also the first time that the FOMC delivered on the number of hikes penciled in at the beginning of the year (despite continued skepticism from market participants).

The impacts of a series of devastating storms during the third quarter of 2017 were generally viewed to be temporary. The FOMC upgraded its forecasts for growth and employment, while leaving its outlook for inflation — which is not expected to hit its 2% target until 2019 — unchanged. Despite the stronger prognosis for economic growth, the so-called ‘dot plot’ continued to reflect three interest rate hikes in 2018 (while the longer run forecast for the Federal Funds rate was unchanged at 2.8%). (The dot plot represents the Fed’s ongoing efforts to become more transparent with respect to its policies.) Summing this up, the underlying tone of the meeting was generally regarded as dovish. As of year end, the market-implied odds of a rate hike upcoming in March stood close to 70%, while futures contracts for federal funds were priced for about two hikes during 2018. As anticipated, the FOMC announced the commencement of its balance sheet normalization program in October at its September 20, 2017 meeting. A total of $10 billion of Treasury and agency mortgage-backed securities were initially allowed to mature each month, with the aggregate sum rising by a like amount each quarter until a “roll off” rate of $50 billion per month is achieved.

Credit spreads, as reflected in the differential between the three-month London Inter-Bank Offered Rate and overnight index swaps, widened heading into year end as fund managers generally maintained a defensive posture while certain banks appeared to limit the availability of U.S. dollar funding given balance sheet management concerns. The U.S. debt ceiling was a focus during the summer months. Volatility was manifested via an earlier-than-usual back up in yields on Treasury bills deemed most at risk of a potential delay in payment if the borrowing capacity was not addressed in a timely fashion. A respite was achieved in September when a bipartisan agreement to temporarily extend the debt limit along with a continuing resolution to keep the Federal government open until December 8, 2017 was attached to funding for hurricane relief.

Two ‘stopgap’ spending measures were put in place during the fourth quarter of 2017 to ensure that the government remained open. Extraordinary measures allowed the Treasury to continue borrowing during the latter part of the year. Jerome Powell was nominated as Chairman of the FOMC to replace Janet Yellen, who is expected to step down upon his confirmation. Vice-chairman Bill Dudley’s resignation in early 2018 will add to the number of vacancies on the FOMC (including various unfilled seats on the Federal Reserve’s Board of Governors). Finally, tax reform legislation was enacted and became effective January 1, 2018.

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 BlackRock Government Money Market V.I. Fund

Investment Objective

BlackRock Government Money Market V.I. Fund’s (the “Fund”) investment objective is to seek to preserve capital, maintain liquidity, and achieve the highest possible current income consistent with the foregoing.

CURRENT SEVEN-DAY YIELDS

	7-Day SEC Yields			7-Day Yields
BlackRock Government Money Market V.I. Fund		1.05	%		1.05	%

The 7-Day SEC Yield may differ from the 7-Day Yield shown above due to the fact that the 7-Day SEC Yield excludes distributed capital gains.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

PORTFOLIO COMPOSITION

Asset Type	Percent of Net Assets
Repurchase Agreements		38	%
U.S. Government Sponsored Agency Securities		35
U.S. Treasury Obligations		24
Other Assets Less Liabilities		3

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, and (b) operating expenses, including investment advisory fees, service and distribution fees, and other fund expenses. The expense example shown below (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,004.20	$	1.52	$	1,000.00	$	1,023.69	$	1.53		0.30	%

^(a) Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

FUND SUMMARY 3

Schedule of Investments December 31, 2017 BlackRock Government Money Market V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)		Value
U.S. Government Sponsored Agency Obligations — 35.0%
Federal Farm Credit Bank:
1.00%, 01/19/18		USD    500	$	499,960
0.75%, 04/18/18		1,500		1,497,966
Federal Farm Credit Bank Discount Notes(a):
1.23%, 02/14/18		1,000		998,424
1.55%, 08/10/18		105		104,020
Federal Farm Credit Bank Variable Rate Notes(b):
(LIBOR USD 3 Month - 0.08%), 1.28%, 01/23/18		575		575,001
(LIBOR USD 1 Month + 0.18%), 1.55%, 04/04/18		1,000		999,974
Federal Home Loan Bank:
Series 1, 0.88%, 03/19/18		4,000		3,997,457
1.25%, 06/08/18		1,250		1,249,535
Federal Home Loan Bank Discount Notes(a):
1.06%, 01/02/18		1,000		999,971
1.06%, 01/19/18		2,000		1,998,866
1.11%, 01/24/18		4,345		4,341,671
1.15%, 01/31/18		1,755		1,753,328
1.19%, 02/02/18		1,500		1,498,400
1.21%, 02/07/18		1,500		1,498,127
1.29%, 03/07/18		1,280		1,276,986
1.46%, 06/06/18		500		496,817
Federal Home Loan Bank Variable Rate Notes(b):
(LIBOR USD 1 Month - 0.15%), 1.35%, 04/17/18		1,400		1,400,000
(LIBOR USD 1 Month - 0.14%), 1.35%, 04/17/18		2,500		2,500,000
(LIBOR USD 3 Month - 0.35%), 1.05%, 05/09/18		1,000		1,000,000
(LIBOR USD 3 Month - 0.16%), 1.36%, 06/08/18		500		500,000
(LIBOR USD 1 Month - 0.12%), 1.26%, 10/03/18		1,000		1,000,000
(LIBOR USD 1 Month - 0.10%), 1.47%, 11/01/18		3,000		3,000,000
(LIBOR USD 1 Month - 0.10%), 1.47%, 11/02/18		2,000		2,000,000
(LIBOR USD 1 Month - 0.13%), 1.35%, 11/15/18		3,000		3,000,000
(LIBOR USD 1 Month - 0.09%), 1.46%, 01/25/19		750		750,000
(LIBOR USD 3 Month - 0.16%), 1.39%, 06/12/19		420		419,842
(LIBOR USD 3 Month - 0.16%), 1.46%, 06/20/19		1,000		1,000,000
(LIBOR USD 1 Month - 0.06%), 1.37%, 09/11/19		1,200		1,200,000
(LIBOR USD 3 Month - 0.14%), 1.47%, 12/19/19		535		535,000
Federal Home Loan Mortgage Corp. Discount Notes, 1.23%, 02/16/18(a)		285		284,603
Federal Home Loan Mortgage Corp. Notes:
0.75%, 04/09/18		1,000		998,739
4.88%, 06/13/18		900		914,123
1.33%, 06/27/18		500		499,988
0.88%, 10/12/18		840		835,139
Federal National Mortgage Association Notes:
0.88%, 02/08/18		1,000		999,668
0.88%, 05/21/18		870		868,799
Total U.S. Government Sponsored Agency Obligations — 35.0% (Cost: $47,492,404)				47,492,404
U.S. Treasury Obligations — 23.8%
U.S. Treasury Bills(a):
1.31%, 03/22/18		1,820		1,815,237
1.33%, 03/29/18		13,200		13,160,836
1.35%, 04/05/18		1,230		1,226,184
1.38%, 05/03/18		2,000		1,991,460
1.44%, 05/31/18		1,305		1,297,197
1.46%, 06/07/18		2,445		2,429,539
1.51%, 06/28/18		4,000		3,969,740
U.S. Treasury Notes:
0.75%, 02/28/18		1,955		1,954,502
1.38%, 07/31/18		685		684,767

Security	Par (000)		Value
U.S. Treasury Obligations (continued)
U.S. Treasury Notes (continued):
(U.S. Treasury 3 Month Bill Money Market Yield + 0.14%), 1.59%, 01/31/19(b)		3,775	$	3,775,000
Total U.S. Treasury Obligations — 23.8% (Cost: $32,304,462)				32,304,462
Total Repurchase Agreements — 38.2% (Cost: $51,777,000)				51,777,000
Total Investments — 97.0% (Cost: $131,573,866)(c)				131,573,866
Other Assets Less Liabilities — 3.0%				4,084,734
Net Assets — 100.0%			$	135,658,600

^(a)  Rates are discount rates or a range of discount rates at the time of purchase.

^(b)  Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

^(c)  Cost for U.S. federal income tax purposes.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Government Money Market V.I. Fund

Repurchase Agreements

	Repurchase Agreements												Collateral
Counterparty	Coupon Rate			Purchase Date		Maturity Date		Par (000)		At Value (000)		Proceeds Including Interest	Position	Original Par	Position Received, At Value
Bank of Montreal		1.36	%		12/29/17		01/02/18	$	5,600	$	5,600	$5,600,846	U.S. Government Sponsored Agency Obligations, 2.50% to 5.50%, due 09/01/25 to 04/01/37	$15,735,512	$5,768,000
BNP Paribas SA		1.25	(a)		12/29/17		01/05/18		677		677	677,165	U.S. Treasury Obligations, 0.13% to 1.75%, due 01/31/23 to 11/15/27	691,014	690,574
		1.40			12/29/17		01/02/18		10,000		10,000	10,001,555	U.S. Government Sponsored Agency Obligations and U.S. Treasury Obligations, 0.63% to 4.00%, due 03/31/19 to 06/20/47	10,849,393	10,200,006
Total BNP Paribas SA										$	10,677				$10,890,580
Goldman Sachs & Co. LLC		1.45			12/27/17		01/03/18		2,500		2,500	2,500,705	U.S. Government Sponsored Agency Obligations, 3.00% to 6.50%, due 04/20/19 to 08/20/47	13,014,279	2,550,095
JP Morgan Securities LLC		1.41			12/29/17		01/02/18		6,000		6,000	6,000,940	U.S. Treasury Obligation, 1.50%, due 03/31/19	6,125,000	6,120,460
		1.73	(a)		12/29/17		02/02/18		3,500		3,500	3,505,887	U.S. Treasury Obligation, 0.75%, due 07/31/18	3,580,000	3,573,187
Total JP Morgan Securities LLC										$	9,500				$9,693,647
Merrill Lynch, Pierce, Fenner & Smith, Inc.		1.42			12/29/17		01/02/18		10,000		10,000	10,001,578	U.S. Treasury Obligation, 2.38%, due 08/15/24	10,094,500	10,200,060
		1.50			12/27/17		01/03/18		1,000		1,000	1,000,292	U.S. Government Sponsored Agency Obligation, 2.89%, due 04/01/47	1,039,984	1,030,000
Total Merrill Lynch, Pierce, Fenner & Smith, Inc.										$	11,000				$11,230,060
Mizuho Securities USA LLC		1.37			12/29/17		01/02/18		10,000		10,000	10,001,522	U.S. Treasury Obligations, 0.13% to 3.63%, due 04/15/19 to 11/15/45	10,152,000	10,200,026
Wells Fargo Securities LLC		1.35			12/27/17		01/03/18		1,500		1,500	1,500,394	U.S. Government Sponsored Agency Obligations, 4.00% due 11/01/46 to 06/01/47	1,480,259	1,545,000
		1.42			12/29/17		01/05/18		1,000		1,000	1,000,276	U.S. Government Sponsored Agency Obligation, 4.00%, due 11/01/47	984,169	1,030,000
Total Wells Fargo Securities LLC										$	2,500				$  2,575,000
Total										$	51,777				$52,907,408

^(a)  Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand.

SCHEDULES OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Government Money Market V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Investments:
Assets:
Short-Term Securities(a)	$	—	$	131,573,866	$	—	$	131,573,866
	$	—	$	131,573,866	$	—	$	131,573,866

^(a)  See above Schedule of Investments for values in each security type.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Government Money Market V.I. Fund
ASSETS
Investments at value — unaffiliated (cost — $79,796,866)	$	79,796,866
Cash		4,400,232
Repurchase agreements at value (cost — $51,777,000)		51,777,000
Receivables:
Capital shares sold		3,365
Interest — unaffiliated		68,761
Prepaid expenses		653
Other assets		20,766
Total assets		136,067,643
LIABILITIES
Payables:
Capital shares redeemed		301,906
Printing fees		27,479
Professional fees		40,080
Investment advisory fees		34,310
Officer’s and Directors’ fees		4,736
Other affiliates		532
Total liabilities		409,043
NET ASSETS	$	135,658,600
NET ASSETS CONSIST OF
Paid-in capital	$	135,658,453
Accumulated net realized gain		147
NET ASSETS	$	135,658,600
Class I — Based on net assets of $135,658,600 and 135,662,592 shares outstanding, 3.3 billion shares authorized, $0.10 par value.	$	1.00

See notes to financial statements.

FINANCIAL STATEMENTS 7

Statement of Operations

December 31, 2017

	BlackRock Government Money Market V.I. Fund
INVESTMENT INCOME
Interest — unaffiliated	$	1,349,240
Total investment income		1,349,240
EXPENSES
Investment advisory		722,858
Transfer agent — class specific		153,326
Professional		59,111
Printing		32,899
Custodian		25,265
Directors and Officer		22,719
Accounting services		19,680
Transfer agent		4,999
Miscellaneous		4,829
Total expenses		1,045,686
Less:
Fees waived and/or reimbursed by the Manager		(458,573	)
Transfer agent fees reimbursed		(153,321	)
Total expenses after fees waived and/or reimbursed		433,792
Net investment income		915,448
REALIZED GAIN
Net realized gain from investments		475
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	915,923

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock Government Money Market V.I. Fund
	Year Ended
	12/31/2017			12/31/2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	915,448		$	198,934
Net realized gain		475			279
Net increase in net assets resulting from operations		915,923			199,213
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income		(915,448	)		(198,934	)
From net realized gain		(477	)		(1,077	)
Decrease in net assets resulting from distributions to shareholders		(915,925	)		(200,011	)
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of shares		110,014,964			85,450,151
Reinvestments of distributions		916,673			202,247
Cost of shares redeemed		(126,795,881	)		(86,246,950	)
Net decrease in net assets derived from capital share transactions		(15,864,244	)		(594,552	)
NET ASSETS
Total decrease in net assets		(15,864,246	)		(595,350	)
Beginning of year		151,522,846			152,118,196
End of year	$	135,658,600		$	151,522,846

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 9

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Government Money Market V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net investment income		0.0064			0.0013			0.0000	(a)		0.0000	(a)		0.0000	(a)
Net realized gain		0.0000	(a)		0.0000	(a)		0.0001			0.0001			0.0000	(a)
Net increase from investment operations		0.0064			0.0013			0.0001			0.0001			0.0000
Distributions:(b)
From net investment income		(0.0064	)		(0.0013	)		(0.0000	)(c)		(0.0000	)(c)		(0.0000	)(c)
From net realized gain		(0.0000	)(c)		(0.0000	)(c)		(0.0001	)		(0.0001	)		(0.0000	)(c)
Total distributions		(0.0064	)		(0.0013	)		(0.0001	)		(0.0001	)		(0.0000	)
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return:(d)
Based on net asset value		0.65	%		0.13	%		0.01	%		0.01	%		0.00	%
Ratios to Average Net Assets:
Total expenses		0.72	%		0.62	%		0.61	%		0.61	%		0.63	%
Total expenses after fees waived and/or reimbursed		0.30	%		0.30	%		0.18	%		0.17	%		0.20	%
Net investment income		0.63	%		0.13	%		0.00	%		0.00	%		0.00	%
Supplemental Data:
Net assets, end of year (000)	$	135,659		$	151,523		$	152,118		$	228,241		$	179,570

^(a)  Amount is less than $0.00005 per share.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Amount is greater than $(0.00005) per share.

^(d)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Government Money Market Fund V.I. Fund (the “Fund”). The Fund is classified as diversified.

The Fund operates as a “government money market fund” under Rule 2a-7 under the 1940 Act. The Fund is not subject to liquidity fees or temporary suspensions of redemptions due to declines in the Fund’s weekly liquid assets.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities are recognized on an accrual basis.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Recent Accounting Standards: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Fund’s presentation in the Statement of Cash Flows.

In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Fund.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund are charged to the Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund’s investments are valued under the amortized cost method which approximates current market value in accordance with Rule 2a-7 under the 1940 Act. Under this method, investments are valued at cost when purchased and, thereafter, a constant proportionate accretion of discounts and amortization of premiums are recorded until the maturity of the security. The Fund seeks to maintain its net asset value (“NAV”) per share at $1.00, although there is no assurance that it will be able to do so on a continuing basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

NOTESTO FINANCIAL STATEMENTS 11

Notes to Financial Statements   (continued)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments is not necessarily an indication of the risks associated with investing in those securities.

4. SECURITIES AND OTHER INVESTMENTS

Repurchase Agreements: Repurchase agreements are commitments to purchase a security from a counterparty who agrees to repurchase the same security at a mutually agreed upon date and price. On a daily basis, the counterparty is required to maintain collateral subject to the agreement and in value no less than the agreed upon repurchase amount. Pursuant to the custodial undertaking associated with a tri-party repurchase arrangement, an unaffiliated third party custodian maintains accounts to hold collateral for a fund and its counterparties. Typically, a fund and counterparty are not permitted to sell, re-pledge or use the collateral absent a default by the counterparty or a fund, respectively.

In the event the counterparty defaults and the fair value of the collateral declines, a fund could experience losses, delays and costs in liquidating the collateral.

Repurchase agreements are entered into by a fund under Master Repurchase Agreements (each, an “MRA”). The MRA permits a fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, a fund receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, a fund would recognize a liability with respect to such excess collateral. The liability reflects a fund’s obligation under bankruptcy law to return the excess to the counterparty.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets.

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.500	%
$1 Billion — $2 Billion		0.450
$2 Billion — $3 Billion		0.400
$3 Billion — $4 Billion		0.375
$4 Billion — $7 Billion		0.350
$7 Billion — $10 Billion		0.325
$10 Billion — $15 Billion		0.300
Greater than $15 Billion		0.290

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

Expense Limitations, Waivers and Reimbursements: The Manager voluntarily agreed to waive a portion of the investment advisory fees to enable the Fund to maintain minimum levels of daily net investment income. The Manager may discontinue this waiver and/or reimbursement at any time without notice. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Fund’s investments in other affiliated investment companies, if any.

For the year ended December 31, 2017, the Fund reimbursed the Manager $1,756 for certain accounting services, which is included in accounting services in the Statement of Operations.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements   (continued)

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”), to 0.30% of average daily net assets of Class I. The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors who are not “interested persons” of the Fund, as defined in the 1940 (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived $458,573 and reimbursed $153,321, which is shown as fees waived and/or reimbursed by the Manager and transfer agent fees reimbursed, respectively, in the Statement of Operations.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

6. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income	$	915,604	$	199,088
Long-term capital gains		321		923
	$	915,925	$	200,011

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	147
Undistributed long-term capital gains		—
	$	147

7. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

Counterparty Credit Risk: Similar to issuer credit risk, the Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

8. CAPITAL SHARE TRANSACTIONS

The number of shares sold, reinvested and redeemed corresponds to the net proceeds from the sale of shares, reinvestment of all distributions and cost of shares redeemed, respectively, since shares are sold and redeemed at $1.00 per share.

9. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 13

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Government Money Market V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Government Money Market V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock High Yield V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock High Yield V.I. Fund

Investment Objective

BlackRock High Yield V.I. Fund’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its benchmark, the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index.

What factors influenced performance?

A sustained global economic expansion fueled another strong year for high yield bonds—and for risk assets more broadly—in 2017.

The Fund’s positioning in the electric utilities, automotive and oil field services sectors detracted from performance. The effect was largely from sector allocation rather than security selection. The Fund’s underweight in BB rated securities and slight underweight in bonds rated CC and below also detracted from performance. However, the investment adviser remained comfortable with both of these underweights.

The drivers of the Fund’s positive relative performance included security selection in the gaming, technology, and metals & mining sectors. From an asset allocation perspective, out-of-benchmark positions in bank loans and preferred stocks contributed positively. From a credit rating perspective, the Fund’s allocations to the B and CCC tiers were the largest contributors.

Describe recent portfolio activity.

The Fund actively managed risk throughout the year, and it ended with a slightly lower risk profile than the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index. From an asset allocation perspective, the Fund added to its allocations in bank loans and preferred stocks while reducing its weightings in common stocks and cash.

Describe portfolio positioning at period end.

The Fund’s general investment themes and core positions reflected the investment adviser’s views regarding issuer cash flows, firm or industry catalysts, and idiosyncratic factors.

The Fund’s credit-rating positioning remained consistent over the annual period, with an underweight in BB rated issues, an overweight in B rated bonds, and an overweight in select CCC rated issues with improving credit positions or attractive yields. Importantly, the Fund maintained underweights to the market’s “tails”: both the higher-yielding segment that contained a larger concentration of stressed assets, as well as the lower-yielding portion where narrow spreads indicated an unattractive level of income.

The Fund’s largest overweights were in the gaming, metals & mining and independent energy areas. Conversely, it was underweight in the retail, automotive and consumer products sectors. From an asset allocation perspective, the Fund had an approximate 7.5% weighting in bank loans at period end, coupled with smaller positions in preferred and common stocks.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock High Yield V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses. The returns for Class III Shares, prior to February 15, 2012, the recommencement of Class III Shares, are based upon performance of the Fund’s Class I Shares, as adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class III Shares.

^(b)  The Fund invests primarily in non-investment grade bonds with maturities of ten years or less. The Fund’s total returns prior to October 1, 2011 are the returns of the Fund that followed different investment objectives and investment strategies under the name “BlackRock High Income V.I. Fund”.

^(c)  An unmanaged index comprised of issues that meet the following criteria: at least $150 million par value outstanding; maximum credit rating of Ba1; at least one year to maturity; and no issuer represents more than 2% of the index.

Performance Summary for the Period Ended December 31, 2017

	Standardized 30-Day Yield  (b)			Unsubsidized 30-Day Yield  (b)			6-Month Total Returns (c)			Average Annual Total Returns
										1 Year (c)			5 Years (c)			10 Years (c)
Class I(a)		4.50	%		4.41	%		2.67	%		7.48	%		5.65	%		7.23	%
Class III(a)		4.27			4.16			2.55			7.08			5.37			6.95	(d)
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index		—			—			2.46			7.50			5.78			8.09

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend/payable date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to October 1, 2011 are the returns of the Fund that followed different investment objectives and investment strategies under the name “BlackRock High Income V.I. Fund”.

^(b)  The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

^(c)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(d)  The returns for Class III Shares prior to February 15, 2012, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,026.70	$	3.47	$	1,000.00	$	1,021.78	$	3.47		0.68	%
Class III		1,000.00		1,025.50		4.80		1,000.00		1,020.47		4.79		0.94

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock High Yield V.I. Fund

Portfolio Information

CREDIT QUALITY ALLOCATION ^(a)

	Percent of Total Investments (b)
AA/Aa		—	(c)
BBB/Baa		5	%
BB/Ba		82	%
CCC/Caa		10	%
CC/Ca		—	(c)
DD/Da		—	(c)
NR		3	%

^(a)  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s or Moody’s Investors Service if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

^(b)  Total investments exclude short-term securities.

^(c)  Representing less than 0.5% of Total Investments.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

DISCLOSUREOF EXPENSES / DERIVATIVE FINANCIAL INSTRUMENTS 5

Schedule of Investments   December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)				Value
Asset-Backed Securities — 0.1%
Continental Airlines Pass-Through Trust, Series 2012-3, Class C, 6.13%, 04/29/18		USD		365	$	368,833
Virgin Australia Pass-Through Trust, Series 2013-1C, 7.13%, 10/23/18(a)				103		104,320
Total Asset-Backed Securities — 0.1% (Cost: $467,555)						473,153
			Shares
Common Stocks — 0.7%
Chemicals — 0.1%
Advanced Emissions Solutions, Inc.				1,644		15,881
Platform Speciality Products Corp.(b)				65,870		653,430
						669,311
Construction & Engineering — 0.2%
Star Group, Inc. (The)(b)				39,643		922,480
Media — 0.1%
Altice USA, Inc., Class A(b)				20,929		444,323
Metals & Mining — 0.1%
Constellium NV, Class A(b)				31,378		349,865
Wireless Telecommunication Services — 0.2%
T-Mobile US, Inc.(b)				11,157		708,581
Total Common Stocks — 0.7% (Cost: $2,818,881)						3,094,560
	Par (000)
Corporate Bonds — 88.1%
Aerospace & Defense — 2.4%
Arconic, Inc.:
6.15%, 08/15/20		USD		595		639,684
5.13%, 10/01/24				1,321		1,409,947
5.90%, 02/01/27				129		144,892
6.75%, 01/15/28				330		388,842
5.95%, 02/01/37				128		139,200
Bombardier, Inc.(a):
8.75%, 12/01/21				1,185		1,300,538
5.75%, 03/15/22				70		68,600
6.00%, 10/15/22				24		23,580
6.13%, 01/15/23				555		543,900
7.50%, 12/01/24				672		682,080
7.50%, 03/15/25				565		569,407
7.45%, 05/01/34				210		206,325
KLX, Inc., 5.88%, 12/01/22(a)				1,791		1,875,535
Kratos Defense & Security Solutions, Inc., 6.50%, 11/30/25(a)				221		229,840
Pioneer Holdings LLC, 9.00%, 11/01/22(a)				224		231,560
TransDigm, Inc.:
6.00%, 07/15/22				992		1,011,840
6.50%, 07/15/24				728		746,200
6.50%, 05/15/25				100		102,250
6.38%, 06/15/26				167		168,670
						10,482,890
Air Freight & Logistics — 0.3%(a)
CEVA Group plc, 7.00%, 03/01/21				80		77,600
XPO Logistics, Inc.:
6.50%, 06/15/22				1,020		1,064,625
6.13%, 09/01/23				43		45,473
						1,187,698

Security	Par (000)			Value
Airlines — 0.0%
American Airlines Group, Inc., 5.50%, 10/01/19(a)		USD	30	$	30,825
Auto Components — 0.8%
Allison Transmission, Inc., 5.00%, 10/01/24(a)			16		16,500
Icahn Enterprises LP:
4.88%, 03/15/19			475		475,095
6.00%, 08/01/20			67		68,904
6.25%, 02/01/22			1,147		1,172,807
6.75%, 02/01/24			583		599,033
6.38%, 12/15/25(a)			198		198,020
IHO Verwaltungs GmbH(a)(c):
4.12% ( 4.12% Cash or 4.88% PIK), 09/15/21			201		204,517
4.50% ( 4.50% Cash or 5.25% PIK), 09/15/23			515		524,981
4.75% ( 4.75% Cash or 5.50% PIK), 09/15/26			300		304,500
ZF North America Capital, Inc., 4.75%, 04/29/25(a)			164		173,635
					3,737,992
Automobiles — 0.2%(a)
Jaguar Land Rover Automotive plc, 5.63%, 02/01/23			150		153,563
Tesla, Inc., 5.30%, 08/15/25			682		651,310
					804,873
Banks — 2.5%
Banco Espirito Santo SA(d):
2.63%, 05/08/17(e)		EUR	100		35,995
4.75%, 01/15/18			100		35,096
4.00%, 01/21/19(e)			100		35,995
Bank of America Corp.(e)(f):
(LIBOR USD 3 Month + 3.71%), 6.25%		USD	558		616,618
(LIBOR USD 3 Month + 4.17%), 6.50%			201		228,386
(LIBOR USD 3 Month + 3.90%), 6.10%			1,423		1,561,743
CIT Group, Inc.:
(LIBOR USD 3 Month + 3.97%), 5.80%(e)(f)			595		612,850
5.00%, 08/15/22			30		31,800
5.00%, 08/01/23			1,466		1,561,290
Citigroup, Inc.(e)(f):
(LIBOR USD 3 Month + 4.09%), 5.80%			460		476,675
(LIBOR USD 3 Month + 4.48%), 6.13%			175		186,156
(LIBOR USD 3 Month + 4.07%), 5.95%			302		321,253
(LIBOR USD 3 Month + 3.91%), 5.95%			210		223,650
HSBC Holdings plc, (USD Swap Rate 5 Year + 3.75%), 6.00%(e)(f)			465		488,831
JPMorgan Chase & Co.(e)(f):
(LIBOR USD 3 Month + 3.32%), 5.00%			640		651,123
(LIBOR USD 3 Month + 3.25%), 5.15%			190		196,422
(LIBOR USD 3 Month + 3.33%), 6.12%			99		108,405
(LIBOR USD 3 Month + 3.33%), 6.10%			1,486		1,632,817
Wells Fargo & Co.(e)(f):
(LIBOR USD 3 Month + 3.11%), 5.90%			580		620,426
(LIBOR USD 3 Month + 3.99%), 5.88%			1,185		1,312,447
					10,937,978
Building Products — 0.7%
CPG Merger Sub LLC, 8.00%, 10/01/21(a)			396		408,870
James Hardie International Finance DAC, 4.75%, 01/15/25(a)			30		30,225
Jeld-Wen, Inc.(a):
4.63%, 12/15/25			137		138,027
4.88%, 12/15/27			123		124,230
Masonite International Corp., 5.63%, 03/15/23(a)			852		890,596
Ply Gem Industries, Inc., 6.50%, 02/01/22			284		293,230
Standard Industries, Inc.(a):
5.50%, 02/15/23			10		10,425
5.38%, 11/15/24			240		250,872
6.00%, 10/15/25			352		375,760

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Building Products (continued)
USG Corp.(a):
5.50%, 03/01/25		USD	37	$	39,313
4.88%, 06/01/27			686		711,073
					3,272,621
Capital Markets — 0.3%
Eagle Holding Co. II LLC, 7.63% (7.63% Cash or 8.38% PIK), 05/15/22(a)(c)			324		327,240
Goldman Sachs Group, Inc. (The), (LIBOR USD 3 Month + 2.87%), 5.00%(e)(f)			1,195		1,175,880
					1,503,120
Chemicals — 3.5%
Alpha 3 BV, 6.25%, 02/01/25(a)			1,100		1,127,500
Axalta Coating Systems LLC, 4.88%, 08/15/24(a)			253		265,650
Blue Cube Spinco, Inc.:
9.75%, 10/15/23			377		444,860
10.00%, 10/15/25			677		812,400
CF Industries, Inc.:
7.13%, 05/01/20			71		77,411
5.15%, 03/15/34			105		107,100
4.95%, 06/01/43			175		165,375
Chemours Co. (The):
6.63%, 05/15/23			280		296,100
7.00%,��05/15/25			108		117,180
5.38%, 05/15/27			622		643,770
Gates Global LLC, 6.00%, 07/15/22(a)			1,871		1,913,097
Hexion, Inc., 10.38%, 02/01/22(a)			222		206,599
Huntsman International LLC:
4.88%, 11/15/20			376		391,040
5.13%, 11/15/22			755		805,019
Koppers, Inc., 6.00%, 02/15/25(a)			278		294,680
MPM Escrow LLC(d)(g)			334		—
Momentive Performance Materials, Inc., 3.88%, 10/24/21			1,330		1,389,850
NOVA Chemicals Corp., 4.88%, 06/01/24(a)			338		337,155
Platform Specialty Products Corp.(a):
6.50%, 02/01/22			3,186		3,293,528
5.88%, 12/01/25			872		865,460
PQ Corp.(a):
6.75%, 11/15/22			439		468,632
5.75%, 12/15/25			503		511,803
Tronox Finance plc, 5.75%, 10/01/25(a)			228		234,270
Venator Finance Sarl, 5.75%, 07/15/25(a)			194		204,670
W.R. Grace & Co.-Conn., 5.13%, 10/01/21(a)			729		766,361
					15,739,510
Commercial Services & Supplies — 2.6%
ACCO Brands Corp., 5.25%, 12/15/24(a)			108		110,970
ADT Corp. (The):
6.25%, 10/15/21			310		339,450
3.50%, 07/15/22			38		37,430
4.13%, 06/15/23			1,282		1,282,000
4.88%, 07/15/32(a)			700		661,500
Advanced Disposal Services, Inc., 5.63%, 11/15/24(a)			257		262,782
APX Group, Inc.:
6.38%, 12/01/19			120		121,800
8.75%, 12/01/20			368		375,360
7.88%, 12/01/22			217		232,461
Aramark Services, Inc.:
5.13%, 01/15/24			891		935,104
5.00%, 04/01/25(a)			506		534,488
GW Honos Security Corp., 8.75%, 05/15/25(a)			108		116,100

Security	Par (000)			Value
Commercial Services & Supplies (continued)
Harland Clarke Holdings Corp., 8.38%, 08/15/22(a)		USD	182	$	188,998
KAR Auction Services, Inc., 5.13%, 06/01/25(a)			360		369,000
Matthews International Corp., 5.25%, 12/01/25(a)			90		90,900
Mobile Mini, Inc., 5.88%, 07/01/24			1,055		1,107,750
Nielsen Co. Luxembourg SARL (The), 5.00%, 02/01/25(a)			441		457,538
Prime Security Services Borrower LLC, 9.25%, 05/15/23(a)			2,923		3,244,530
Ritchie Bros Auctioneers, Inc., 5.38%, 01/15/25(a)			382		394,415
Tervita Escrow Corp., 7.63%, 12/01/21(a)			460		461,150
Wrangler Buyer Corp., 6.00%, 10/01/25(a)			149		153,470
					11,477,196
Communications Equipment — 0.4%
CommScope Technologies LLC(a):
6.00%, 06/15/25			2		2,125
5.00%, 03/15/27			500		500,000
CommScope, Inc., 5.00%, 06/15/21(a)			165		168,093
Nokia OYJ:
3.38%, 06/12/22			133		132,175
4.38%, 06/12/27			187		184,850
6.63%, 05/15/39			373		412,165
Riverbed Technology, Inc., 8.88%, 03/01/23(a)			229		216,119
					1,615,527
Construction & Engineering — 0.4%
Brand Energy & Infrastructure Services, Inc., 8.50%, 07/15/25(a)			801		841,050
Engility Corp., 8.88%, 09/01/24			287		306,731
New Enterprise Stone & Lime Co., Inc., 10.13%, 04/01/22(a)			200		216,000
Tutor Perini Corp., 6.88%, 05/01/25(a)			298		320,350
Weekley Homes LLC, 6.63%, 08/15/25(a)			82		81,590
					1,765,721
Consumer Finance — 1.6%
Ally Financial, Inc.:
5.13%, 09/30/24			1,032		1,115,850
8.00%, 11/01/31			1,621		2,107,300
General Motors Financial Co., Inc., (LIBOR USD 3 Month + 3.60%), 5.75%(e)(f)			482		496,378
Navient Corp.:
6.63%, 07/26/21			527		555,985
6.50%, 06/15/22			76		79,762
5.50%, 01/25/23			1,165		1,162,087
7.25%, 09/25/23			154		164,010
6.13%, 03/25/24			41		41,513
5.88%, 10/25/24			122		121,085
6.75%, 06/25/25			208		213,720
5.63%, 08/01/33			100		87,250
OneMain Financial Holdings LLC(a):
6.75%, 12/15/19			241		249,001
7.25%, 12/15/21			263		273,310
Springleaf Finance Corp.:
6.13%, 05/15/22			90		93,375
5.63%, 03/15/23			338		338,743
					7,099,369
Containers & Packaging — 2.5%
Ardagh Packaging Finance plc(a):
6.00%, 06/30/21			550		564,437
4.25%, 09/15/22			296		301,180
4.63%, 05/15/23			374		381,592
7.25%, 05/15/24			1,512		1,646,190
6.00%, 02/15/25			967		1,017,768
4.75%, 07/15/27		GBP	100		135,825

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Containers & Packaging (continued)
Ball Corp.:
5.00%, 03/15/22		USD	279	$	297,832
4.00%, 11/15/23			182		185,640
BWAY Holding Co., 5.50%, 04/15/24(a)			1,073		1,115,920
Crown Americas LLC, 4.25%, 09/30/26			272		267,920
OI European Group BV, 4.00%, 03/15/23(a)			325		325,439
Reynolds Group Issuer, Inc.:
5.75%, 10/15/20			1,057		1,073,156
6.88%, 02/15/21			142		143,893
(LIBOR USD 3 Month + 3.50%), 4.86%, 07/15/21(a)(e)			620		629,300
5.13%, 07/15/23(a)			552		571,320
7.00%, 07/15/24(a)			1,768		1,891,760
Sealed Air Corp.(a):
4.88%, 12/01/22			536		566,150
6.88%, 07/15/33			31		36,038
					11,151,360
Distributors — 0.2%(a)
American Builders & Contractors Supply Co., Inc., 5.75%, 12/15/23			363		382,057
American Tire Distributors, Inc., 10.25%, 03/01/22			420		432,600
					814,657
Diversified Consumer Services — 0.3%
Laureate Education, Inc., 8.25%, 05/01/25(a)			319		338,140
Service Corp. International:
4.50%, 11/15/20			240		242,100
5.38%, 01/15/22			166		169,942
4.63%, 12/15/27			38		38,556
ServiceMaster Co. LLC (The), 5.13%, 11/15/24(a)			324		328,050
Sotheby’s, 5.25%, 10/01/22(a)			390		400,335
					1,517,123
Diversified Financial Services — 0.5%(a)
FBM Finance, Inc., 8.25%, 08/15/21			355		377,187
Infinity Acquisition LLC, 7.25%, 08/01/22			46		46,345
Jefferies Finance LLC:
7.38%, 04/01/20			200		205,750
6.88%, 04/15/22			451		456,638
Tempo Acquisition LLC, 6.75%, 06/01/25			649		655,490
Vantiv LLC, 4.38%, 11/15/25			263		266,335
					2,007,745
Diversified Telecommunication Services — 5.2%
CCO Holdings LLC(a):
4.00%, 03/01/23			331		327,690
5.13%, 05/01/23			719		733,380
5.13%, 05/01/27			3,240		3,191,400
5.00%, 02/01/28			695		675,887
CenturyLink, Inc.:
6.45%, 06/15/21			919		928,190
5.80%, 03/15/22			71		69,537
6.75%, 12/01/23			250		245,000
5.63%, 04/01/25			255		232,050
7.60%, 09/15/39			21		18,060
7.65%, 03/15/42			160		141,000
Cincinnati Bell, Inc., 7.00%, 07/15/24(a)			858		851,565
Frontier Communications Corp.:
7.13%, 03/15/19			349		335,040
7.13%, 01/15/23			249		165,585
7.63%, 04/15/24			405		268,312
6.88%, 01/15/25			1,119		724,553
Intelsat Jackson Holdings SA:
7.25%, 10/15/20			323		303,620
5.50%, 08/01/23			516		421,830
9.75%, 07/15/25(a)			905		871,062

Security		Par (000)			Value
Diversified Telecommunication Services (continued)
Level 3 Financing, Inc.:
5.38%, 08/15/22			USD	395	$	400,056
5.63%, 02/01/23				405		408,038
5.13%, 05/01/23				96		96,240
5.38%, 01/15/24				877		875,904
5.38%, 05/01/25				363		362,546
5.25%, 03/15/26	��			1,451		1,424,229
Qwest Corp., 6.75%, 12/01/21				160		172,301
SFR Group SA(a):
6.00%, 05/15/22				865		875,813
7.38%, 05/01/26				2,204		2,261,855
Sprint Capital Corp.:
6.90%, 05/01/19				375		392,344
8.75%, 03/15/32				1,127		1,279,145
Telecom Italia Capital SA:
6.38%, 11/15/33				230		267,375
6.00%, 09/30/34				1,579		1,772,428
7.20%, 07/18/36				140		173,950
Telecom Italia SpA, 5.30%, 05/30/24(a)				200		213,500
Telesat Canada, 8.88%, 11/15/24(a)				325		364,000
Virgin Media Finance plc, 5.75%, 01/15/25(a)				1,280		1,305,600
						23,149,085
Electric Utilities — 0.1%
DPL, Inc., 7.25%, 10/15/21				39		43,290
NextEra Energy Operating Partners LP, 4.25%, 09/15/24(a)				239		243,183
						286,473
Electrical Equipment — 0.6%
GrafTech International Ltd., 6.38%, 11/15/20				103		102,743
Sensata Technologies BV(a):
5.63%, 11/01/24				202		221,947
5.00%, 10/01/25				837		885,128
Vertiv Group Corp., 9.25%, 10/15/24(a)				1,246		1,330,105
						2,539,923
Electronic Equipment, Instruments & Components — 0.5%
Anixter, Inc., 5.63%, 05/01/19				55		56,719
CDW LLC:
5.00%, 09/01/23				514		531,348
5.50%, 12/01/24				1,307		1,421,362
5.00%, 09/01/25				132		136,620
						2,146,049
Energy Equipment & Services — 1.7%
Diamond Offshore Drilling, Inc., 7.88%, 08/15/25				124		129,735
Ensco plc, 5.20%, 03/15/25				45		38,250
Noble Holding International Ltd.:
4.63%, 03/01/21				12		11,220
7.75%, 01/15/24				200		172,000
7.70%, 04/01/25				106		88,775
Noble Holding US LLC, 7.50%, 03/15/19				130		133,087
Parker Drilling Co., 7.50%, 08/01/20				159		144,690
Pioneer Energy Services Corp., 6.13%, 03/15/22				516		422,965
Precision Drilling Corp.:
6.50%, 12/15/21				44		44,825
7.75%, 12/15/23				110		115,500
5.25%, 11/15/24				168		158,340
7.13%, 01/15/26(a)				157		160,140
Rowan Cos., Inc.:
4.88%, 06/01/22				90		84,825
4.75%, 01/15/24				227		199,760
7.38%, 06/15/25				923		939,152
SESI LLC:
7.13%, 12/15/21				110		112,750
7.75%, 09/15/24(a)				281		298,563

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Energy Equipment & Services (continued)
Transocean, Inc.:
5.80%, 10/15/22		USD	259	$	255,115
9.00%, 07/15/23(a)			1,306		1,412,113
7.50%, 01/15/26(a)			362		370,706
6.80%, 03/15/38			117		93,892
Trinidad Drilling Ltd., 6.63%, 02/15/25(a)			455		432,250
Weatherford International LLC, 6.80%, 06/15/37			107		88,810
Weatherford International Ltd.:
7.75%, 06/15/21			399		406,731
8.25%, 06/15/23			670		676,700
9.88%, 02/15/24			136		144,500
6.50%, 08/01/36			218		179,305
7.00%, 03/15/38			183		153,720
5.95%, 04/15/42			190		148,200
					7,616,619
Equity Real Estate Investment Trusts (REITs) — 2.2%
CoreCivic, Inc., 4.75%, 10/15/27			186		183,675
CyrusOne LP:
5.00%, 03/15/24			729		756,337
5.38%, 03/15/27(a)			68		71,400
Equinix, Inc.:
5.38%, 04/01/23			70		72,380
5.88%, 01/15/26			785		842,894
ESH Hospitality, Inc., 5.25%, 05/01/25(a)			577		582,770
GEO Group, Inc. (The):
5.13%, 04/01/23			348		348,000
5.88%, 10/15/24			220		226,050
6.00%, 04/15/26			70		71,925
iStar, Inc.:
4.63%, 09/15/20			154		156,310
6.00%, 04/01/22			37		38,295
5.25%, 09/15/22			155		155,969
MGM Growth Properties Operating Partnership LP:
5.63%, 05/01/24			2,029		2,160,885
4.50%, 09/01/26			1,164		1,158,180
4.50%, 01/15/28(a)			425		416,500
SBA Communications Corp.:
4.00%, 10/01/22(a)			922		923,153
4.88%, 09/01/24			505		518,887
Uniti Group LP, 8.25%, 10/15/23			572		549,835
VICI Properties 1 LLC, 8.00%, 10/15/23			393		438,616
					9,672,061
Food & Staples Retailing — 0.1%
Albertsons Cos. LLC:
6.63%, 06/15/24			163		154,442
5.75%, 03/15/25			152		137,104
Rite Aid Corp., 6.13%, 04/01/23(a)			299		269,848
					561,394
Food Products — 1.1%
B&G Foods, Inc., 5.25%, 04/01/25			746		758,794
Chobani LLC, 7.50%, 04/15/25(a)			554		587,240
JBS USA LUX SA(a):
5.88%, 07/15/24			470		454,137
5.75%, 06/15/25			791		761,338
Lamb Weston Holdings, Inc., 4.63%, 11/01/24(a)			22		22,660
Pilgrim’s Pride Corp.(a):
5.75%, 03/15/25			233		240,864
5.88%, 09/30/27			201		207,030
Post Holdings, Inc.(a):
5.50%, 03/01/25			442		457,470
5.00%, 08/15/26			1,323		1,301,501
5.63%, 01/15/28			80		80,424
TreeHouse Foods, Inc., 6.00%, 02/15/24(a)			21		21,840
					4,893,298

Security	Par (000)			Value
Health Care Equipment & Supplies — 1.7%
Avantor, Inc.(a):
6.00%, 10/01/24		USD	2,413	$	2,403,951
9.00%, 10/01/25			532		524,020
DJO Finco, Inc., 8.13%, 06/15/21(a)			1,126		1,052,810
Fresenius US Finance II, Inc., 4.50%, 01/15/23(a)			127		133,350
Mallinckrodt International Finance SA(a):
4.88%, 04/15/20			155		148,800
5.75%, 08/01/22			1,161		1,053,607
5.63%, 10/15/23			99		84,150
5.50%, 04/15/25			43		35,045
Ortho-Clinical Diagnostics, Inc., 6.63%, 05/15/22(a)			1,761		1,769,805
Sterigenics-Nordion Holdings LLC, 6.50%, 05/15/23(a)			70		72,975
Teleflex, Inc., 4.88%, 06/01/26			273		281,873
					7,560,386
Health Care Providers & Services — 4.7%
Acadia Healthcare Co., Inc.:
5.13%, 07/01/22			31		31,077
5.63%, 02/15/23			279		283,185
6.50%, 03/01/24			237		246,480
Centene Corp.:
5.63%, 02/15/21			330		339,075
4.75%, 05/15/22			448		464,800
6.13%, 02/15/24			73		77,197
4.75%, 01/15/25			594		604,395
Community Health Systems, Inc.:
8.00%, 11/15/19			396		334,620
5.13%, 08/01/21			6		5,400
6.25%, 03/31/23			302		271,800
DaVita, Inc., 5.13%, 07/15/24			337		340,370
Envision Healthcare Corp.:
5.13%, 07/01/22(a)			261		253,170
5.63%, 07/15/22			727		734,270
6.25%, 12/01/24(a)			223		229,690
HCA, Inc.:
6.50%, 02/15/20			294		311,640
7.50%, 02/15/22			289		325,125
5.88%, 03/15/22			380		406,600
4.75%, 05/01/23			130		133,900
5.88%, 05/01/23			821		876,418
5.00%, 03/15/24			2,164		2,250,560
5.38%, 02/01/25			197		203,895
5.25%, 04/15/25			575		608,063
5.88%, 02/15/26			559		591,142
5.25%, 06/15/26			1,249		1,323,940
4.50%, 02/15/27			129		129,645
5.50%, 06/15/47			1,358		1,354,605
HealthSouth Corp., 5.75%, 11/01/24			445		455,569
MEDNAX, Inc., 5.25%, 12/01/23(a)			144		146,520
Molina Healthcare, Inc., 4.88%, 06/15/25(a)			134		133,665
MPH Acquisition Holdings LLC, 7.13%, 06/01/24(a)			734		781,710
Polaris Intermediate Corp., 8.50% (8.50% Cash or 9.25% PIK), 12/01/22(a)(c)			870		902,625
RegionalCare Hospital Partners Holdings, Inc., 8.25%, 05/01/23(a)			187		197,285
Surgery Center Holdings, Inc.(a):
8.88%, 04/15/21			145		150,075
6.75%, 07/01/25			421		397,845
Team Health Holdings, Inc., 6.38%, 02/01/25(a)			393		350,753
Tenet Healthcare Corp.:
6.75%, 02/01/20			85		85,850
4.75%, 06/01/20			167		169,922
6.00%, 10/01/20			172		181,856

SCHEDULE OF INVESTMENTS 9

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Health Care Providers & Services (continued)
Tenet Healthcare Corp. (continued):
7.50%, 01/01/22(a)		USD	184	$	193,200
8.13%, 04/01/22			1,414		1,438,745
6.75%, 06/15/23			640		620,800
4.63%, 07/15/24(a)			497		484,575
5.13%, 05/01/25(a)			587		572,325
7.00%, 08/01/25(a)			270		253,800
Vizient, Inc., 10.38%, 03/01/24(a)			444		498,390
WellCare Health Plans, Inc., 5.25%, 04/01/25			136		143,480
					20,890,052
Hotels, Restaurants & Leisure — 3.9%
1011778 BC ULC/New Red Finance, Inc.(a):
4.25%, 05/15/24			399		398,002
5.00%, 10/15/25			2,255		2,271,913
Caesars Entertainment Resort Properties LLC, 8.00%, 10/01/20			946		967,285
CRC Escrow Issuer LLC, 5.25%, 10/15/25(a)			1,119		1,127,392
Eldorado Resorts, Inc., 6.00%, 04/01/25			151		157,795
GLP Capital LP:
5.38%, 11/01/23			66		70,455
5.38%, 04/15/26			123		131,918
Hilton Domestic Operating Co., Inc., 4.25%, 09/01/24			113		114,130
Jacobs Entertainment, Inc., 7.88%, 02/01/24(a)			70		74,900
KFC Holding Co.(a):
5.00%, 06/01/24			35		36,094
5.25%, 06/01/26			262		275,755
Melco Resorts Finance Ltd., 4.88%, 06/06/25(a)			265		267,905
MGM Resorts International:
5.25%, 03/31/20			180		186,300
6.75%, 10/01/20			547		590,760
6.63%, 12/15/21			1,988		2,181,234
7.75%, 03/15/22			541		616,740
Sabre GLBL, Inc.(a):
5.38%, 04/15/23			65		66,950
5.25%, 11/15/23			278		284,338
Scientific Games International, Inc.:
7.00%, 01/01/22(a)			2,217		2,336,164
10.00%, 12/01/22			1,406		1,543,085
5.00%, 10/15/25(a)			413		414,032
Six Flags Entertainment Corp., 4.88%, 07/31/24(a)			1,918		1,946,770
Station Casinos LLC, 5.00%, 10/01/25(a)			601		604,005
Viking Cruises Ltd.(a):
6.25%, 05/15/25			186		191,580
5.88%, 09/15/27			278		282,865
Wyndham Worldwide Corp., 4.15%, 04/01/24			158		158,739
Yum Brands, Inc., 3.88%, 11/01/23			97		97,606
					17,394,712
Household Durables — 1.7%
Brookfield Residential Properties, Inc.(a):
6.50%, 12/15/20			20		20,400
6.38%, 05/15/25			93		98,580
CalAtlantic Group, Inc.:
6.63%, 05/01/20			255		274,176
8.38%, 01/15/21			488		562,420
5.38%, 10/01/22			20		21,450
5.25%, 06/01/26			170		179,775
K. Hovnanian Enterprises, Inc.(a):
10.00%, 07/15/22			264		290,400
10.50%, 07/15/24			134		153,765
Lennar Corp.:
4.50%, 11/15/19			64		65,680
2.95%, 11/29/20(a)			82		81,385

Security	Par (000)			Value
Household Durables (continued)
Lennar Corp. (continued):
4.75%, 04/01/21		USD	51	$	53,040
4.13%, 01/15/22			684		697,680
4.75%, 11/15/22			880		924,000
4.88%, 12/15/23			450		472,500
4.75%, 11/29/27(a)			465		478,857
Mattamy Group Corp.(a):
6.88%, 12/15/23			234		247,455
6.50%, 10/01/25			241		254,857
MDC Holdings, Inc., 6.00%, 01/15/43			290		282,750
Meritage Homes Corp.:
7.15%, 04/15/20			70		76,125
5.13%, 06/06/27			320		325,600
PulteGroup, Inc.:
5.50%, 03/01/26			161		175,088
6.38%, 05/15/33			473		529,760
6.00%, 02/15/35			244		262,300
Springs Industries, Inc., 6.25%, 06/01/21			53		54,060
Tempur Sealy International, Inc., 5.50%, 06/15/26			241		247,073
TRI Pointe Group, Inc.:
4.38%, 06/15/19			165		168,300
4.88%, 07/01/21			115		119,312
5.88%, 06/15/24			170		181,475
5.25%, 06/01/27			178		182,575
William Lyon Homes, Inc., 5.88%, 01/31/25			76		77,615
Williams Scotsman International, Inc., 7.88%, 12/15/22(a)			140		144,200
					7,702,653
Household Products — 0.1%
Spectrum Brands, Inc., 6.63%, 11/15/22			460		476,100
Independent Power and Renewable Electricity Producers — 1.7%
AES Corp.:
8.00%, 06/01/20			36		40,320
4.88%, 05/15/23			365		371,844
5.50%, 03/15/24			195		202,800
5.50%, 04/15/25			120		126,000
6.00%, 05/15/26			177		191,160
5.13%, 09/01/27			163		171,150
Calpine Corp.:
5.88%, 01/15/24(a)			272		276,760
5.75%, 01/15/25			450		425,250
5.25%, 06/01/26(a)			1,230		1,205,412
Dynegy, Inc.:
7.38%, 11/01/22			605		638,275
7.63%, 11/01/24			117		125,482
8.00%, 01/15/25(a)			232		251,140
8.13%, 01/30/26(a)			228		249,090
NRG Energy, Inc.:
6.25%, 07/15/22			335		348,400
6.63%, 01/15/27			1,518		1,605,285
5.75%, 01/15/28(a)			616		622,160
NRG Yield Operating LLC, 5.38%, 08/15/24			279		288,765
Pattern Energy Group, Inc., 5.88%, 02/01/24(a)			276		289,800
Talen Energy Supply LLC, 6.50%, 06/01/25			231		186,533
					7,615,626
Insurance — 1.0%(a)
Acrisure LLC, 7.00%, 11/15/25			283		272,744
Alliant Holdings Intermediate LLC, 8.25%, 08/01/23			2,169		2,277,450
Ardonagh Midco 3 plc, 8.63%, 07/15/23			546		565,110
AssuredPartners, Inc., 7.00%, 08/15/25			69		68,655
HUB International Ltd., 7.88%, 10/01/21			800		833,000
NFP Corp., 6.88%, 07/15/25			127		127,953
USIS Merger Sub, Inc., 6.88%, 05/01/25			80		80,800
					4,225,712

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Internet & Direct Marketing Retail — 0.5%
Netflix, Inc.:
5.38%, 02/01/21		USD	60	$	63,375
5.50%, 02/15/22			446		468,858
4.38%, 11/15/26			886		866,065
4.88%, 04/15/28(a)			699		685,020
					2,083,318
Internet Software & Services — 0.8%
GTT Communications, Inc., 7.88%, 12/31/24(a)			284		299,620
Match Group, Inc., 5.00%, 12/15/27(a)			123		124,845
Rackspace Hosting, Inc., 8.63%, 11/15/24(a)			270		288,225
Zayo Group LLC:
6.00%, 04/01/23			1,860		1,937,283
6.38%, 05/15/25			60		63,450
5.75%, 01/15/27(a)			1,030		1,050,600
					3,764,023
IT Services — 1.5%(a)
Alliance Data Systems Corp.:
5.88%, 11/01/21			490		502,250
5.38%, 08/01/22			860		866,450
First Data Corp.:
7.00%, 12/01/23			1,128		1,192,860
5.75%, 01/15/24			2,738		2,833,830
Gartner, Inc., 5.13%, 04/01/25			401		419,045
WEX, Inc., 4.75%, 02/01/23			874		892,573
					6,707,008
Leisure Products — 0.1%
Mattel, Inc.:
6.75%, 12/31/25(a)			436		441,864
6.20%, 10/01/40			101		90,774
5.45%, 11/01/41			59		48,822
					581,460
Machinery — 2.0%
BlueLine Rental Finance Corp., 9.25%, 03/15/24(a)			1,773		1,892,677
Cleaver-Brooks, Inc., 7.88%, 03/01/23(a)			122		125,050
EnPro Industries, Inc., 5.88%, 09/15/22			160		166,600
Grinding Media, Inc., 7.38%, 12/15/23(a)			906		972,772
Navistar International Corp., 6.63%, 11/01/25(a)			370		386,051
Novelis Corp.(a):
6.25%, 08/15/24			1,981		2,075,097
5.88%, 09/30/26			1,452		1,481,040
RBS Global, Inc., 4.88%, 12/15/25(a)			283		285,830
SPX FLOW, Inc., 5.63%, 08/15/24(a)			332		349,430
Terex Corp., 5.63%, 02/01/25(a)			854		892,430
Wabash National Corp., 5.50%, 10/01/25(a)			303		305,273
					8,932,250
Media — 7.2%
Acosta, Inc., 7.75%, 10/01/22(a)			261		190,530
Altice Financing SA(a):
6.63%, 02/15/23			200		209,420
7.50%, 05/15/26			1,128		1,201,320
Altice Luxembourg SA, 7.75%, 05/15/22(a)			2,199		2,166,015
Altice US Finance I Corp.(a):
5.38%, 07/15/23			1,331		1,360,947
5.50%, 05/15/26			254		258,763
AMC Networks, Inc.:
5.00%, 04/01/24			238		240,975
4.75%, 08/01/25			318		315,217
Cablevision Systems Corp.:
7.75%, 04/15/18			492		498,150
8.00%, 04/15/20			125		133,437
CBS Radio, Inc., 7.25%, 11/01/24(a)			93		98,057

Security	Par (000)			Value
Media (continued)
Cequel Communications Holdings I LLC:
6.38%, 09/15/20(a)		USD	180	$	182,700
5.13%, 12/15/21			1,149		1,151,872
7.75%, 07/15/25(a)			1,284		1,367,460
Charter Communications Operating LLC, 4.91%, 07/23/25			10		10,632
Clear Channel International BV, 8.75%, 12/15/20(a)			1,189		1,227,643
Clear Channel Worldwide Holdings, Inc.:
7.63%, 03/15/20			981		961,380
6.50%, 11/15/22			4,089		4,143,488
CSC Holdings LLC:
10.13%, 01/15/23(a)			2,610		2,939,513
5.25%, 06/01/24			499		491,515
10.88%, 10/15/25(a)			1,916		2,280,040
DISH DBS Corp.:
5.88%, 07/15/22			1,150		1,155,750
5.00%, 03/15/23			273		257,985
5.88%, 11/15/24			321		312,574
7.75%, 07/01/26			1,490		1,566,362
DISH Network Corp., 3.38%, 08/15/26(h)			497		540,798
iHeartCommunications, Inc.:
9.00%, 12/15/19			111		82,417
9.00%, 03/01/21			321		229,515
9.00%, 09/15/22			213		152,828
10.63%, 03/15/23			330		232,650
Lions Gate Entertainment Corp., 5.88%, 11/01/24(a)			92		97,175
McGraw-Hill Global Education Holdings LLC, 7.88%, 05/15/24(a)			95		93,813
MDC Partners, Inc., 6.50%, 05/01/24(a)			440		442,200
Midcontinent Communications, 6.88%, 08/15/23(a)			293		310,946
Outfront Media Capital LLC:
5.63%, 02/15/24			54		57,105
5.88%, 03/15/25			240		253,800
Radiate Holdco LLC, 6.63%, 02/15/25(a)			293		276,885
Sirius XM Radio, Inc., 5.00%, 08/01/27(a)			401		402,003
Sterling Entertainment Enterprises LLC, 9.75%, 12/15/19(a)(g)			475		470,250
TEGNA, Inc., 5.50%, 09/15/24(a)			83		87,046
Telenet Finance Luxembourg Notes Sarl, 5.50%, 03/01/28(a)			200		199,500
Townsquare Media, Inc., 6.50%, 04/01/23(a)			262		256,105
Tribune Media Co., 5.88%, 07/15/22			172		176,730
Univision Communications, Inc.(a):
5.13%, 05/15/23			1,138		1,135,155
5.13%, 02/15/25			23		22,396
Urban One, Inc., 7.38%, 04/15/22(a)			60		59,850
Videotron Ltd., 5.13%, 04/15/27(a)			479		500,555
WaveDivision Escrow LLC, 8.13%, 09/01/20(a)			794		809,880
Ziggo Bond Finance BV, 5.88%, 01/15/25(a)			600		589,500
					32,200,847
Metals & Mining — 4.8%
Big River Steel LLC, 7.25%, 09/01/25(a)			234		247,455
Cleveland-Cliffs, Inc., 4.88%, 01/15/24(a)			273		272,317
Constellium NV(a):
5.75%, 05/15/24			512		522,240
6.63%, 03/01/25			337		355,114
5.88%, 02/15/26			378		385,087
First Quantum Minerals Ltd.(a):
7.00%, 02/15/21			1,058		1,097,675
7.25%, 05/15/22			187		196,032
7.50%, 04/01/25			229		248,465
FMG Resources August 2006 Pty. Ltd., 9.75%, 03/01/22(a)			160		177,040

SCHEDULE OF INVESTMENTS 11

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Metals & Mining (continued)
Freeport-McMoRan, Inc.:
2.38%, 03/15/18		USD	1,205	$	1,203,494
3.10%, 03/15/20			2,145		2,131,594
4.00%, 11/14/21			215		215,000
3.55%, 03/01/22			1,620		1,601,775
3.88%, 03/15/23			1,483		1,475,585
4.55%, 11/14/24			67		68,119
5.40%, 11/14/34			130		132,275
5.45%, 03/15/43			1,642		1,639,947
Joseph T Ryerson & Son, Inc., 11.00%, 05/15/22(a)			177		198,019
Kaiser Aluminum Corp., 5.88%, 05/15/24			81		86,063
Kinross Gold Corp.:
4.50%, 07/15/27(a)			154		154,963
6.88%, 09/01/41			101		114,256
Mountain Province Diamonds, Inc., 8.00%, 12/15/22(a)			122		120,628
Signode Industrial Group Lux SA, 6.38%, 05/01/22(a)			739		772,255
Steel Dynamics, Inc.:
5.13%, 10/01/21			475		486,875
5.25%, 04/15/23			673		693,190
5.50%, 10/01/24			57		60,562
4.13%, 09/15/25(a)			258		259,935
5.00%, 12/15/26			45		47,588
SunCoke Energy Partners LP, 7.50%, 06/15/25(a)			387		404,415
Teck Resources Ltd.:
4.50%, 01/15/21			106		109,307
4.75%, 01/15/22			77		80,373
3.75%, 02/01/23			653		654,632
8.50%, 06/01/24(a)			2,658		3,003,540
6.00%, 08/15/40			76		84,550
5.20%, 03/01/42			1,093		1,082,070
5.40%, 02/01/43			362		363,810
United States Steel Corp.:
8.38%, 07/01/21(a)			384		416,832
6.88%, 08/15/25			243		253,643
					21,416,720
Mortgage Real Estate Investment Trusts (REITs) — 0.1%
Starwood Property Trust, Inc.:
5.00%, 12/15/21			267		277,013
4.75%, 03/15/25(a)			124		123,070
					400,083
Multiline Retail — 0.3%
Dollar Tree, Inc.:
5.25%, 03/01/20			24		24,415
5.75%, 03/01/23			1,103		1,155,393
JC Penney Corp., Inc.:
8.13%, 10/01/19			52		53,040
6.38%, 10/15/36			61		36,295
7.40%, 04/01/37			50		32,250
Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21(a)			257		147,826
					1,449,219
Oil, Gas & Consumable Fuels — 11.0%
Alta Mesa Holdings LP, 7.88%, 12/15/24			129		141,416
Andeavor Logistics LP, (LIBOR USD 3 Month + 4.65%), 6.87%, 02/15/23(e)(f)			426		432,475
Antero Midstream Partners LP, 5.38%, 09/15/24			60		61,800
Antero Resources Corp.:
5.13%, 12/01/22			115		117,300
5.63%, 06/01/23			745		774,800
Ascent Resources Utica Holdings LLC, 10.00%, 04/01/22(a)			232		248,820

Security	Par (000)			Value
Oil, Gas & Consumable Fuels (continued)
California Resources Corp., 8.00%, 12/15/22(a)		USD	399	$	329,175
Callon Petroleum Co., 6.13%, 10/01/24			483		497,490
Carrizo Oil & Gas, Inc.:
6.25%, 04/15/23			207		214,762
8.25%, 07/15/25			173		190,084
Cheniere Corpus Christi Holdings LLC:
7.00%, 06/30/24			172		195,757
5.88%, 03/31/25			1,197		1,297,249
5.13%, 06/30/27			1,092		1,129,565
Cheniere Energy Partners LP, 5.25%, 10/01/25(a)			511		519,942
Chesapeake Energy Corp., 8.00%, 06/15/27(a)			1,393		1,337,280
CNX Resources Corp.:
5.88%, 04/15/22			4,478		4,573,157
8.00%, 04/01/23			29		31,088
CONSOL Energy, Inc., 11.00%, 11/15/25(a)			456		478,800
Continental Resources, Inc.:
3.80%, 06/01/24			139		137,436
4.38%, 01/15/28(a)			16		15,795
4.90%, 06/01/44			487		465,085
Covey Park Energy LLC, 7.50%, 05/15/25(a)			568		591,970
Crestwood Midstream Partners LP, 6.25%, 04/01/23			260		270,192
CrownRock LP, 5.63%, 10/15/25(a)			1,060		1,065,300
DCP Midstream Operating LP(a):
4.75%, 09/30/21			150		154,875
6.45%, 11/03/36			198		212,355
6.75%, 09/15/37			262		285,580
Denbury Resources, Inc., 9.25%, 03/31/22(a)			693		701,662
Diamondback Energy, Inc., 5.38%, 05/31/25			242		248,957
Eclipse Resources Corp., 8.88%, 07/15/23			85		87,231
Endeavor Energy Resources LP(a):
5.50%, 01/30/26			160		162,800
5.75%, 01/30/28			293		300,911
Energy Transfer Equity LP:
7.50%, 10/15/20			158		173,800
4.25%, 03/15/23			239		237,207
5.88%, 01/15/24			992		1,044,080
5.50%, 06/01/27			608		620,160
EP Energy LLC:
9.38%, 05/01/20			430		363,350
8.00%, 11/29/24(a)			613		632,922
Extraction Oil & Gas, Inc.(a):
7.88%, 07/15/21			714		755,055
7.38%, 05/15/24			546		582,855
Genesis Energy LP:
6.50%, 10/01/25			195		197,925
6.25%, 05/15/26			232		231,130
Great Western Petroleum LLC, 9.00%, 09/30/21(a)			582		605,280
Gulfport Energy Corp.:
6.63%, 05/01/23			304		310,080
6.00%, 10/15/24			79		79,000
6.38%, 05/15/25			88		88,440
6.38%, 01/15/26(a)			425		426,062
Halcon Resources Corp., 6.75%, 02/15/25(a)			658		684,320
Hess Infrastructure Partners LP, 5.63%, 02/15/26(a)			546		563,745
Matador Resources Co., 6.88%, 04/15/23			1,019		1,072,498
MEG Energy Corp.(a):
6.38%, 01/30/23			247		209,950
7.00%, 03/31/24			761		642,094
6.50%, 01/15/25			986		973,675
Murphy Oil Corp.:
4.45%, 12/01/22			127		127,476
5.88%, 12/01/42			81		79,129
Newfield Exploration Co., 5.63%, 07/01/24			788		847,100

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Oil, Gas & Consumable Fuels (continued)
NGL Energy Partners LP:
5.13%, 07/15/19		USD	193	$	196,378
6.88%, 10/15/21			828		844,560
NGPL PipeCo LLC(a):
4.38%, 08/15/22			250		254,219
4.88%, 08/15/27			91		94,413
7.77%, 12/15/37			713		878,772
Oasis Petroleum, Inc.:
6.50%, 11/01/21			176		179,740
6.88%, 03/15/22			312		320,190
6.88%, 01/15/23			65		66,463
Parsley Energy LLC(a):
6.25%, 06/01/24			74		77,885
5.38%, 01/15/25			656		662,560
5.25%, 08/15/25			94		94,235
5.63%, 10/15/27			340		347,650
PBF Holding Co. LLC, 7.25%, 06/15/25			263		276,150
PDC Energy, Inc., 5.75%, 05/15/26(a)			225		230,625
QEP Resources, Inc.:
5.38%, 10/01/22			160		163,600
5.25%, 05/01/23			60		60,712
Range Resources Corp.:
5.88%, 07/01/22			494		503,880
5.00%, 08/15/22			37		36,815
5.00%, 03/15/23			387		385,065
4.88%, 05/15/25			122		117,730
Resolute Energy Corp., 8.50%, 05/01/20			1,012		1,029,710
Rockies Express Pipeline LLC(a):
5.63%, 04/15/20			765		801,338
6.88%, 04/15/40			709		797,625
RSP Permian, Inc.:
6.63%, 10/01/22			499		523,326
5.25%, 01/15/25			177		181,425
Sanchez Energy Corp.:
7.75%, 06/15/21			228		214,320
6.13%, 01/15/23			1,244		1,051,180
Seven Generations Energy Ltd.(a):
6.88%, 06/30/23			179		190,188
5.38%, 09/30/25			852		860,520
SM Energy Co.:
6.50%, 11/15/21			75		75,938
6.13%, 11/15/22			371		377,956
6.50%, 01/01/23			169		172,380
5.63%, 06/01/25			63		61,110
6.75%, 09/15/26			119		122,570
Southern Star Central Corp., 5.13%, 07/15/22(a)			47		48,763
Southwestern Energy Co.:
6.70%, 01/23/25			225		233,719
7.50%, 04/01/26			550		584,375
7.75%, 10/01/27			169		180,407
Tallgrass Energy Partners LP(a):
5.50%, 09/15/24			718		736,848
5.50%, 01/15/28			420		425,124
Targa Resources Partners LP:
5.25%, 05/01/23			15		15,337
5.13%, 02/01/25			107		109,541
5.38%, 02/01/27			42		43,103
5.00%, 01/15/28(a)			775		773,063
TerraForm Power Operating LLC(a):
4.25%, 01/31/23			237		235,223
6.63%, 06/15/25(i)			75		81,750
5.00%, 01/31/28			237		234,630

Security	Par (000)			Value
Oil, Gas & Consumable Fuels (continued)
Whiting Petroleum Corp.:
5.00%, 03/15/19		USD	782	$	801,941
6.63%, 01/15/26(a)			818		834,360
WildHorse Resource Development Corp., 6.88%, 02/01/25			186		190,185
Williams Cos., Inc. (The):
4.55%, 06/24/24			107		111,013
5.75%, 06/24/44			1,344		1,434,720
WPX Energy, Inc.:
7.50%, 08/01/20			47		50,877
6.00%, 01/15/22			282		294,690
8.25%, 08/01/23			83		94,205
5.25%, 09/15/24			496		494,289
					49,077,833
Paper & Forest Products — 0.2%
Mercer International, Inc.:
7.75%, 12/01/22			214		226,840
6.50%, 02/01/24			188		199,750
5.50%, 01/15/26(a)			172		174,580
Norbord, Inc., 6.25%, 04/15/23(a)			261		284,816
PH Glatfelter Co., 5.38%, 10/15/20			34		34,425
					920,411
Personal Products — 0.1%
Prestige Brands, Inc., 6.38%, 03/01/24(a)			434		449,733
Pharmaceuticals — 1.9%(a)
Catalent Pharma Solutions, Inc., 4.88%, 01/15/26			445		446,669
Endo Dac:
6.00%, 07/15/23			360		282,600
5.88%, 10/15/24			205		207,562
Endo Finance LLC, 7.25%, 01/15/22			211		182,515
inVentiv Group Holdings, Inc., 7.50%, 10/01/24			306		330,480
Valeant Pharmaceuticals International, Inc.:
7.50%, 07/15/21			1,017		1,034,798
6.75%, 08/15/21			1,127		1,135,452
5.63%, 12/01/21			251		245,352
6.50%, 03/15/22			486		510,300
7.25%, 07/15/22			98		99,103
5.50%, 03/01/23			142		129,930
5.88%, 05/15/23			923		856,082
7.00%, 03/15/24			594		635,580
6.13%, 04/15/25			828		757,620
5.50%, 11/01/25			1,044		1,062,270
9.00%, 12/15/25			418		435,640
					8,351,953
Professional Services — 0.8%(a)
Booz Allen Hamilton, Inc., 5.13%, 05/01/25			876		878,190
Ceridian HCM Holding, Inc., 11.00%, 03/15/21			398		415,910
IHS Markit Ltd.:
4.75%, 02/15/25			305		321,775
4.00%, 03/01/26			161		160,799
Jaguar Holding Co. II, 6.38%, 08/01/23			1,843		1,861,430
Michael Baker International LLC, 8.75%, 03/01/23			62		59,985
					3,698,089
Real Estate Management & Development — 0.4%(a)
Five Point Operating Co. LP, 7.88%, 11/15/25			213		216,727
Greystar Real Estate Partners LLC, 5.75%, 12/01/25			242		249,260
Howard Hughes Corp. (The), 5.38%, 03/15/25			452		463,300
Realogy Group LLC:
4.50%, 04/15/19			127		128,746
5.25%, 12/01/21			85		88,188
4.88%, 06/01/23			732		722,850
					1,869,071

SCHEDULE OF INVESTMENTS 13

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)				Value
Road & Rail — 0.7%(a)
Avis Budget Car Rental LLC, 5.13%, 06/01/22		USD		601	$	608,513
Herc Rentals, Inc.:
7.50%, 06/01/22				962		1,036,555
7.75%, 06/01/24				146		160,235
Hertz Corp. (The), 7.63%, 06/01/22				400		419,000
Park Aerospace Holdings Ltd.:
3.63%, 03/15/21				310		296,825
5.25%, 08/15/22				612		608,175
Watco Cos. LLC, 6.38%, 04/01/23				99		102,465
						3,231,768
Semiconductors & Semiconductor Equipment — 0.7%
Advanced Micro Devices, Inc., 7.50%, 08/15/22				83		91,092
Entegris, Inc., 4.63%, 02/10/26(a)				261		264,915
Micron Technology, Inc.:
5.25%, 01/15/24(a)				53		55,054
5.50%, 02/01/25				11		11,509
3.00%, 11/15/43(h)				240		346,050
Microsemi Corp., 9.13%, 04/15/23(a)				21		23,625
NXP BV(a):
4.13%, 06/15/20				245		250,887
4.63%, 06/15/22				430		449,888
3.88%, 09/01/22				200		202,250
4.63%, 06/01/23				767		802,282
Sensata Technologies UK Financing Co. plc, 6.25%, 02/15/26(a)				500		543,750
Versum Materials, Inc., 5.50%, 09/30/24(a)				128		136,960
						3,178,262
Software — 3.6%
Ascend Learning LLC, 6.88%, 08/01/25(a)				413		426,422
BMC Software Finance, Inc., 8.13%, 07/15/21(a)			��	626		629,912
CDK Global, Inc., 4.88%, 06/01/27(a)				414		419,175
Genesys Telecommunications Laboratories, Inc., 10.00%, 11/30/24(a)				546		596,505
Infor Software Parent LLC, 7.13% ( 7.13% Cash or 7.88% PIK), 05/01/21(a)(c)				372		380,370
Infor US, Inc., 6.50%, 05/15/22				2,904		3,005,640
Informatica LLC, 7.13%, 07/15/23(a)				1,075		1,099,188
Nuance Communications, Inc.:
5.38%, 08/15/20(a)				33		33,454
6.00%, 07/01/24				148		158,730
5.63%, 12/15/26				459		477,934
PTC, Inc., 6.00%, 05/15/24				249		263,940
RP Crown Parent LLC, 7.38%, 10/15/24(a)				374		391,765
Solera LLC, 10.50%, 03/01/24(a)				2,280		2,564,954
Sophia LP, 9.00%, 09/30/23(a)				290		306,675
SS&C Technologies Holdings, Inc., 5.88%, 07/15/23				1,595		1,682,725
Symantec Corp., 5.00%, 04/15/25(a)				230		239,200
TIBCO Software, Inc., 11.38%, 12/01/21(a)				1,189		1,295,273
Veritas US, Inc.(a):
7.50%, 02/01/23				1,000		1,047,500
10.50%, 02/01/24				811		843,440
						15,862,802
Specialty Retail — 0.6%
Asbury Automotive Group, Inc., 6.00%, 12/15/24				441		459,169
Beacon Escrow Corp., 4.88%, 11/01/25(a)				797		799,989
Group 1 Automotive, Inc.:
5.00%, 06/01/22				80		82,400
5.25%, 12/15/23(a)				45		46,462
L Brands, Inc., 6.88%, 11/01/35				444		448,440
Penske Automotive Group, Inc., 5.50%, 05/15/26				476		482,997
PetSmart, Inc., 5.88%, 06/01/25(a)				165		126,638
Staples, Inc., 8.50%, 09/15/25(a)				236		218,300
						2,664,395

Security	Par (000)			Value
Technology Hardware, Storage & Peripherals — 0.4%
Dell International LLC, 7.13%, 06/15/24(a)		USD	901	$	986,473
Western Digital Corp.:
7.38%, 04/01/23(a)			494		532,902
10.50%, 04/01/24			296		342,990
					1,862,365
Thrifts & Mortgage Finance — 0.2%
Ladder Capital Finance Holdings LLLP(a):
5.25%, 03/15/22			44		45,375
5.25%, 10/01/25			256		254,720
MGIC Investment Corp., 5.75%, 08/15/23			175		191,406
Radian Group, Inc.:
5.25%, 06/15/20			42		44,257
4.50%, 10/01/24			381		390,335
					926,093
Trading Companies & Distributors — 1.4%
Aircastle Ltd.:
6.25%, 12/01/19			125		131,875
7.63%, 04/15/20			12		13,110
5.50%, 02/15/22			398		426,357
4.13%, 05/01/24			585		593,775
Beacon Roofing Supply, Inc., 6.38%, 10/01/23			169		179,774
Fortress Transportation & Infrastructure Investors LLC, 6.75%, 03/15/22(a)			58		60,030
HD Supply, Inc., 5.75%, 04/15/24(a)			2,377		2,525,563
United Rentals North America, Inc.:
4.63%, 07/15/23			78		80,642
5.75%, 11/15/24			328		345,220
5.50%, 07/15/25			539		571,340
4.63%, 10/15/25			861		867,457
5.88%, 09/15/26			362		387,340
					6,182,483
Water Utilities — 0.1%
Core & Main LP, 6.13%, 08/15/25(a)			481		488,215
Wireless Telecommunication Services — 3.3%
Digicel Ltd., 6.00%, 04/15/21(a)			1,305		1,284,459
Hughes Satellite Systems Corp.:
7.63%, 06/15/21			162		179,010
5.25%, 08/01/26			614		626,280
6.63%, 08/01/26			257		269,208
SoftBank Group Corp.(e)(f):
(USD Swap Rate 5 Year + 4.23%), 6.00%			790		780,378
(USD Swap Rate 5 Year + 4.85%), 6.87%			385		389,427
Sprint Communications, Inc.:
7.00%, 03/01/20(a)			938		1,003,660
6.00%, 11/15/22			1,532		1,532,000
Sprint Corp.:
7.88%, 09/15/23			858		913,770
7.13%, 06/15/24			3,320		3,378,100
7.63%, 02/15/25			648		678,780
T-Mobile USA, Inc.:
6.13%, 01/15/22			38		39,197
4.00%, 04/15/22			239		245,124
6.00%, 03/01/23			365		382,155
6.63%, 04/01/23			630		656,775
6.00%, 04/15/24			111		117,660
6.38%, 03/01/25			68		72,760
5.13%, 04/15/25			1,548		1,607,985
5.38%, 04/15/27			146		155,673
Xplornet Communications, Inc., 9.63% (9.63% Cash or 10.63% PIK), 06/01/22(a)(c)			156		161,885
					14,474,286
Total Corporate Bonds — 88.1% (Cost: $388,750,162)					392,649,035

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Floating Rate Loan Interests — 7.5%(j)
Aerospace & Defense — 0.2%
Accudyne Industries LLC, Term Loan, (LIBOR USD 3 Month + 3.75%), 5.32%, 08/18/24		USD	653	$	657,551
Sequa Corp., 1st Lien Term Loan, (LIBOR USD 3 Month + 5.00%), 6.55%, 11/28/21			212		213,128
Sequa Mezzanine Holdings LLC, Term Loan, (LIBOR USD + 9.00%), 10.37%, 04/28/22			75		75,656
					946,335
Air Freight & Logistics — 0.1%
Ceva Group plc, Term Loan, (LIBOR USD 3 Month + 1.23%), 1.23%, 03/19/21(g)			119		111,765
Ceva Logistics Canada ULC, Canadian Term Loan, (LIBOR USD 3 Month + 5.50%), 6.88%, 03/19/21			18		17,281
Ceva Logistics US Holdings, Inc., US Term Loan, (LIBOR USD 3 Month + 5.50%), 6.88%, 03/19/21			173		162,864
					291,910
Chemicals — 0.3%
Alpha 3 BV, Term Loan, (LIBOR USD 3 Month + 3.00%), 4.69%, 01/31/24			144		145,057
Ascend Performance Materials Operations LLC, Term Loan B, (LIBOR USD 3 Month + 5.25%), 6.94%, 08/23/22(g)			523		525,507
Gates Global LLC, Term Loan B, (LIBOR USD 3 Month + 3.00%), 4.69%, 04/01/24			196		197,070
HB Fuller Co., 1st Lien Term Loan, (LIBOR USD 3 Month + 2.25%), 3.75%, 10/20/24			362		363,049
Tronox Blocked Borrower LLC, 1st Lien Term Loan, (LIBOR USD 3 Month + 3.00%), 4.69%, 09/23/24			43		42,871
Tronox Finance LLC, 1st Lien Term Loan, (LIBOR USD 3 Month + 3.00%), 4.69%, 09/23/24			98		98,934
					1,372,488
Commercial Services & Supplies — 0.4%
Sedgwick Claims Management Services, 1st Lien Term Loan, (LIBOR USD 3 Month + 2.75%), 4.32%, 03/01/21(k)			688		687,566
Sedgwick Claims Management Services, 2nd Lien Term Loan, (LIBOR USD 3 Month + 5.75%), 7.32%, 02/28/22			201		201,754
West Corp., Term Loan, (LIBOR USD + 4.00%), 5.35%, 10/03/24			675		676,811
					1,566,131
Construction & Engineering — 0.5%
Brand Industrial Services, Inc., Term Loan, (LIBOR USD 3 Month + 4.25%), 5.61% - 5.63%, 06/21/24			2,205		2,211,763
Diversified Consumer Services — 0.1%
Belron Finance Ltd., Term Loan B, (LIBOR USD 3 Month + 2.50%), 3.89%, 10/25/24			166		167,557
Laureate Education, Inc., Term Loan B, (LIBOR USD 3 Month + 4.50%), 6.07%, 04/26/24			149		149,992
					317,549
Diversified Financial Services — 0.0%
TCW Group, Inc., Term Loan, (LIBOR USD 3 Month + 2.00%), 3.50%, 12/13/24(k)			119		119,099
Diversified Telecommunication Services — 1.4%
Centurylink, Inc., 1st Lien Term Loan, (LIBOR USD 1 Month + 2.75%), 4.32%, 01/31/25			947		912,378
Digicel International Finance Ltd., Term Loan, (LIBOR USD 3 Month + 3.75%), 5.31%, 05/27/24			512		513,636

Security	Par (000)			Value
Diversified Telecommunication Services — 1.4%
Intelsat Jackson Holdings SA, Term Loan, (LIBOR USD 3 Month + 3.25%), 3.25%, 01/15/24(k)		USD	336	$	339,709
Intelsat Jackson Holdings SA, Term Loan B2, (LIBOR USD 3 Month + 2.75%), 4.21%, 06/30/19(k)			1,070		1,065,993
Intelsat Jackson Holdings SA, Term Loan B5, (LIBOR 6 Month + 6.63%), 6.63%, 01/14/24(k)			2,166		2,185,862
Ligado Networks LLC, 1st Lien Term Loan, (LIBOR USD 3 Month + 12.50%), 14.02%, 12/07/20			530		320,082
Lumos Networks Operators, Term Loan, (LIBOR USD 3 Month + 3.25%), 4.82%, 11/15/24			80		80,475
Spirit Communication, Term Loan, 10/27/24(k)			79		78,414
Virgin Media, Term Loan, (LIBOR USD 3 Month + 2.50%), 3.98%, 01/30/26			728		727,629
					6,224,178
Electrical Equipment — 0.3%
Generac Power Systems, Inc., Term Loan B, (LIBOR USD + 2.00%), 3.41%, 05/31/23(k)			491		491,859
Vertiv Group Corp., Term Loan B, (LIBOR USD 3 Month + 4.00%), 5.35%, 11/30/23			625		624,304
					1,116,163
Energy Equipment & Services — 0.3%
ExGen Renewables I LLC, Term Loan, (LIBOR USD 3 Month + 3.00%), 4.47%, 11/28/24(g)			106		107,060
Pioneer Energy Services Corp., Term Loan, (LIBOR USD 3 Month + 1.41%), 9.16%, 11/17/22(g)			819		833,332
Weatherford International Ltd., Term Loan, (LIBOR USD 1 Month + 2.30%), 3.87%, 07/13/20			264		257,462
					1,197,854
Food Products — 0.0%
Chobani LLC, Term Loan, (LIBOR USD + 3.50%), 5.07%, 10/07/23			69		69,967
Health Care Equipment & Supplies — 0.4%
DJO Finance LLC, Term Loan, (LIBOR USD 3 Month + 3.25%), 4.59% - 4.82%, 06/08/20			596		587,410
Immucor, Inc., Term Loan, (LIBOR USD 3 Month + 5.00%), 6.57%, 06/15/21			997		1,011,480
Ortho-Clinical Diagnostics, Term Loan, (LIBOR USD 3 Month + 3.75%), 5.44%, 06/30/21			40		39,650
					1,638,540
Health Care Providers & Services — 0.0%
Superior Vision, Term Loan, (LIBOR USD 3 Month + 3.00%), 4.49%, 12/02/24(k)			113		113,495
Team Health Holdings, Inc., Term Loan B, (LIBOR USD 3 Month + 2.75%), 4.32%, 02/06/24			57		55,052
					168,547
Hotels, Restaurants & Leisure — 0.3%
Aristocrat International, Term Loan B, (LIBOR USD 3 Month + 2.00%), 3.36%, 10/19/24(k)			460		460,575
Caesars Resort Collection LLC, Term Loan, (LIBOR USD 1 Month + 2.75%), 4.34%, 09/30/24			718		720,821
Four Seaons Holding, Inc., Term Loan, (LIBOR USD 3 Month + 2.50%), 4.07%, 11/30/23			44		43,785
					1,225,181
Household Products — 0.0%
Diamond BC BV, Term Loan, (LIBOR USD 3 Month + 3.00%), 4.42%, 09/06/24			151		151,091
Insurance — 0.1%
Alliant Holdings Intermediate LLC, Term Loan B, (LIBOR USD 3 Month + 3.25%), 4.80%, 08/12/22			127		127,227

SCHEDULE OF INVESTMENTS 15

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Insurance (continued)
Asurion LLC, 2nd Lien Term Loan B-2, (LIBOR USD 3 Month + 6.00%), 7.57%, 08/04/25		USD	181	$	185,807
USI, Inc., 1st Lien Term Loan B, (LIBOR USD 3 Month + 3.00%), 4.69%, 05/16/24			105		104,520
					417,554
IT Services — 0.2%
CCC Information Services, Inc., Term Loan:
(LIBOR USD 3 Month + 3.00%), 4.57%, 04/29/24			132		131,923
(LIBOR USD 3 Month + 6.75%), 8.32%, 04/28/25			40		40,775
Information Resources, Inc., 1st Lien Term B, (LIBOR USD 3 Month + 4.25%), 5.62%, 01/18/24			85		85,711
Peak 10, Inc., 2nd Lien Term Loan, (LIBOR USD 3 Month + 7.25%), 8.63%, 08/01/25			83		83,311
Peak 10, Inc., Term Loan B, (LIBOR USD 3 Month + 3.50%), 5.19%, 08/01/24			195		194,209
Tempo Acquisition LLC, Term Loan B, (LIBOR USD 3 Month + 3.00%), 4.57%, 05/01/24			320		319,156
					855,085
Leisure Products — 0.0%
Hayward Industries, Inc., 1st Lien Term Loan B, (LIBOR USD 3 Month + 3.50%), 5.07%, 08/05/24			74		73,907
Life Sciences Tools & Services — 0.1%
Albany Molecular Research, Inc., 1st Lien Term Loan, (LIBOR USD 3 Month + 3.25%), 4.82%, 08/30/24			199		195,029
Albany Molecular Research, Inc., 2nd Lien Term Loan, (LIBOR USD 3 Month + 7.00%), 8.57%, 08/30/25			33		32,216
					227,245
Media — 0.5%
Cablevision CSC Holdings, Term Loan, (LIBOR USD 3 Month + 2.25%), 3.74%, 07/17/25			66		66,120
Charter Communications Operating LLC, Term Loan, (LIBOR USD 3 Month + 2.00%), 3.57%, 04/13/25(k)			583		583,077
iHeartCommunications, Inc., Term Loan, (LIBOR USD 3 Month + 6.75%), 8.44%, 01/30/19			683		510,905
Sinclair Television Group, Inc., Term Loan B, (LIBOR USD + 2.50%), 3.91%, 12/12/24(k)			396		395,260
Unitymedia Finance LLC, Term Loan, (LIBOR USD 3 Month + 2.25%), 2.25%, 01/20/26(k)			555		553,457
					2,108,819
Metals & Mining — 0.0%
Signode Industrial Group, 1st Lien Term Loan B, (LIBOR USD 3 Month + 2.75%), 4.32% - 4.44%, 05/01/21			136		136,152
Oil, Gas & Consumable Fuels — 0.9%
California Resources Corp., Term Loan, (LIBOR USD 3 Month + 4.75%), 6.24%, 12/31/22(k)			743		739,285
Chesapeake Energy Corp., Term Loan, (LIBOR USD 3 Month + 7.50%), 8.95%, 08/23/21			1,524		1,619,789
CITGO Holding, Inc., 1st Lien Term Loan B, (LIBOR USD 3 Month + 8.50%), 9.84%, 05/12/18			123		123,960
CONSOL Energy, Inc., Term Loan, (LIBOR USD 3 Month + 6.00%), 7.47%, 10/30/22			39		39,422
Gavilan Resources LLC, 2nd Lien Term Loan, (LIBOR USD 3 Month + 6.00%), 7.46%, 03/01/24			404		399,625
Medallian Midland Acquisition LLC, Term Loan B, (LIBOR USD 3 Month + 3.25%), 4.82%, 10/30/24(g)(k)			255		255,319
Rover BCP Renaissance, Term Loan B, (LIBOR USD 3 Month + 4.00%), 5.38%, 10/31/24			356		360,094
Vine Oil & Gas LP, 1st Lien Term Loan B, (LIBOR USD + 6.88%), 8.44%, 11/26/21(g)			367		361,495
					3,898,989

Security	Par (000)				Value
Professional Services — 0.0%
CPA Global Ltd., Term Loan, (LIBOR USD 3 Month + 3.25%), 4.63%, 10/15/24		USD	136		$	135,830
Greenrock Element Materials, Term Loan, (LIBOR USD 3 Month + 3.50%), 5.19%, 06/28/24			64			64,187
						200,017
Real Estate Management & Development — 0.2%
VICI Properties, Inc., Term Loan, (LIBOR USD 3 Month + 2.25%), 3.78%, 12/13/24(k)			675			675,000
Road & Rail — 0.0%
Ceva Intercompany BV, Term Loan, (LIBOR USD 3 Month + 5.50%), 6.88%, 03/19/21			121			114,355
Software — 0.7%
Applied Systems, Inc., 1st Lien Term Loan B, (LIBOR USD 3 Month + 3.25%), 4.94%, 09/19/24(k)			164			165,180
Applied Systems, Inc., 2nd Lien Term Loan, (LIBOR USD 3 Month + 7.00%), 8.69%, 12/19/18			38			39,283
Ascend Learning LLC, Term Loan B, (LIBOR USD + 3.00%), 4.57%, 07/12/24			77			77,192
BMC Software Finance, Inc., Term Loan B, (LIBOR USD 3 Month + 3.25%), 4.82%, 09/10/22(k)			675			674,938
Kronos, Inc., 2nd Lien Term Loan B, (LIBOR USD + 8.25%), 9.63%, 11/01/24			569			589,768
McAfee Holdings LLC, 1st Lien Term Loan, (LIBOR USD 3 Month + 4.50%), 6.07%, 09/27/24(k)			365			363,650
Mitchell International, Inc., 1st Lien Term Loan, (LIBOR USD 3 Month + 3.25%), 4.94%, 11/20/24			329			329,124
Mitchell International, Inc., 2nd Lien Term Loan, (LIBOR USD 3 Month + 7.25%), 8.94%, 12/01/25			184			185,196
Veritas US, Inc., Term Loan, (LIBOR USD 3 Month + 4.50%), 6.19%, 01/27/23			868			869,093
						3,293,424
Specialty Retail — 0.1%				��
Neiman Marcus Group, Inc., Other Term Loan, (LIBOR USD 3 Month + 3.25%), 4.64%, 10/25/20			336			273,490
Trading Companies & Distributors — 0.0%
Beacon Roofing Supply, Inc., Term Loan B, (LIBOR USD 3 Month + 2.25%), 3.94%, 01/02/25(k)			178			178,370
Transportation Infrastructure — 0.0%
Deck Chassis Acquisition, Inc., Term Loan, (LIBOR USD 3 Month + 6.50%), 6.50%, 06/15/23(g)(k)			68			69,020
Water Utilities — 0.0%
HD Supply Waterworks Ltd., 1st Lien Term Loan B, (LIBOR USD 3 Month + 3.00%), 4.69%, 08/01/24			169			170,163
Wireless Telecommunication Services — 0.4%
New Lightsquared LLC, 1st Lien Term Loan, (LIBOR USD + 8.75%), 10.29%, 12/07/20			2,165			2,005,476
Total Floating Rate Loan Interests — 7.5% (Cost: $33,392,696)						33,313,862
Foreign Agency Obligations — 0.0%
Mexico — 0.0%
Petroleos Mexicanos, 5.38%, 03/13/22(a)			44			46,640
Total Foreign Agency Obligations — 0.0% (Cost: $43,756)						46,640

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)				Value
Preferred Securities — 0.8%
Capital Trusts — 0.1%
Banks — 0.1%
Citigroup, Inc., Series O, 5.87%(b)(f)		USD		315	$	326,812
Capital Markets — 0.0%
Morgan Stanley, Series H, 5.45%(b)(f)				162		166,293
Total Capital Trusts — 0.1% (Cost: $480,033)						493,105
			Shares
Preferred Stocks — 0.5%
Hotels, Restaurants & Leisure — 0.5%
Stars Group, Inc. (The), 0.00%(b)(f)(g)(h)				1,516		1,972,247
Machinery — 0.0%
Rexnord Corp., Series A, 5.75%, 11/15/19(h)				2,562		149,314
Total Preferred Stocks — 0.5% (Cost: $1,438,297)						2,121,561
Trust Preferreds — 0.2%
GMAC Capital Trust I, Series 2, 7.20%, 02/15/40(l)				32,966		855,468
Total Trust Preferreds — 0.2% (Cost: $862,505)						855,468
Total Preferred Securities — 0.8% (Cost: $2,780,835)						3,470,134
Total Long-Term Investments — 97.2% (Cost: $428,253,885)						433,047,384
Short-Term Securities — 3.6%(m)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%(n)				15,856,054		15,856,054
JPMorgan US Treasury Plus Money Market Fund, Agency Class, 1.14%				82,985		82,985
Total Short-Term Securities — 3.6% (Cost: $15,939,039)						15,939,039
Total Investments — 100.8% (Cost: $444,192,924)						448,986,423
Liabilities in Excess of Other Assets — (0.8)%						(3,562,060	)
Net Assets — 100.0%					$	445,424,363

^(a)  Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(b)  Non-income producing security.

^(c)  Payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.

^(d)  Issuer filed for bankruptcy and/or is in default.

^(e)  Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

^(f)  Perpetual security with no stated maturity date.

^(g)  Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

^(h)  Convertible security.

⁽ⁱ⁾  Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

^(j)  Variable rate security. Rate shown is the rate in effect as of period end.

^(k)  Represents an unsettled loan commitment at period end. Certain details associated with this purchase are not known prior to the settlement date, including coupon rate.

^(l)  Variable or floating rate security, which interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.

^(m)  Annualized 7-day yield as of period end.

⁽ⁿ⁾  During the year ended December 31, 2017, investments in issuers considered to be an affiliate of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity		Shares Held at 12/31/17		Value at 12/31/17		Income		Net Realized Gain (Loss)(a)		Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		13,620,548		2,235,506		15,856,054	$	15,856,054	$	117,495	$	107	$	—

^(a)  Includes net capital gain distributions, if applicable.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

SCHEDULE OF INVESTMENTS 17

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Short Contracts
U.S. Treasury 10 Year Note		50		03/20/18	$	6,202	$	11,264

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	135,049	GBP	100,000	Royal Bank of Scotland		01/04/18	$	31
USD	1,995,808	CAD	2,570,000	Westpac Banking Corp.		01/04/18		(48,795	)
USD	93,092	EUR	78,000	Deutsche Bank AG		01/04/18		(502	)
							$	(49,297	)
	Net Unrealized Depreciation						$	(49,266	)

Centrally Cleared Credit Default Swaps — Sell Protection

Reference Obligation/Index	Financing Rate Received by the Fund			Payment Frequency		Termination Date		Credit Rating (a)		Notional Amount (000) (b)			Value			Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
Chesapeake Energy Corp.		5.00	%		Quarterly		12/20/21		CCC		USD	245	$	(9,405	)	$	(8,036	)	$	(1,369	)
CDX.NA.HY.29.V1		5.00			Quarterly		12/20/22		B+		USD	10,275		865,504			810,243			55,261
													$	856,099		$	802,207		$	53,892

^(a)  Using Standard & Poor’s rating of the issuer or the underlying securities of the index, as applicable.

^(b)  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

Balances reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps

	Swap Premiums Paid		Swap Premiums Received			Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swaps(a)	$	810,243	$	(8,036	)	$	55,261	$	(1,369	)

^(a)  Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Futures contracts
Net unrealized appreciation(a)	$	—	$	—	$	—	$	—	$	11,264	$	—	$	11,264
Forward foreign currency exchange contracts
Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		31		—		—		31
Swaps — centrally cleared
Net unrealized appreciation(a)		—		55,261		—		—		—		—		55,261
Total	$	—	$	55,261	$	—	$	31	$	11,264	$	—	$	66,556
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts
Unrealized depreciation on forward foreign currency exchange contracts	$	—	$	—	$	—	$	49,297	$	—	$	—	$	49,297
Swaps — centrally cleared
Net unrealized depreciation(a)		—		1,369		—		—		—		—		1,369
	$	—	$	1,369	$	—	$	49,297	$	—	$	—	$	50,666

^(a)  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts			Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Net Realized Gain (Loss) from:
Futures contracts	$	—	$	—		$	(331,063	)	$	—		$	8,081	$	—	$	(322,982	)
Forward foreign currency exchange contracts		—		—			—			(85,878	)		—		—		(85,878	)
Swaps		—		681,210			—			—			—		—		681,210
Total	$	—	$	681,210		$	(331,063	)	$	(85,878	)	$	8,081	$	—	$	272,350
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	$	—	$	—		$	(7,974	)	$	—		$	11,264	$	—	$	3,290
Forward foreign currency exchange contracts		—		—			—			(48,330	)		—		—		(48,330	)
Swaps		—		(210,566	)		—			—			—		—		(210,566	)
	$	—	$	(210,566	)	$	(7,974	)	$	(48,330	)	$	11,264	$	—	$	(255,606	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — short	$	3,538,089
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	2,786,667
Average amounts sold — in USD	$	56,534
Credit default swaps:
Average notional value—sell protection	$	4,690,500

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

SCHEDULE OF INVESTMENTS 19

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	—		$	10,156
Forward foreign currency exchange contracts		31			49,297
Swaps — Centrally cleared		11,677			—
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	11,708		$	59,453
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(11,677	)		(10,156	)
Total derivative assets and liabilities subject to an MNA	$	31		$	49,297

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund.

Counterparty	Derivative Assets Subject to MNA by Counterparty		Derivatives Available for Offset		Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets  (a)
Royal Bank of Scotland	$	31	$	—	$	—	$	—	$	31

Counterparty	Derivative Liabilities Subject to MNA by Counterparty		Derivatives Available for Offset		Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities  (b)
Westpac Banking Corp.	$	48,795	$	—	$	—	$	—	$	48,795
Deutsche Bank AG		502		—		—		—		502
	$	49,297	$	—		—	$	—	$	49,297

^(a)  Net amount represents the net amount receivable from the counterparty in the event of default.

^(b)  Net amount represents the net amount payable due to the counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	$	—	$	473,153	$	—	$	473,153
Common Stocks(a)		3,094,560		—		—		3,094,560
Corporate Bonds:
Aerospace & Defense		—		10,482,890		—		10,482,890
Air Freight & Logistics		—		1,187,698		—		1,187,698
Airlines		—		30,825		—		30,825
Auto Components		—		3,737,992		—		3,737,992
Automobiles		—		804,873		—		804,873
Banks		—		10,937,978		—		10,937,978
Building Products		—		3,272,621		—		3,272,621
Capital Markets		—		1,503,120		—		1,503,120
Chemicals		—		15,739,510		—		15,739,510
Commercial Services & Supplies		—		11,477,196		—		11,477,196
Communications Equipment		—		1,615,527		—		1,615,527
Construction & Engineering		—		1,765,721		—		1,765,721
Consumer Finance		—		7,099,369		—		7,099,369
Containers & Packaging		—		11,151,360		—		11,151,360
Distributors		—		814,657		—		814,657
Diversified Consumer Services		—		1,517,123		—		1,517,123

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund

	Level 1		Level 2			Level 3		Total
Diversified Financial Services	$	—	$	2,007,745		$	—	$	2,007,745
Diversified Telecommunication Services		—		23,149,085			—		23,149,085
Electric Utilities		—		286,473			—		286,473
Electrical Equipment		—		2,539,923			—		2,539,923
Electronic Equipment, Instruments & Components		—		2,146,049			—		2,146,049
Energy Equipment & Services		—		7,616,619			—		7,616,619
Equity Real Estate Investment Trusts (REITs)		—		9,672,061			—		9,672,061
Food & Staples Retailing		—		561,394			—		561,394
Food Products		—		4,893,298			—		4,893,298
Health Care Equipment & Supplies		—		7,560,386			—		7,560,386
Health Care Providers & Services		—		20,890,052			—		20,890,052
Hotels, Restaurants & Leisure		—		17,394,712			—		17,394,712
Household Durables		—		7,702,653			—		7,702,653
Household Products		—		476,100			—		476,100
Independent Power and Renewable Electricity Producers		—		7,615,626			—		7,615,626
Insurance		—		4,225,712			—		4,225,712
Internet & Direct Marketing Retail		—		2,083,318			—		2,083,318
Internet Software & Services		—		3,764,023			—		3,764,023
IT Services		—		6,707,008			—		6,707,008
Leisure Products		—		581,460			—		581,460
Machinery		—		8,932,250			—		8,932,250
Media		—		31,730,597			470,250		32,200,847
Metals & Mining		—		21,416,720			—		21,416,720
Mortgage Real Estate Investment Trusts (REITs)		—		400,083			—		400,083
Multiline Retail		—		1,449,219			—		1,449,219
Oil, Gas & Consumable Fuels		—		49,077,833			—		49,077,833
Paper & Forest Products		—		920,411			—		920,411
Personal Products		—		449,733			—		449,733
Pharmaceuticals		—		8,351,953			—		8,351,953
Professional Services		—		3,698,089			—		3,698,089
Real Estate Management & Development		—		1,869,071			—		1,869,071
Road & Rail		—		3,231,768			—		3,231,768
Semiconductors & Semiconductor Equipment		—		3,178,262			—		3,178,262
Software		—		15,862,802			—		15,862,802
Specialty Retail		—		2,664,395			—		2,664,395
Technology Hardware, Storage & Peripherals		—		1,862,365			—		1,862,365
Thrifts & Mortgage Finance		—		926,093			—		926,093
Trading Companies & Distributors		—		6,182,483			—		6,182,483
Water Utilities		—		488,215			—		488,215
Wireless Telecommunication Services		—		14,474,286			—		14,474,286
Floating Rate Loan Interests		—		31,050,364			2,263,498		33,313,862
Foreign Agency Obligations		—		46,640			—		46,640
Preferred Securities		1,004,782		493,105			1,972,247		3,470,134
Short-Term Securities		15,939,039		—			—		15,939,039
Unfunded Floating Rate Loan Interests(b)		—		—			110		110
	$	20,038,381	$	424,242,047		$	4,706,105	$	448,986,533
Derivative Financial Instruments(c)
Assets:
Credit contracts	$	—	$	55,261		$	—	$	55,261
Foreign currency exchange contracts		—		31			—		31
Interest rate contracts		11,264		—			—		11,264
Liabilities:
Credit contracts		—		(1,369	)		—		(1,369	)
Foreign currency exchange contracts		—		(49,297	)		—		(49,297	)
	$	11,264	$	4,626		$	—	$	15,890

^(a)  See above Schedule of Investments for values in each industry.

^(b)  Unfunded floating rate loan interests are valued at the unrealized appreciation (depreciation) on the commitment.

^(c)  Derivative financial instruments are swaps, futures contracts, and forward foreign currency exchange contracts. Swaps, futures contracts, and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2.

SCHEDULE OF INVESTMENTS 21

Schedule of Investments  (continued) December 31, 2017 BlackRock High Yield V.I. Fund

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Common Stocks			Corporate Bonds			Floating Rate Loan Interests			Other Interests			Preferred Securities		Unfunded Floating Rate Loan Interests		Total
Investments:
Assets:
Opening Balance, as of December 31, 2016	$	1,200		$	571,167		$	933,953		$	451,771		$	1,209,842	$	—	$	3,167,933
Transfers into Level 3		—			—			643,267			—			—		—		643,267
Transfers out of Level 3		—			—			(156,859	)		—			—		—		(156,859	)
Accrued discounts/premiums		—			2			1,108			—			—		—		1,110
Net realized gain (loss)		1,583			287			25,984			312,411			—		—		340,265
Net change in unrealized appreciation (depreciation)(a)(b)		—			13			(5,157	)		(327,069	)		762,405		—		430,192
Purchases		—			—			1,595,070			—			—		110		1,595,180
Sales		(2,783	)		(101,219	)		(773,868	)		(437,113	)		—		—		(1,314,983	)
Closing Balance, as of December 31, 2017	$	—		$	470,250		$	2,263,498		$	—		$	1,972,247	$	110	$	4,706,105
Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017(b)	$	—		$	—		$	(27,331	)	$	—		$	762,405	$	110	$	735,184

^(a)  Included in the related net change in unrealized appreciation (depreciation) in the Statement of Operations.

^(b)  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017 is generally due to investments no longer held or categorized as Level 3 at period end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See notes to financial statements.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock High Yield V.I. Fund
ASSETS
Investments at value — unaffiliated (cost — $428,336,870)	$	433,130,369
Investments at value — affiliated (cost — $15,856,054)		15,856,054
Cash		138,694
Cash pledged:
Futures contracts		54,000
Centrally cleared swaps		715,000
Foreign currency at value (cost — $904)		913
Receivables:
Investments sold		115,794
Capital shares sold		464,891
Dividends — affiliated		22,904
Interest — unaffiliated		6,319,776
Variation margin on centrally cleared swaps		11,677
Unrealized appreciation on:
Forward foreign currency exchange contracts		31
Unfunded floating rate loan interests		110
Prepaid expenses		2,030
Total assets		456,832,243
LIABILITIES
Payables:
Investments purchased		9,152,067
Capital shares redeemed		45,880
Income dividends		1,657,602
Distribution fees		50,114
Variation margin on futures contracts		10,156
Investment advisory fees		176,635
Officer’s and Directors’ fees		4,711
Other affiliates		2,162
Other accrued expenses		259,256
Unrealized depreciation on forward foreign currency exchange contracts		49,297
Total liabilities		11,407,880
NET ASSETS	$	445,424,363
NET ASSETS CONSIST OF
Paid-in capital	$	445,923,369
Distributions in excess of net investment income		(533,776	)
Accumulated net realized loss		(4,774,827	)
Net unrealized appreciation (depreciation)		4,809,597
NET ASSETS	$	445,424,363
NET ASSET VALUE
Class I — Based on net assets of $201,945,097 and 27,345,175 shares outstanding, 200 million shares authorized, $0.10 par value	$	7.39
Class III — Based on net assets of $243,479,266 and 32,988,448 shares outstanding, 100 million shares authorized, $0.10 par value	$	7.38

See notes to financial statements.

FINANCIAL STATEMENTS 23

Statement of Operations

Year Ended December 31, 2017

	BlackRock High Yield V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	117,495
Dividends — unaffiliated		122,598
Interest — unaffiliated		22,234,634
Foreign taxes withheld		(2,280	)
Total investment income		22,472,447
EXPENSES
Investment advisory		1,926,095
Transfer agent — class specific		611,882
Distribution — class specific		564,262
Pricing		112,328
Printing		101,655
Accounting services		95,965
Professional		69,296
Custodian		42,020
Directors and Officer		25,872
Transfer agent		5,488
Miscellaneous		18,880
Total expenses		3,573,743
Less:
Transfer agent fees reimbursed — class specific		(399,502	)
Fees waived and/or reimbursed by the Manager		(10,861	)
Total expenses after fees waived and/or reimbursed		3,163,380
Net investment income		19,309,067
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — unaffiliated		7,621,144
Capital gain distributions from investment companies — affiliated		107
Forward foreign currency exchange contracts		(85,878	)
Foreign currency transactions		9,435
Futures contracts		(322,982	)
Swaps		681,210
		7,903,036
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		(1,095,188	)
Forward foreign currency exchange contracts		(48,330	)
Foreign currency translations		2,404
Futures contracts		3,290
Swaps		(210,566	)
Unfunded floating rate loan interests		110
		(1,348,280	)
Net realized and unrealized gain		6,554,756
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	25,863,823

See notes to financial statements.

24 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock High Yield V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	19,309,067		$	14,558,815
Net realized gain (loss)		7,903,036			(4,596,317	)
Net change in unrealized appreciation (depreciation)		(1,348,280	)		24,405,937
Net increase in net assets resulting from operations		25,863,823			34,368,435
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(8,390,075	)		(7,326,634	)
Class III		(11,127,344	)		(7,724,511	)
Decrease in net assets resulting from distributions to shareholders		(19,517,419	)		(15,051,145	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		96,093,493			100,786,505
NET ASSETS
Total increase in net assets		102,439,897			120,103,795
Beginning of year		342,984,466			222,880,671
End of year	$	445,424,363		$	342,984,466
Distributions in excess of net investment income, end of year	$	(533,776	)	$	(695,400	)

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 25

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock High Yield V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	7.24		$	6.77		$	7.44		$	7.67		$	7.44
Net investment income(a)		0.38			0.37			0.36			0.40			0.43
Net realized and unrealized gain (loss)		0.15			0.48			(0.61	)		(0.18	)		0.24
Net increase (decrease) from investment operations		0.53			0.85			(0.25	)		0.22			0.67
Distributions:(b)
From net investment income		(0.38	)		(0.38	)		(0.42	)		(0.45	)		(0.44	)
Net asset value, end of year	$	7.39		$	7.24		$	6.77		$	7.44		$	7.67
Total Return:(c)
Based on net asset value		7.48	%		12.92	%		(3.60	)%		2.89	%		9.33	%
Ratios to Average Net Assets:(d)
Total expenses		0.78	%		0.80	%		0.84	%		0.87	%		0.85	%
Total expenses after fees waived and/or reimbursed		0.67	%		0.68	%		0.70	%		0.73	%		0.73	%
Net investment income		5.13	%		5.29	%		4.86	%		5.23	%		5.65	%
Supplemental Data:
Net assets, end of year (000)	$	201,945		$	152,835		$	127,742		$	139,729		$	150,691
Portfolio turnover rate		75	%		89	%		73	%		87	%		101	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,
	2017			2016			2015			2014		2013
Investments in underlying funds		0.01	%		0.01	%		0.01	%		—		—

See notes to financial statements.

26 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock High Yield V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	7.24		$	6.76		$	7.43		$	7.67		$	7.44
Net investment income(a)		0.36			0.36			0.34			0.38			0.40
Net realized and unrealized gain (loss)		0.14			0.48			(0.61	)		(0.18	)		0.25
Net increase (decrease) from investment operations		0.50			0.84			(0.27	)		0.20			0.65
Distributions:(b)
From net investment income		(0.36	)		(0.36	)		(0.40	)		(0.44	)		(0.42	)
Net asset value, end of year	$	7.38		$	7.24		$	6.76		$	7.43		$	7.67
Total Return:(c)
Based on net asset value		7.08	%		12.82	%		(3.85	)%		2.51	%		9.07	%
Ratios to Average Net Assets:(d)
Total expenses		1.03	%		1.00	%		1.06	%		1.07	%		1.07	%
Total expenses after fees waived and/or reimbursed		0.92	%		0.92	%		0.94	%		0.98	%		0.96	%
Net investment income		4.87	%		5.05	%		4.63	%		4.86	%		5.23	%
Supplemental Data:
Net assets, end of year (000)	$	243,479		$	190,149		$	95,139		$	51,524		$	18,567
Portfolio turnover rate		75	%		89	%		73	%		87	%		101	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,
	2017			2016			2015			2014		2013
Investments in underlying funds		0.01	%		0.01	%		0.01	%		—		—

See notes to financial statements.

FINANCIAL HIGHLIGHTS 27

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock High Yield V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts, forward foreign currency exchange contracts and swaps) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Fund.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period

28 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Swap agreements are valued utilizing quotes received daily by the Fund’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

NOTESTO FINANCIAL STATEMENTS 29

Notes to Financial Statements  (continued)

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach	(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii)   recapitalizations and other transactions across the capital structure; and (iii)  market multiples of comparable issuers.
Income approach	(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit and/or market risks; (ii)   quoted prices for similar investments or assets in active markets; and (iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach	(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii)  relevant news and other public sources; and (iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset- backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

30 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result in proceeds from the sale not being readily available for a fund to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a fund to the extent that it invests in floating rate loan interests. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a fund’s investment policies.

When a fund purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A fund may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a fund having a contractual relationship only with the lender, not with the borrower. A fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, a fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a fund assumes the credit risk of both the borrower and the lender that is selling the Participation. A fund’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a fund having a direct contractual relationship with the borrower, and a fund may enforce compliance by the borrower with the terms of the loan agreement.

In connection with floating rate loan interests, the Fund may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, the Fund earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statement of

NOTESTO FINANCIAL STATEMENTS 31

Notes to Financial Statements  (continued)

Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statement of Assets and Liabilities and Statement of Operations. As of period end, the Fund had the following unfunded floating rate loan interests:

Borrower	Par		Commitment Amount		Value		Unrealized Appreciation (Depreciation)
Mitchell International, Inc.	$	26,708	$	26,575	$	26,685	$	110

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statement of Operations.

• Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk).

32 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Fund will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee based on a percentage of the Fund’s and BlackRock Total Return V.I. Fund’s, a series of the Company, aggregate average daily net assets at the following annual rates:

Average Daily Net Assets	Investment Advisory Fees
First $250 Million		0.55	%
$250 Million — $500 Million		0.50
$500 Million — $750 Million		0.45
Greater than $750 Million		0.40

For the year ended December 31, 2017, the aggregate average daily net assets of the Fund and the Company’s BlackRock Total Return V.I. Fund were approximately $766,491,695.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $564,262.

NOTESTO FINANCIAL STATEMENTS 33

Notes to Financial Statements  (continued)

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III		Total
$	261,408	$	350,474	$	611,882

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $10,861.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $4,428 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.06	%
Class III	0.05

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	163,129	$	236,373	$	399,502

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitation as a percentage of average daily net assets are as follows:

Class I		Class III
	1.25%		1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	2,613,557
Sales		—
Net Realized Gain		—

34 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, including paydowns and excluding short-term securities, were $377,321,931 and $278,747,931, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the accounting for swap agreements, the classification of investments, foreign currency transactions, income recognized from pass-through entities, expiration of capital loss carryforwards and net paydown gains(losses) were reclassified to the following accounts:

Paid-in capital	$	(11,211,061	)
Distributions in excess of net investment income		369,976
Accumulated net realized loss		10,841,085

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	19,517,419	$	15,051,145

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Capital loss carryforward	$	(4,232,859	)
Net unrealized gains(a)		3,733,853
Total	$	(499,006	)

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains/losses on certain futures and foreign currency contracts, the accounting for swap agreements and the classification of investments.

As of December 31, 2017, the Fund had a capital loss carryforward, with no expiration date, available to offset future realized capital gains of $4,232,859.

During the year ended December 31, 2017, the fund utilized $6,602,609 of its capital loss carryforward.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	444,617,440
Gross unrealized appreciation	$	8,862,316
Gross unrealized depreciation		(4,218,704	)
Net unrealized appreciation(depreciation)	$	4,463,612

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

NOTESTO FINANCIAL STATEMENTS 35

Notes to Financial Statements  (continued)

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

With exchange-traded futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: The Fund invests a significant portion of its assets in fixed income securities and/or uses derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

Certain Funds may invest in securities that are rated below investment grade quality (sometimes called “junk bonds”), which are predominantly speculative, have greater credit risk and generally are less liquid and have more volatile prices than higher quality securities.

36 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		8,305,552		$	61,351,404			4,252,978		$	30,397,964
Shares issued in reinvestment of distributions		1,123,883			8,293,740			1,033,368			7,206,037
Shares redeemed		(3,183,322	)		(23,471,934	)		(3,064,338	)		(21,335,572	)
Net increase		6,246,113		$	46,173,210			2,222,008		$	16,268,429
Class III
Shares sold		27,190,401		$	200,516,323			38,213,690		$	266,471,599
Shares issued in reinvestment of distributions		1,490,839			11,005,500			1,051,175			7,357,157
Shares redeemed		(21,963,775	)		(161,601,540	)		(27,060,956	)		(189,310,680	)
Net increase		6,717,465		$	49,920,283			12,203,909		$	84,518,076
Total Net Increase		12,963,578		$	96,093,493			14,425,917		$	100,786,505

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 37

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock High Yield V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock High Yield V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

38 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Glossary of Terms Used in this Report

Currency
CAD	Canadian Dollar
EUR	Euro
GBP	British Pound
USD	United States Dollar
Portfolio Abbreviations
LIBOR	London Interbank Offered Rate
REIT	Real Estate Investment Trust

GLOSSARYOF TERMS USEDINTHIS REPORT 39

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock International V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock International V.I. Fund

Investment Objective

BlackRock International V.I. Fund’s (the “Fund”) investment objective is long-term capital growth.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed its benchmark, the MSCI All Country World (ACWI) ex-USA Index.

What factors influenced performance?

From a sector perspective, positive stock selection in financials was the primary contributor to the Fund’s relative performance for the period, particularly among banks. Positive stock selection and an overweight allocation to information technology (“IT”) also contributed to performance. The most significant individual contributor was Japanese consumer discretionary company Sony Corp., whose shares jumped after its operating profit beat expectations by a substantial margin in its second-quarter financial report. Sony’s management ultimately upgraded its operating profit guidance for the full year. IT cybersecurity solutions provider Trend Micro Inc. and sensing and control products specialist Omron Corp. also were notable individual contributors to performance.

Negative stock selection in telecommunication services (“telecom”) detracted the most from performance for the period, while the Fund’s cash balance and negative stock selection in consumer staples also detracted. The main individual detractors included U.K. telecom BT Group PLC, which issued a profit warning following a sharp downturn in public-sector contracts and accounting irregularities in its Italian operations. U.K. tobacco company Imperial Brands PLC and home improvement retailer Kingfisher PLC were also among the primary detractors from relative performance.

Describe recent portfolio activity.

The largest change to the Fund’s positioning in the period was a significant increase in exposure to consumer staples, moving from underweight the sector to meaningfully overweight through new positions in the tobacco, beverages, and household products industries. The Fund fully exited the industrials sector through the sale of its sole remaining positions within the machinery and professional services industries. The Fund’s overweight exposure to health care was reduced to a modest underweight following the sales of positions in two pharmaceutical companies and one health care equipment business.

Describe portfolio positioning at period end.

The Fund’s largest sector overweight positions were to consumer staples, financials, and energy, driven by investments in the tobacco, banks, and energy equipment & supplies industry groups. The largest underweight exposures were to industrials, materials, and real estate. On a regional basis, the largest overweight exposures were to the United Kingdom and the United States, while the largest underweight allocations were to Canada and Australia.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

GEOGRAPHIC ALLOCATION

Country	Percent of Net Assets
United Kingdom		23	%
Japan		13
China		9
Netherlands		8
Spain		6
United States		5
Brazil		4
Switzerland		4
Germany		4
France		4
India		4
Norway		3
Italy		3
Portugal		3
Hong Kong		2
Indonesia		2
Singapore		1
Short-Term Securities		8
Liabilities in Excess of Other Assets		(6	)

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock International V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests primarily in stocks of companies located outside the U.S. The Fund’s total returns prior to October 1, 2011 are the returns of the Fund when it followed different investment strategies under the name “BlackRock International Value V.I. Fund.”

^(c)  A free float-adjusted market capitalization index designed to measure the combined equity market performance of developed and emerging countries, excluding the United States.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		12.44	%		31.11	%		8.30	%		1.65	%
MSCI ACWI ex-USA Index		11.48			27.19			6.80			1.84

^(a)  Average annual and cumulative total returns are based on changes in net asset value (“NAV”) for the periods shown, and assume reinvestment of all distributions at NAV on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to October 1, 2011 are the returns of the Fund when it followed different investment strategies under the name “BlackRock International Value V.I. Fund.”

^(b)  For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,124.40	$	5.94	$	1,000.00	$	1,019.61	$	5.65		1.11	%

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical example that appears in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock International V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 95.5%
Brazil — 2.1%
Vale SA, ADR(a)(b)		202,417	$	2,475,560
China — 8.6%
Bank of China Ltd., Class H		10,654,000		5,217,650
NetEase, Inc., ADR		7,738		2,670,152
Ping An Insurance Group Co. of China Ltd., Class H(a)		190,500		1,975,879
				9,863,681
France — 3.6%
Engie SA		244,221		4,198,529
Germany — 3.7%
Bayer AG (Registered)		34,123		4,240,234
Hong Kong — 2.4%
AIA Group Ltd.		329,400		2,801,760
India — 3.6%
ICICI Bank Ltd.		835,036		4,092,568
Indonesia — 2.2%
Bank Mandiri Persero Tbk. PT(a)		4,392,000		2,586,258
Italy — 2.9%
Intesa Sanpaolo SpA		996,875		3,307,493
Japan — 13.4%
Japan Tobacco, Inc.		82,100		2,643,876
Omron Corp.		41,800		2,486,220
Sony Corp.		122,000		5,475,710
Trend Micro, Inc.		85,800		4,856,547
				15,462,353
Netherlands — 7.9%
Aegon NV(a)		381,206		2,422,171
ASML Holding NV		9,425		1,638,616
Heineken NV		28,513		2,972,403
Koninklijke Philips NV		53,985		2,038,402
				9,071,592
Norway — 3.3%
Statoil ASA		180,329		3,860,561
Portugal — 2.6%
Banco Comercial Portugues SA, Class R(a)		9,085,284		2,957,206
Singapore — 1.5%
Sea Ltd., ADR(a)(b)		130,606		1,740,978
Spain — 6.0%
Banco Bilbao Vizcaya Argentaria SA(b)		559,119		4,751,513
CaixaBank SA(a)		461,882		2,147,208
				6,898,721
Switzerland — 3.7%
Cie Financiere Richemont SA (Registered)		47,495		4,301,521
United Kingdom — 23.0%
British American Tobacco plc		52,467		3,546,705
BT Group plc		996,823		3,656,703
Burberry Group plc(a)		90,218		2,175,142
Diageo plc		124,000		4,545,141
Imperial Brands plc		110,118		4,697,043
ITV plc		1,118,371		2,498,998
Reckitt Benckiser Group plc		25,160		2,347,264
TechnipFMC plc		99,748		3,123,110
				26,590,106

Security	Shares/ Par (000)		Value
United States — 5.0%
BioMarin Pharmaceutical, Inc.(a)		27,594	$	2,460,557
Schlumberger Ltd.		48,804		3,288,902
				5,749,459
Total Common Stocks — 95.5% (Cost: $93,769,747)				110,198,580
Preferred Stocks — 1.9%
Brazil — 1.9%
Itau Unibanco Holding SA (Preference), 0.00%		176,259		2,262,551
Total Preferred Stocks — 1.9% (Cost: $2,249,119)				2,262,551
Total Long-Term Investments — 97.4% (Cost: $96,018,866)				112,461,131
Short-Term Securities — 8.2%
Money Market Funds — 8.1%(c)(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		3,135,204		3,135,204
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)		6,216,364		6,215,742
Total Money Market Funds — 8.1% (Cost: $9,351,220)				9,350,946
Time Deposits — 0.1%
Norway — 0.0%
Brown Brothers Harriman & Co., (1.50)%, 01/02/18		NOK     321		39,117
United Kingdom — 0.1%
Citibank NA, 0.16%, 01/02/18		GBP       66		88,477
Total Time Deposits — 0.1% (Cost: $127,594)				127,594
Total Short-Term Securities — 8.2% (Cost: $9,478,814)				9,478,540
Total Investments — 105.6% (Cost: $105,497,680)				121,939,671
Liabilities in Excess of Other Assets — (5.6)%				(6,507,055	)
Net Assets — 100.0%			$	115,432,616

^(a)  Non-income producing security.

^(b)  Security, or a portion of the security, is on loan.

^(c)  Annualized 7-day yield as of period end.

^(d)  Security was purchased with the cash collateral from loaned securities.

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock International V.I. Fund

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		4,486,922		(1,351,718	)		3,135,204	$	3,135,204	$	29,835		$	15		$	—
SL Liquidity Series, LLC, Money Market Series		167,612		6,048,752			6,216,364		6,215,742		36,920	(b)		(2,471	)		(273	)
								$	9,350,946	$	66,755		$	(2,456	)	$	(273	)

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

Portfolio Abbreviations

ADR — American Depositary Receipts

GBP — British Pound

NOK — Norwegian Krone

USD — United States Dollar

Derivative Financial Instruments Categorized by Risk Exposure

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts			Interest Rate Contracts		Other Contracts		Total
Net Realized Gain (Loss) from:
Forward foreign currency exchange contracts	$	—	$	—	$	—	$	(169,292	)	$	—	$	—	$	(169,292	)
Total	$	—	$	—	$	—	$	(169,292	)	$	—	$	—	$	(169,292	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	1,614,491
Average amounts sold — in USD	$	526,280

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Investments:
Assets:
Long-Term Investments:
Common Stocks:
Brazil	$	2,475,560	$	—	$	—	$	2,475,560
China		2,670,152		7,193,529		—		9,863,681
France		—		4,198,529		—		4,198,529
Germany		—		4,240,234		—		4,240,234
Hong Kong		—		2,801,760		—		2,801,760
India		—		4,092,568		—		4,092,568
Indonesia		—		2,586,258		—		2,586,258
Italy		—		3,307,493		—		3,307,493
Japan		—		15,462,353		—		15,462,353
Netherlands		—		9,071,592		—		9,071,592
Norway		—		3,860,561		—		3,860,561
Portugal		—		2,957,206		—		2,957,206
Singapore		1,740,978		—		—		1,740,978
Spain		—		6,898,721		—		6,898,721
Switzerland		—		4,301,521		—		4,301,521
United Kingdom		9,278,811		17,311,295		—		26,590,106
United States		5,749,459		—		—		5,749,459
Preferred Securities		2,262,551		—		—		2,262,551

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock International V.I. Fund

	Level 1		Level 2		Level 3		Total
Short-Term Securities:
Money Market Funds	$	3,135,204	$	—	$	—	$	3,135,204
Time Deposits		—		127,594		—		127,594
Subtotal	$	27,312,715	$	88,411,214	$	—	$	115,723,929
Investments valued at NAV(a)							$	6,215,742
Total Investments							$	121,939,671

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

Transfers between Level 1 and Level 2 were as follows:

	Transfers Into Level 1 (a)		Transfers Out of Level 2 (a)
Assets:
Investments:
Common Stocks:
United Kingdom	$	3,656,703	$	3,656,703

^(a)  Systematic Fair Value Prices were not utilized at period end for these investments.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 7

Statement of Assets and Liabilities

December 31, 2017

	BlackRock International V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $5,088,701) (cost — $96,146,460)	$	112,588,725
Investments at value — affiliated (cost — $9,351,220)		9,350,946
Cash		15
Receivables:
Securities lending income — affiliated		1,344
Dividends — affiliated		3,540
Dividends — unaffiliated		279,135
From the Manager		46,530
Prepaid expenses		516
Total assets		122,270,751
LIABILITIES
Foreign bank overdraft (cost — $(5,282))		4,561
Cash collateral on securities loaned at value		6,218,182
Payables:
Capital shares redeemed		205,112
Deferred foreign capital gain tax		125,570
Investment advisory fees		72,861
Officer’s and Directors’ fees		3,735
Other accrued expenses		74,457
Other affiliates		543
Professional fees		80,618
Transfer agent fees		52,496
Total liabilities		6,838,135
NET ASSETS	$	115,432,616
NET ASSETS CONSIST OF
Paid-in capital	$	97,874,970
Undistributed net investment income		1,301,053
Accumulated net realized loss		(63,153	)
Net unrealized appreciation (depreciation)		16,319,746
NET ASSETS	$	115,432,616
Class I — Based on net assets of $115,432,616 and 9,193,573 shares outstanding, 100 million shares authorized, $0.10 par value.	$	12.56

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock International V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	29,835
Dividends — unaffiliated		2,730,830
Securities lending income — affiliated — net		36,920
Foreign taxes withheld		(204,693	)
Total investment income		2,592,892
EXPENSES
Investment advisory		782,412
Transfer agent		199,997
Professional		146,419
Custodian		46,697
Accounting services		38,012
Printing		37,071
Directors and Officer		21,673
Miscellaneous		20,234
Total expenses		1,292,515
Less:
Transfer agent fees reimbursed — class specific		(112,367	)
Fees waived and/or reimbursed by the Manager		(21,521	)
Total expenses after fees waived and/or reimbursed		1,158,627
Net investment income		1,434,265
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(2,471	)
Investments — unaffiliated (net of $34,542 foreign capital gain tax)		9,339,824
Capital gain distributions from investment companies — affiliated		15
Forward foreign currency exchange contracts		(169,292	)
Foreign currency transactions		5,849
		9,173,925
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		(273	)
Investments — unaffiliated (net of $55,722 foreign capital gain tax)		17,275,573
Foreign currency translations		(64,644	)
		17,210,656
Net realized and unrealized gain		26,384,581
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	27,818,846

See notes to financial statements.

FINANCIAL STATEMENTS 9

Statements of Changes in Net Assets

	BlackRock International V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	1,434,265		$	1,553,479
Net realized gain (loss)		9,173,925			(3,236,168	)
Net change in unrealized appreciation (depreciation)		17,210,656			1,738,672
Net increase in net assets resulting from operations		27,818,846			55,983
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income		—			(1,638,966	)
Return of capital		—			(9,671	)
Decrease in net assets resulting from distributions to shareholders		—			(1,648,637	)
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from capital share transactions		(8,586,936	)		(10,148,958	)
NET ASSETS
Total increase (decrease) in net assets		19,231,910			(11,741,612	)
Beginning of year		96,200,706			107,942,318
End of year	$	115,432,616		$	96,200,706
Undistributed (distributions in excess of) net investment income, end of year	$	1,301,053		$	(4,310	)

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock International V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	9.58		$	9.71		$	10.10		$	10.87		$	9.04
Net investment income(a)		0.15			0.15			0.14			0.13			0.19
Net realized and unrealized gain (loss)		2.83			(0.11	)		(0.42	)		(0.69	)		1.86
Net increase (decrease) from investment operations		2.98			0.04			(0.28	)		(0.56	)		2.05
Distributions:(b)
From net investment income		—			(0.17	)		(0.11	)		(0.21	)		(0.22	)
From return of capital		—			(0.00	)(c)		—			—			—
Total distributions		—			(0.17	)		(0.11	)		(0.21	)		(0.22	)
Net asset value, end of year	$	12.56		$	9.58		$	9.71		$	10.10		$	10.87
Total Return:(d)
Based on net asset value		31.11	%		0.39	%		(2.76	)%		(5.19	)%		22.75	%
Ratios to Average Net Assets:
Total expenses		1.24	%(e)		1.15	%		1.09	%		1.11	%		1.08	%
Total expenses after fees waived and/or reimbursed		1.11	%(e)		1.04	%		0.98	%		0.99	%		0.97	%
Net investment income		1.37	%(e)		1.57	%		1.35	%		1.21	%		1.92	%
Supplemental Data:
Net assets, end of year (000)	$	115,433		$	96,201		$	107,942		$	125,144		$	150,314
Portfolio turnover rate		103	%		82	%		112	%		129	%		121	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Amount is greater than $(0.005) per share.

^(d)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(e)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 11

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock International V.I. Fund (the “Fund”). The Fund is classified as diversified.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., forward foreign currency exchange contracts) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character of distributions is determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a Trust’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. However, certain Funds have capital loss carryforwards from pre-2012 tax years that offset realized net capital gains but do not offset current earnings and profits. Consequently, if distributions in any tax year are less than the Fund’s current earnings and profits but greater than net investment income and net realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund are charged to the Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

NOTESTO FINANCIAL STATEMENTS 13

Notes to Financial Statements  (continued)

4. SECURITIES AND OTHER INVESTMENTS

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Goldman Sachs & Co.	$	4,746,261	$	(4,746,261	)	$	—
State Street Bank & Trust Co.		342,440		(342,440	)		—
	$	5,088,701	$	(5,088,701	)	$	—

^(a)  Cash collateral with a value of $6,218,182 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.75	%
$1 Billion — $3 Billion		0.71
$3 Billion — $5 Billion		0.68
$5 Billion — $10 Billion		0.65
Greater than $10 Billion		0.64

With respect to the Fund, the Manager entered into a sub-advisory agreement with BlackRock International Limited (“BIL”), an affiliate of the Manager. The Manager pays BIL, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Fund to the Manager.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund. For the year ended December 31, 2017, the Fund had no distribution fees.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $2,305.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $1,113 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager contractually agreed to reimburse transfer agent fees in order to limit such expenses at 0.08% of average daily net assets. The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of the Fund. This amount is shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific waivers and/or reimbursements were $112,367.

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitation as a percentage of average daily net assets is 1.25% for Class I.

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived $19,216, which is included in fee waived and/or reimbursed by the Manager in the Statement of Operations.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $7,364 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to lend under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $103,567,285 and $109,278,349, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions, the expiration of capital loss carryforwards and the characterization of expenses were reclassified to the following accounts:

Paid-in capital	$	(20,828,634	)
Undistributed net investment income		(128,902	)
Accumulated net realized loss		20,957,536

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income	$	—	$	1,638,966
Return of Capital		—		9,671
	$	—	$	1,648,637

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	1,274,770
Net unrealized gains(a)		16,282,876
	$	17,557,646

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

During the year ended December 31, 2017, the Fund utilized $9,218,250 of their respective capital loss carryforward:

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	105,534,550
Gross unrealized appreciation	$	18,295,542
Gross unrealized depreciation		(1,890,421	)
Net unrealized appreciation (depreciation)	$	16,405,121

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the financials sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

The Fund invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in U.S. securities. Investment percentages in specific countries are presented in the Schedule of Investments.

The Fund invests a significant portion of its assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of, several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of the Fund’s investments.

The United Kingdom voted on June 23, 2016 to withdraw from the European Union, which may introduce significant new uncertainties and instability in the financial markets across Europe.

As of period end, the Fund’s investments had the following industry classifications:

Industry	Percent of Long-Term Investments
Banks		25	%
Tobacco		10
Beverages		7
Energy Equipment & Services		6
Insurance		6
Textiles, Apparel & Luxury Goods		6
Software		5
Other1		35

¹  All other industries held were each less than 5% of long-term investments.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		766,286		$	8,733,286			153,174		$	1,431,855
Shares issued in reinvestment of distributions		—			—			173,208			1,648,637
Shares redeemed		(1,613,860	)		(17,320,222	)		(1,405,110	)		(13,229,450	)
Net decrease		(847,574	)	$	(8,586,936	)		(1,078,728	)	$	(10,148,958	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 19

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock International V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock International V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock iShares^® Alternative Strategies V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock iShares^® Alternative Strategies V.I. Fund

Investment Objective

BlackRock iShares^® Alternative Strategies V.I. Fund’s (the “Fund”) investment objective is to seek to achieve long-term growth of capital and risk adjusted returns.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its blended benchmark, the 60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index.

What factors influenced performance?

There were no significant detractors from absolute returns during the period. Relative to the benchmark, the Fund’s exposure to precious metals detracted from performance as metals underperformed equities.

The largest contributor to Fund performance was exposure to the iShares Edge MSCI Minimum Volatility Global ETF. This was followed by exposure to the iShares Commodities Select Strategy ETF.

Describe recent portfolio activity.

In the reporting period, the Fund reduced exposure to the iShares U.S. Preferred Stock ETF and the iShares Gold and Silver Trust ETFs. The Fund added to the iShares J.P. Morgan USD Emerging Markets Bond ETF.

Describe portfolio positioning at period end.

At period end, the Fund was underweight U.S. equities relative to international market equities. The Fund’s top holdings included minimum volatility global equities, preferred stock and global infrastructure. In addition, the Fund maintained exposure to U.S. dollar-denominated emerging market debt, real estate, broad commodities and precious metals.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Affiliated Investment Companies
Equity Funds		50	%
Fixed Income Funds		27
Commodity Funds		14
Short-Term Securities		9

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock iShares^® Alternative Strategies V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests in a portfolio of underlying exchange-traded funds that seek to track alternative indices.

^(c)  A customized weighted index comprised of 60% MSCI All Country World Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index.

^(d)  A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.

^(e)  A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

^(f)  Commencement of operations.

Performance Summary for the Period Ended December 31, 2017

				Average Annual Total Returns
	6-Month Total Returns (b)			1 Year (b)			Since Inception (b)(c)
Class I(a)		4.98	%		12.74	%		5.77	%
Class III(a)		4.88			12.45			5.52
60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index		7.14			15.41			6.07
MSCI All Country World Index		11.21			23.97			8.15
Bloomberg Barclays U.S. Aggregate Bond Index		1.24			3.54			2.70

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The Fund commenced operations on April 30, 2014.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,049.80	$	3.31	$	1,000.00	$	1,021.98	$	3.26		0.65	%
Class III		1,000.00		1,049.80		4.60		1,000.00		1,020.72		4.53		0.90

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock iShares^® Alternative Strategies V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments December 31, 2017 BlackRock iShares^® Alternative Strategies V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Affiliated Investment Companies — 109.7%(f)
Commodity Funds — 15.7%
iShares Commodities Select Strategy ETF		62,033	$	2,254,279
iShares Gold Trust(a)(b)		105,748		1,322,908
iShares Silver Trust(a)(b)		56,107		897,151
				4,474,338
Equity Funds — 55.0%
iShares Edge MSCI Minimum Volatility Global ETF		88,203		7,437,277
iShares Edge MSCI USA Momentum Factor ETF		14,300		1,474,759
iShares Global Infrastructure ETF		86,765		3,923,513
iShares U.S. Real Estate ETF(c)		35,364		2,864,838
				15,700,387
Fixed Income Funds — 29.4%
iShares J.P. Morgan USD Emerging Markets Bond ETF		31,319		3,636,136
iShares U.S. Preferred Stock ETF		125,328		4,771,237
				8,407,373

Security	Shares		Value
Short-Term Securities — 9.6%(d)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		88,209	$	88,209
SL Liquidity Series, LLC, Money Market Series, 1.48%(e)		2,666,376		2,666,109
				2,754,318
Total Affiliated Investment Companies — 109.7% (Cost: $29,341,896)				31,336,416
Liabilities in Excess of Other Assets — (9.7)%				(2,770,063	)
Net Assets — 100.0%			$	28,566,353

^(a) Non-income producing security.

^(b)  All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

^(c)  Security, or a portion of the security, is on loan.

^(d) Annualized 7-day yield as of period end.

^(e) Security was purchased with the cash collateral from loaned securities.

^(f)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Shares Purchased			Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		139,845		—			(51,636	)(b)		88,209	$	88,209	$	653		$	—		$	—
SL Liquidity Series, LLC, Money Market Series		99,233		2,567,143	(c)		—			2,666,376		2,666,109		16,344	(d)		(1,032	)		7
iShares Commodities Select Strategy ETF		20,963		45,130			(4,060	)		62,033		2,254,279		112,838			11,337			98,245
iShares Edge MSCI Minimum Volatility Global ETF		77,765		21,863			(11,425	)		88,203		7,437,277		139,748			(34,981	)		885,068
iShares Edge MSCI USA Momentum Factor ETF		9,528		14,741			(9,969	)		14,300		1,474,759		4,343			14,590			83,992
iShares Global Infrastructure ETF		—		91,065			(4,300	)		86,765		3,923,513		107,229			8,786			399,352
iShares Gold Trust		86,001		53,300			(33,553	)		105,748		1,322,908		—			48,004			121,502
iShares J.P. Morgan USD Emerging Markets Bond ETF		39,361		15,938			(23,980	)		31,319		3,636,136		125,203			40,284			138,320
iShares Silver Trust		37,235		19,872			(1,000	)		56,107		897,151		—			(547	)		32,297
iShares U.S. Preferred Stock ETF		170,216		39,101			(83,989	)		125,328		4,771,237		319,362			(52,762	)		224,202
iShares U.S. Real Estate ETF		28,544		19,490			(12,670	)		35,364		2,864,838		104,971			(14,852	)		126,478
											$	31,336,416	$	930,691		$	18,827		$	2,109,463

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents net shares sold.

^(c)  Represents net shares purchased.

^(d)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

Portfolio Abbreviation
ETF	Exchange-Traded Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS 5

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock IShares^® Alternative Strategies V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Consolidated Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	28,670,307	$	—	$	—	$	28,670,307
Investments valued at NAV(a)								2,666,109
Total Investments							$	31,336,416

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to consolidated financial statements.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Statement of Assets and Liabilities

December 31, 2017

	BlackRock iShares® Alternative Strategies V.I. Fund
ASSETS
Investments at value — affiliated (including securities loaned at value of $2,603,580) (cost — $29,341,896)	$	31,336,416
Cash		14,978
Receivables:
Securities lending income — affiliated		881
Capital shares sold		12,194
Dividends — affiliated		66
From the Manager		1,605
Investment adviser		2,726
Prepaid expenses		130
Total assets		31,368,996
LIABILITIES
Cash collateral on securities loaned at value		2,667,537
Payables:
Capital shares redeemed		17,460
Investments purchased		37,177
Officer’s and Directors’ fees		3,207
Other accrued expenses		39,659
Other affiliates		14
Professional fees		35,049
Distribution fees		2,540
Total liabilities		2,802,643
NET ASSETS	$	28,566,353
NET ASSETS CONSIST OF
Paid-in capital	$	26,992,299
Undistributed net investment income		22,396
Accumulated net realized loss		(442,862	)
Net unrealized appreciation (depreciation)		1,994,520
NET ASSETS	$	28,566,353
NET ASSET VALUE
Class I — Based on net assets of $16,000,317 and 1,435,983 shares outstanding, 100 million shares authorized, $0.10 par value.	$	11.14
Class III — Based on net assets of $12,566,036 and 1,132,459 shares outstanding, 100 million shares authorized, $0.10 par value.	$	11.10

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS 7

Consolidated Statement of Operations

Year Ended December 31, 2017

	BlackRock iShares® Alternative Strategies V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	914,347
Securities lending income — affiliated — net		16,344
Total investment income		930,691
EXPENSES
Professional		63,130
Investment advisory		62,282
Transfer agent — class specific		56,450
Accounting services		26,326
Distribution — class specific		24,741
Directors and Officer		12,582
Transfer agent		5,001
Custodian		4,964
Printing		2,141
Miscellaneous		4,961
Total expenses		262,578
Less:
Fees waived and/or reimbursed by the Manager		(49,157	)
Transfer agent fees reimbursed — class specific		(30,079	)
Total expenses after fees waived and/or reimbursed		183,342
Net investment income		747,349
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss from investments — affiliated		18,827
Net change in unrealized appreciation on investments — affiliated		2,109,463
Net realized and unrealized gain		2,128,290
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	2,875,639

See notes to consolidated financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Statements of Changes in Net Assets

	BlackRock iShares® Alternative Strategies V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	747,349		$	574,680
Net realized loss		18,827			(272,382	)
Net change in unrealized appreciation (depreciation)		2,109,463			342,360
Net increase in net assets resulting from operations	$	2,875,639			644,658
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(422,009	)		(374,610	)
Class III		(307,726	)		(197,011	)
From return of capital:
Class I		(1,366	)		(1,529	)
Class III		(900	)		(853	)
Decrease in net assets resulting from distributions to shareholders		(732,001	)		(574,003	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		4,937,220			9,547,597
NET ASSETS
Total increase in net assets		7,080,858			9,618,252
Beginning of year		21,485,495			11,867,243
End of year	$	28,566,353		$	21,485,495
Undistributed net investment income, end of year	$	22,396		$	4,777

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS 9

Consolidated Financial Highlights

(For a share outstanding throughout each period)

	BlackRock iShares® Alternative Strategies V.I. Fund
	Class I
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	10.15		$	9.79		$	10.20		$	10.00
Net investment income(b)		0.33			0.35			0.37			0.31
Net realized and unrealized gain (loss)		0.96			0.30			(0.47	)		0.03
Net increase (decrease) from investment operations		1.29			0.65			(0.10	)		0.34
Distributions:(c)
From net investment income		(0.30	)		(0.29	)		(0.30	)		(0.13	)
From net realized capital gains		—			—			—			(0.01	)
From return of capital		(0.00	)(d)		(0.00	)(d)		(0.01	)		(0.00	)(d)
Total distributions		(0.30	)		(0.29	)		(0.31	)		(0.14	)
Net asset value, end of period	$	11.14		$	10.15		$	9.79		$	10.20
Total Return:(e)
Based on net asset value		12.74	%		6.59	%		(1.02	)%		3.32	%(f)
Ratios to Average Net Assets:(g)
Total expenses		0.94	%		1.10	%		2.15	%		8.81	%(h),(i)
Total expenses after fees waived and/or reimbursed		0.65	%		0.65	%		0.71	%		0.75	%(h)
Net investment income		3.04	%		3.30	%		3.59	%		4.36	%(h)
Supplemental Data:
Net assets, end of period (000)	$	16,000		$	13,800		$	9,707		$	5,116
Portfolio turnover rate		37	%		47	%		37	%		34	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.38	%		0.34	%		0.37	%		0.41	%

^(h)  Annualized.

⁽ⁱ⁾  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I and Class III would have been 9.60% and 9.03%, respectively.

See notes to consolidated financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock iShares® Alternative Strategies V.I. Fund
	Class III
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	10.12		$	9.77		$	10.20		$	10.00
Net investment income(b)		0.32			0.36			0.39			0.36
Net realized and unrealized gain (loss)		0.94			0.26			(0.52	)		(0.03	)
Net increase (decrease) from investment operations		1.26			0.62			(0.13	)		0.33
Distributions:(c)
From net investment income		(0.28	)		(0.27	)		(0.29	)		(0.12	)
From net realized capital gains		—			—			—			(0.01	)
From return of capital		(0.00	)(d)		(0.00	)(d)		(0.01	)		(0.00	)(d)
Total distributions		(0.28	)		(0.27	)		(0.30	)		(0.13	)
Net asset value, end of period	$	11.10		$	10.12		$	9.77		$	10.20
Total Return:(e)
Based on net asset value		12.45	%		6.33	%		(1.24	)%		3.26	%(f)
Ratios to Average Net Assets:(g)
Total expenses		1.22	%		1.29	%		2.26	%		8.54	%(h),(i)
Total expenses after fees waived and/or reimbursed		0.90	%		0.90	%		0.94	%		1.00	%(h)
Net investment income		2.94	%		3.38	%		3.81	%		5.05	%(h)
Supplemental Data:
Net assets, end of period (000)	$	12,566		$	7,685		$	2,160		$	334
Portfolio turnover rate		37	%		47	%		37	%		34	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.38	%		0.34	%		0.37	%		0.41	%

^(h)  Annualized.

⁽ⁱ⁾  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I and Class III would have been 9.60% and 9.03%, respectively.

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL HIGHLIGHTS 11

Notes to Consolidated Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The consolidated financial statements presented are for BlackRock iShares^® Alternative Strategies V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

Basis of Consolidation: The accompanying consolidated financial statements of the Fund include the accounts of iShares^® Alternative Strategies V.I. Fund (Cayman) (the “Subsidiary”), which is a wholly-owned subsidiary of the Fund and primarily invests in commodity-related instruments. The Subsidiary enables the Fund to hold these commodity-related instruments and satisfy regulated investment company tax requirements. The Fund may invest up to 25% of its total assets in the Subsidiary. The net assets of the Subsidiary as of December 31, 2017 were $2,234,460, which is 7.8% of the Fund’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. The Subsidiary is subject to the same investment policies and restrictions that apply to the iShares^® Alternative Strategies V.I. Fund, except that the Subsidiary may invest without limitation in commodity-related instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds the Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Net income and realized gains from investments held by the Subsidiary are treated as ordinary income for tax purposes. If a net loss is realized by the Subsidiary in any taxable year, the loss will generally not be available to offset the Fund’s ordinary income and/or capital gains for that year.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the consolidated financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Exchange-traded funds (“ETFs”) traded on a recognized securities exchange are valued at the official closing price each day, if available. For ETFs traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. ETFs traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for consolidated financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market- corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”). There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as affiliated investment companies in the Fund’s Consolidated Schedule of Investments, and the value of any related collateral are shown separately in the Consolidated Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Consolidated Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 13

Notes to Consolidated Financial Statements  (continued)

However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Securities Lending Agreements

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
JP Morgan Securities LLC	$	2,603,580	$	(2,603,580	)	$	—

^(a)  Cash collateral with a value of $2,667,537 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.250	%
$1 Billion — $3 Billion		0.240
$3 Billion — $5 Billion		0.225
$5 Billion — $10 Billion		0.220
Greater than $10 Billion		0.210

The Manager provides investment management and other services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, the Fund pays the Manager based on the Fund’s net assets which includes the assets of the Subsidiary.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III is $24,741.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, net- working, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Consolidated Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III		Total
$	32,465	$	23,985	$	56,450

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds. In addition, the Manager has

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

contractually agreed to waive the management fee on assets estimated to be attributable to the Fund’s investments in other equity and fixed-income mutual funds managed by BlackRock or its affiliates, if any. This amount is included in fees waived and/or reimbursed by the Manager in the Consolidated Statement of Operations. For the year ended December 31, 2017, the amount waived was $62.

For the year ended December 31, 2017, the Fund reimbursed the Manager $226 for certain accounting services, which is included in accounting services in the Consolidated Statement of Operations.

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class III
	0.65%		0.90%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived and/or reimbursed $49,095, which is included in fees waived and/or reimbursed by the Manager in the Consolidated Statement of Operations.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed—class specific in the Consolidated Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements are as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	18,123	$	11,956	$	30,079

With respect to the contractual expense limitation, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:

(1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and

(2) the Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.

This repayment applies only to the contractual expense limitation on net expenses and does not apply to any voluntary waivers that may be in effect from time to time.

On December 31, 2017, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring December 31,
	2018		2019
Fund Level	$	46,338	$	49,095
Class I		22,342	$	18,123
Class III		6,323	$	11,956

The following fund level and class specific waivers and/or reimbursements previously recorded by the fund, which were subject to recoupment by the Manager, expired on December 31, 2017:

Fund Level	$	116,781
Class I		17,186
Class III		1,013

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 15

Notes to Consolidated Financial Statements  (continued)

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Consolidated Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $3,440 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Consolidated Statement of Operations.

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $14,329,658 and $9,346,595, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for the period ended December 31, 2014 and each of the three years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s consolidated financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to characterization of income/losses from a wholly owned subsidiary, were reclassified to the following accounts:

Paid-in capital	$	(20,141	)
Undistributed net investment income		5
Accumulated net realized loss		20,136

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	729,735	$	571,621
Tax return of capital		2,266		2,383
	$	732,001	$	574,004

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Capital loss carryforward	$	(172,012	)
Net unrealized gains1		1,746,066
	$	1,574,054

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

As of December 31, 2017, the Fund had a capital loss carryforward with no expiration date, available to offset future realized capital gains of $172,012.

During the year ended December 31, 2017, the Fund utilized $30,192 of its capital loss carryforward.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

As of period end, gross unrealized appreciation and depreciation for investment based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	29,590,350
Gross unrealized appreciation	$	1,773,767
Gross unrealized depreciation		(27,701	)
Net unrealized appreciation (depreciation)	$	1,746,066

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Consolidated Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets approximated by their value recorded in the Consolidated Statement of Assets and Liabilities, less any collateral held by the Fund.

Concentration Risk: The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 17

Notes to Consolidated Financial Statements  (continued)

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		267,737		$	2,911,781			601,734		$	6,360,317
Shares issued in reinvestment of distributions		38,005			423,375			37,058			376,139
Shares redeemed		(228,855	)		(2,485,980	)		(270,838	)		(2,840,041	)
Net increase		76,887		$	849,176			367,954		$	3,896,415
Class III
Shares sold		533,162		$	5,813,619			773,886		$	8,159,220
Shares issued in reinvestment of distributions		27,804			308,626			19,552			197,864
Shares redeemed		(188,023	)		(2,034,201	)		(255,008	)		(2,705,902	)
Net increase		372,943		$	4,088,044			538,430		$	5,651,182
Total Net Increase		449,830		$	4,937,220			906,384		$	9,547,597

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the consolidated financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the consolidated financial statements.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock iShares Alternative Strategies V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of BlackRock iShares Alternative Strategies V.I. Fund, of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the periods presented, and the related notes. In our opinion, the consolidated financial statements and consolidated financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 19

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock iShares^® Dynamic Allocation V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock iShares^® Dynamic Allocation V.I. Fund

Investment Objective

BlackRock iShares^® Dynamic Allocation V.I. Fund’s (the “Fund”) investment objective is to seek to provide total return.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its blended benchmark (60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index).

What factors influenced performance?

The largest detractor from Fund performance was exposure to the iShares 1-3 Year Treasury Bond ETF.

The largest contributor to Fund performance came from exposure to the iShares Core S&P 500 ETF and the iShares Core MSCI Emerging Markets ETF.

Describe recent portfolio activity.

During the 12-month period, the Fund increased exposure to U.S. and emerging market equities, while reducing international developed exposure. In addition, the Fund reduced its holdings within real estate and agency mortgage-backed securities in favor of high yield and short-term U.S. Treasuries.

Describe portfolio positioning at period end.

At period end, the Fund was underweight in developed international market equity exposure in favor of U.S. equities. The Fund’s top holdings included exposure to U.S. developed market equities. Within U.S. equities, the Fund maintained exposure to U.S. large-, mid- and small-cap, minimum volatility and preferred stocks. Within fixed income, the Fund was overweight to credit versus rates. The Fund’s top fixed-income holdings included exposure to investment grade U.S. corporate credit. In addition, the Fund ended the period with small allocations to U.S. real estate, broad commodities and precious metals.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Affiliated Investment Companies
Equity Funds		61	%
Fixed Income Funds		31
Short-Term Securities		7
Commodity Funds		1

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock iShares^® Dynamic Allocation V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests in a portfolio of underlying exchange-traded funds that seek to track equity, fixed income and alternative indices.

^(c)  A customized weighted index comprised of 60% MSCI All Country World Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index.

^(d)  A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.

^(e)  A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

^(f)  Commencement of operations.

Performance Summary for the Period Ended December 31, 2017

				Average Annual Total Returns
	6-Month Total Returns (b)			1 Year (b)			Since Inception (b)(c)
Class I(a)		7.37	%		15.11	%		4.93	%
Class III(a)		7.10			14.72			4.65
60% MSCI All Country World Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index		7.14			15.41			6.07
MSCI All Country World Index		11.21			23.97			8.15
Bloomberg Barclays U.S. Aggregate Bond Index		1.24			3.54			2.70

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The Fund commenced operations on April 30, 2014.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,073.70	$	2.77	$	1,000.00	$	1,022.53	$	2.70		0.53	%
Class III		1,000.00		1,071.00		4.07		1,000.00		1,021.27		3.97		0.78

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock iShares^® Dynamic Allocation V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Schedule of Investments December 31, 2017 BlackRock iShares^® Dynamic Allocation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Affiliated Investment Companies — 107.1%(f)
Commodity Funds — 1.6%
iShares Commodities Select Strategy ETF		6,561	$	238,427
iShares Gold Trust(a)(b)		10,379		129,841
iShares Silver Trust(a)(b)		4,905		78,431
				446,699
Equity Funds — 65.4%
iShares Core MSCI Emerging Markets ETF		50,350		2,864,915
iShares Core S&P 500 ETF		15,804		4,248,905
iShares Core S&P Mid-Cap ETF		12,423		2,357,637
iShares Core S&P Small-Cap ETF		19,736		1,515,922
iShares Edge MSCI Min Vol Global ETF		8,397		708,035
iShares Edge MSCI Min Vol USA ETF(c)		18,450		973,791
iShares Edge MSCI USA Momentum Factor ETF		1,400		144,382
iShares Global Infrastructure ETF		8,277		374,286
iShares MSCI Canada ETF(c)		21,075		624,663
iShares MSCI EAFE ETF		56,073		3,942,493
iShares MSCI EAFE Small-Cap ETF		13,600		877,200
iShares U.S. Real Estate ETF(c)		3,900		315,939
				18,948,168
Fixed Income Funds — 33.0%
iShares 1-3 Year Treasury Bond ETF		23,797		1,995,379
iShares Agency Bond ETF		11,079		1,252,946
iShares iBoxx $ High Yield Corporate Bond ETF		14,263		1,244,589
iShares iBoxx $ Investment Grade Corporate Bond ETF		15,740		1,913,354
iShares J.P. Morgan USD Emerging Markets Bond ETF		3,140		364,554
iShares U.S. Credit Bond ETF		20,159		2,258,413
iShares U.S. Preferred Stock ETF(c)		13,613		518,247
				9,547,482

Security	Shares		Value
Short-Term Securities — 7.1%(d)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		57,845	$	57,845
SL Liquidity Series, LLC, Money Market Series, 1.48%(e)		2,016,002		2,015,801
				2,073,646
Total Affiliated Investment Companies — 107.1% (Cost: $27,883,376)				31,015,995
Liabilities in Excess of Other Assets — (7.1)%				(2,068,941	)
Net Assets — 100.0%			$	28,947,054

^(a)  Non-income producing security.

^(b)  All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

^(c)  Security, or a portion of the security, is on loan.

^(d)  Annualized 7-day yield as of period end.

^(e)  Security was purchased with the cash collateral from loaned securities.

^(f)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related party of the fund were as follows:

Affiliate	Shares Held at 12/31/16		Shares Purchased		Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		64,554		—		(6,709	)(b)		57,845	$	57,845	$	812		$	—		$	—
SL Liquidity Series, LLC, Money Market Series		5,525,311		—		(3,509,309	)(b)		2,016,002		2,015,801		21,706	(c)		143			(94	)
iShares 10+ Year Credit Bond ETF		1,867		—		(1,867	)		—		—		—			(212	)		1,094
iShares 1-3 Year Treasury Bond ETF		4,800		20,237		(1,240	)		23,797		1,995,379		16,349			(546	)		(14,947	)
iShares Agency Bond ETF		9,129		2,950		(1,000	)		11,079		1,252,946		16,822			(1,865	)		4,902
iShares CMBS ETF		1,490		—		(1,490	)		—		—		555			(655	)		1,297
iShares Commodities Select Strategy ETF		2,800		3,761		—			6,561		238,427		10,233			—			12,817
iShares Core MSCI Emerging Markets ETF		—		52,550		(2,200	)		50,350		2,864,915		62,576			12,561			409,864
iShares Core S&P 500 ETF		10,569		5,835		(600	)		15,804		4,248,905		66,549			5,563			600,805
iShares Core S&P Mid-Cap ETF		6,644		9,914		(4,135	)		12,423		2,357,637		25,705			12,803			251,165
iShares Core S&P Small-Cap ETF		6,328		13,898		(490	)		19,736		1,515,922		17,113			6,369			148,913
iShares Core S&P U.S. Value ETF		—		28,712		(28,712	)		—		—		6,270			11,105			—
iShares Edge MSCI Min Vol Emerging Markets ETF		3,300		—		(3,300	)		—		—		—			—			14,309
iShares Edge MSCI Min Vol Global ETF		14,267		1,200		(7,070	)		8,397		708,035		21,769			(13,468	)		99,862
iShares Edge MSCI Min Vol USA ETF		—		18,650		(200	)		18,450		973,791		6,350			6,865			104,454
iShares Edge MSCI USA Momentum Factor ETF		5,100		1,400		(5,100	)		1,400		144,382		—			—			22,310
iShares Global Infrastructure ETF		—		8,277		—			8,277		374,286		10,266			—			37,044
iShares Gold Trust		15,184		5,775		(10,580	)		10,379		129,841		—			12,700			21,153
iShares iBoxx $ High Yield Corporate Bond ETF		5,548		8,815		(100	)		14,263		1,244,589		49,041			632			770
iShares iBoxx $ Investment Grade Corporate Bond ETF		7,540		9,600		(1,400	)		15,740		1,913,354		48,271			(1,343	)		50,784
iShares J.P. Morgan USD Emerging Markets Bond ETF		7,270		1,170		(5,300	)		3,140		364,554		12,597			(1,349	)		24,251
iShares MBS ETF		9,464		200		(9,664	)		—		—		4,162			(13,782	)		19,396
iShares MSCI Canada ETF		7,625		13,450		—			21,075		624,663		12,114			—			63,572
iShares MSCI EAFE ETF		35,923		39,650		(19,500	)		56,073		3,942,493		112,551			63,314			603,334
iShares MSCI EAFE Small-Cap ETF		—		13,600		—			13,600		877,200		20,189			—			135,709
iShares Russell 1000 ETF		17,587		300		(17,887	)		—		—		5,045			308,297			(237,361	)

CONSOLIDATED SCHEDULE OF INVESTMENTS 5

Consolidated Schedule of Investments  (continued) December 31, 2017 BlackRock iShares^® Dynamic Allocation V.I. Fund

Affiliate	Shares Held at 12/31/16		Shares Purchased		Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income		Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
iShares Silver Trust		6,506		1,664		(3,265	)		4,905	$	78,431	$	—	$	(2,087	)	$	8,558
iShares TIPS Bond ETF		1,894		1,630		(3,524	)		—		—		547		7,091			(1,427	)
iShares U.S. Credit Bond ETF		16,517		5,542		(1,900	)		20,159		2,258,413		57,167		(4,909	)		50,297
iShares U.S. Preferred Stock ETF		30,613		1,000		(18,000	)		13,613		518,247		32,667		(26,507	)		52,118
iShares U.S. Real Estate ETF		5,100		900		(2,100	)		3,900		315,939		11,317		(4,998	)		8,098
iShares U.S. Treasury Bond ETF		35,580		1,600		(37,180	)		—		—		—		3,476			892
Total										$	31,015,995	$	648,743	$	379,198		$	2,493,939

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents net shares sold.

^(c)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

Portfolio Abbreviation

ETF — Exchange-Traded Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Consolidated Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated investment Companies	$	29,000,194	$	—	$	—	$	29,000,194
Investments valued at NAV(a)							$	2,015,801
Total Investments							$	31,015,995

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to consolidated financial statements.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Statement of Assets and Liabilities

December 31, 2017

	BlackRock iShares® Dynamic Allocation V.I. Fund
ASSETS
Investments at value — affiliated (including securities loaned at value of $1,971,355) (cost — $27,883,376)	$	31,015,995
Cash		1,209
Receivables:
Investments sold		15
Securities lending income — affiliated		641
Capital shares sold		5,688
Dividends — affiliated		62
From the Manager		28,599
Prepaid expenses		137
Total assets		31,052,346
LIABILITIES
Cash collateral on securities loaned at value		2,015,501
Payables:
Capital shares redeemed		1,713
Officer’s and Directors’ fees		3,284
Other accrued expenses		31,224
Other affiliates		14
Professional fees		37,490
Distribution fees		715
Transfer agent fees		15,351
Total liabilities		2,105,292
NET ASSETS	$	28,947,054
NET ASSETS CONSIST OF
Paid-in capital	$	26,372,202
Undistributed net investment income		16,399
Accumulated net realized loss		(574,166	)
Net unrealized appreciation (depreciation)		3,132,619
NET ASSETS	$	28,947,054
NET ASSET VALUE
Class I — Based on net assets of $25,332,007 and 2,276,825 shares outstanding, 100 million shares authorized, $0.10 par value	$	11.13
Class III — Based on net assets of $3,615,047 and 325,847 shares outstanding, 100 million shares authorized, $0.10 par value	$	11.09

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS 7

Consolidated Statement of Operations

Year Ended December 31, 2017

	BlackRock iShares® Dynamic Allocation V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	627,037
Securities lending income — affiliated — net		21,706
Total investment income		648,743
EXPENSES
Professional		74,211
Transfer agent — class specific		52,399
Investment advisory		36,621
Accounting services		26,145
Printing		14,555
Directors and Officer		12,657
Distribution — class specific		6,467
Transfer agent		5,001
Custodian		4,532
Miscellaneous		5,667
Total expenses		238,255
Less:
Fees waived and/or reimbursed by the Manager		(79,521	)
Transfer agent fees reimbursed — class specific		(28,369	)
Total expenses after fees waived and/or reimbursed		130,365
Net investment income		518,378
REALIZED AND UNREALIZED GAIN
Net realized gain from investments — affiliated		379,198
Net change in unrealized appreciation on investments — affiliated		2,493,939
Net realized and unrealized gain		2,873,137
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	3,391,515

See notes to consolidated financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Statements of Changes in Net Assets

	BlackRock iShares® Dynamic Allocation V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	518,378		$	413,686
Net realized gain (loss)		379,198			(270,823	)
Net change in unrealized appreciation (depreciation)		2,493,939			1,069,860
Net increase in net assets resulting from operations		3,391,515			1,212,723
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(452,727	)		(374,605	)
Class III		(56,728	)		(33,466	)
From return of capital:
Class I		(13,367	)		(9,940	)
Class III		(3,178	)		(992	)
Decrease in net assets resulting from distributions to shareholders		(526,000	)		(419,003	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		6,142,899			3,334,801
NET ASSETS
Total increase in net assets		9,008,414			4,128,521
Beginning of year		19,938,640			15,810,119
End of year	$	28,947,054		$	19,938,640
Undistributed net investment income, end of year	$	16,399		$	7,476

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS 9

Consolidated Financial Highlights

(For a share outstanding throughout each period)

	BlackRock iShares® Dynamic Allocation V.I. Fund
	Class I
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	9.85		$	9.45		$	10.02		$	10.00
Net investment income(b)		0.23			0.22			0.24			0.20
Net realized and unrealized gain (loss)		1.26			0.39			(0.63	)		(0.07	)
Net increase (decrease) from investment operations		1.49			0.61			(0.39	)		0.13
Distributions:(c)
From net investment income		(0.20	)		(0.20	)		(0.17	)		(0.10	)
From net realized gain		—			—			—			(0.01	)
From return of capital		(0.01	)		(0.01	)		(0.01	)		—
Total distributions		(0.21	)		(0.21	)		(0.18	)		(0.11	)
Net asset value, end of period	$	11.13		$	9.85		$	9.45		$	10.02
Total Return:(d)
Based on net asset value		15.11	%		6.49	%		(3.88	)%		1.27	%(e)
Ratios to Average Net Assets:(f)
Total expenses		0.94	%		0.83	%		1.90	%		6.47	%(g),(h)
Total expenses after fees waived and/or reimbursed		0.53	%		0.53	%		0.64	%		0.75	%(g)
Net investment income		2.14	%		2.27	%		2.41	%		2.85	%(g)
Supplemental Data:
Net assets, end of period (000)	$	25,332		$	18,135		$	14,636		$	6,092
Portfolio turnover rate		48	%		54	%		54	%		25	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(e)  Aggregate total return.

^(f)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.21	%		0.23	%		0.29	%		0.27	%

^(g)  Annualized.

^(h)  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I and Class III would have been 7.00% and 9.13%, respectively.

See notes to consolidated financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Consolidated Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock iShares® Dynamic Allocation V.I. Fund
	Class III
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	9.83		$	9.44		$	10.01		$	10.00
Net investment income(b)		0.21			0.21			0.26			0.17
Net realized and unrealized gain (loss)		1.24			0.37			(0.66	)		(0.06	)
Net increase (decrease) from investment operations		1.45			0.58			(0.40	)		0.11
Distributions:(c)
From net investment income		(0.18	)		(0.18	)		(0.16	)		(0.09	)
From net realized gain		—			—			—			(0.01	)
From return of capital		(0.01	)		(0.01	)		(0.01	)		—
Total distributions		(0.19	)		(0.19	)		(0.17	)		(0.10	)
Net asset value, end of period	$	11.09		$	9.83		$	9.44		$	10.01
Total Return:(d)
Based on net asset value		14.72	%		6.16	%		(3.99	)%		1.05	%(e)
Ratios to Average Net Assets:(f)
Total expenses		1.25	%		1.02	%		1.87	%		8.32	%(g),(h)
Total expenses after fees waived and/or reimbursed		0.78	%		0.78	%		0.86	%		1.00	%(g)
Net investment income		1.97	%		2.08	%		2.56	%		2.54	%(g)
Supplemental Data:
Net assets, end of period (000)	$	3,615		$	1,804		$	1,174		$	20
Portfolio turnover rate		48	%		54	%		54	%		25	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(e) Aggregate total return.

^(f)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.21	%		0.23	%		0.29	%		0.27	%

^(g)  Annualized.

^(h)  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I and Class III would have been 7.00% and 9.13%, respectively.

See notes to consolidated financial statements.

CONSOLIDATED FINANCIAL HIGHLIGHTS 11

Notes to Consolidated Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds.

The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The consolidated financial statements presented are for BlackRock iShares^® Dynamic Allocation V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

Basis of Consolidation: The accompanying consolidated financial statements of the Fund include the accounts of iShares^® Dynamic Allocation V.I. Fund (Cayman) (the “Subsidiary”), which is a wholly-owned subsidiary of the Fund and primarily invests in commodity-related instruments. The Subsidiary enables the Fund to hold these commodity-related instruments and satisfy regulated investment company tax requirements. The Fund may invest up to 25% of its total assets in the Subsidiary. The net assets of the Subsidiary as of December 31, 2017 were $208,457, which is 0.72% of the Fund’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. The Subsidiary is subject to the same investment policies and restrictions that apply to the iShares^® Dynamic Allocation V.I. Fund, except that the Subsidiary may invest without limitation in commodity-related instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds the Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Net income and realized gains from investments held by the Subsidiary are treated as ordinary income for tax purposes. If a net loss is realized by the Subsidiary in any taxable year, the loss will generally not be available to offset the Fund’s ordinary income and/or capital gains for that year.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the consolidated financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Exchange-traded funds (“ETFs”) traded on a recognized securities exchange are valued at the official closing price each day, if available. For ETFs traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. ETFs traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for consolidated financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as affiliated investment companies in the Fund’s Consolidated Schedule of Investments, and the value of any related collateral are shown separately in the Consolidated Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Consolidated Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 13

Notes to Consolidated Financial Statements  (continued)

counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
JP Morgan Securities LLC	$	1,971,355	$	(1,971,355	)	$	—

^(a)  Cash collateral with a value of $2,015,501 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.150	%
$1 Billion — $3 Billion		0.140
$3 Billion — $5 Billion		0.135
Greater than $5 Billion		0.130

The Manager provides investment management and other services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, the Fund pays the Manager based on the Fund’s net assets which includes the assets of the Subsidiary.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $6,467.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Consolidated Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III		Total
$	45,747	$	6,652	$	52,399

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds. In addition, the Manager has contractually agreed to waive the management fee on assets estimated to be attributable to the Fund’s investments in other equity and fixed-income mutual funds managed by BlackRock or its affiliates, if any. This amount is included in fees waived and/or reimbursed by the Manager in the Consolidated Statement of Operations. For the year ended December 31, 2017, the amount waived was $70.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

For the year ended December 31, 2017, the Fund reimbursed the Manager $216 for certain accounting services, which is included in accounting services in the Consolidated Statement of Operations.

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I	0.53	%
Class III	0.78	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived and/or reimbursed $79,451 which is included in fees waived and/or reimbursed by the Manager in the Consolidated Statement of Operations.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Consolidated Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	25,064	$	3,305	$	28,369

With respect to the contractual expense limitation, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:

(1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and

(2) the Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.

This repayment applies only to the contractual expense limitation on net expenses and does not apply to any voluntary waivers that may be in effect from time to time.

On December 31, 2017, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement were as follows:

	Expiring December 31,
	2018		2019
Fund Level	$	21,999	$	79,451
Class I		29,259		25,064
Class III		2,053		3,305

The following fund level and class specific waivers and/or reimbursements previously recorded by the fund, which were subject to recoupment by the Manager, expired on December 31, 2017:

Fund Level	$	122,310
Class I		21,925
Class III		265

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 15

Notes to Consolidated Financial Statements  (continued)

amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Consolidated Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $4,820 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the fund’s investment restrictions. If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Consolidated Statement of Operations.

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $17,963,413 and $11,874,905, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for the period ended December 31, 2014 and each of the three years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s consolidated financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent difference attributable to the characterization of income/losses from a wholly owned subsidiary was reclassified to the following accounts:

Paid-in capital	$	(8,924	)
Accumulated net realized loss	$	8,924

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	509,455	$	408,071
Tax return of capital	$	16,545		10,932
	$	526,000	$	419,003

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Capital loss carryforward	$	(458,729	)
Net unrealized gains(a)		3,033,581
	$	2,574,852

^(a) The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

As of December 31, 2017, the Fund had a capital loss carryforward, with no expiration date, available to offset future realized capital gains of $458,729.

During the year ended December 31, 2017, the Fund utilized $296,115 of its capital loss carryforward.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Consolidated Financial Statements  (continued)

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	27,998,813
Gross unrealized appreciation	$	3,050,649
Gross unrealized depreciation		(17,068	)
Net unrealized appreciation	$	3,033,581

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Consolidated Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets approximated by their value recorded in the Consolidated Statement of Assets and Liabilities, less any collateral held by the Fund.

Concentration Risk: The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS 17

Notes to Consolidated Financial Statements  (continued)

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		583,027		$	6,150,100			523,146		$	4,986,995
Shares issued in reinvestment of distributions		41,877			466,094			39,040			384,545
Shares redeemed		(189,522	)		(1,993,433	)		(269,060	)		(2,597,902	)
Net increase		435,382		$	4,622,761			293,126		$	2,773,638
Class III
Shares sold		176,888		$	1,880,454			83,719		$	801,538
Shares issued in reinvestment of distributions		5,402			59,907			3,505			34,458
Shares redeemed		(39,950	)		(420,223	)		(28,150	)		(274,833	)
Net increase		142,340		$	1,520,138			59,074		$	561,163
Total Net Increase		577,722		$	6,142,899			352,200		$	3,334,801

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the consolidated financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the consolidated financial statements.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock iShares Dynamic Allocation V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of BlackRock iShares Dynamic Allocation V.I. Fund, of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the periods presented, and the related notes. In our opinion, the consolidated financial statements and consolidated financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 19

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock iShares^® Dynamic Fixed Income V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock iShares^® Dynamic Fixed Income V.I. Fund

Investment Objective

BlackRock iShares^® Dynamic Fixed Income V.I. Fund’s (the “Fund”) investment objective is to seek to provide total return.

On November 15, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) approved a proposal to close the Fund to new investors and thereafter to liquidate the Fund. Effective December 19, 2017, the Fund is no longer accepting purchase orders from new investors. The liquidation is expected to occur on or about March 29, 2018.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.

What factors influenced performance?

The largest contributor to Fund performance was exposure to the iShares iBoxx $ Investment Grade Corporate Bond ETF. This was followed by exposure to the iShares U.S. Credit Bond ETF.

The largest detractor from performance was exposure to the iShares 1-3 Year Treasury Bond ETF.

Describe recent portfolio activity.

During the reporting period, the Fund reduced exposure to Treasury Inflation-Protected Securities and agency mortgage-backed securities in favor of investment grade corporate credit, high yield and short-term U.S. Treasuries.

Describe portfolio positioning at period end.

At period end, the Fund maintained an overweight to credit versus rates. The Fund’s top holdings included U.S. credit and Treasuries. The Fund also maintained exposure to high yield and agency bonds.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Affiliated Investment Companies
Fixed Income Funds		91	%
Short-Term Securities		9	%

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock iShares^® Dynamic Fixed Income V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests in a portfolio of underlying exchange-traded funds that seek to track fixed income indices.

^(c)  A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

^(d)  Commencement of operations.

Performance Summary for the Period Ended December 31, 2017

				Average Annual Total Returns
	6-Month Total Returns (b)			1 Year (b)			Since Inception (b)(c)
Class I(a)		1.25	%		3.91	%		2.03	%
Class III(a)		1.13			3.60			1.74
Bloomberg Barclays U.S. Aggregate Bond Index		1.24			3.54			2.70

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The Fund commenced operations on April 30, 2014.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,012.50	$	2.54	$	1,000.00	$	1,022.70	$	2.55		0.50	%
Class III		1,000.00		1,011.30		3.80		1,000.00		1,021.40		3.82		0.75

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock iShares^® Dynamic Fixed Income V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock iShares^® Dynamic Fixed Income V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Affiliated Investment Companies — 109.9%(d)
Fixed Income Funds — 100.0%
iShares 1-3 Year Treasury Bond ETF		57,352	$	4,808,965
iShares Agency Bond ETF		27,445		3,103,810
iShares iBoxx $ High Yield Corporate Bond ETF		33,438		2,917,800
iShares iBoxx $ Investment Grade Corporate Bond ETF		38,053		4,625,722
iShares U.S. Credit Bond ETF(a)		47,857		5,361,420
				20,817,717

Security	Shares		Value
Short-Term Securities — 9.9%(b)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		37,990	$	37,990
SL Liquidity Series, LLC, Money Market Series, 1.48%(c)		2,015,402		2,015,200
				2,053,190
Total Affiliated Investment Companies — 109.9% (Cost: $22,673,238)				22,870,907
Liabilities in Excess of Other Assets — (9.9)%				(2,059,453	)
Net Assets — 100.0%			$	20,811,454

^(a)  Security, or a portion of the security, is on loan.

^(b)  Annualized 7-day yield as of period end.

^(c)  Security was purchased with the cash collateral from loaned securities.

^(d)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Fund were as follows:

Affiliate	Shares Held at 12/31/16		Shares Purchased		Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		50,671		—		(12,681	)(b)		37,990	$	37,990	$	650		$	—		$	—
SL Liquidity Series, LLC, Money Market Series		3,328,792		—		(1,313,390	)(b)		2,015,402		2,015,200		25,239	(c)		(212	)		(24	)
iShares 1-3 Year Treasury Bond ETF		11,043		58,589		(12,280	)		57,352		4,808,965		40,190			(4,721	)		(32,771	)
iShares 10+ Year Credit Bond ETF		2,644		—		(2,644	)		—		—		—			(300	)		1,549
iShares Agency Bond ETF		20,567		8,178		(1,300	)		27,445		3,103,810		42,866			17			8,348
iShares CMBS ETF		3,017		—		(3,017	)		—		—		990			(1,356	)		2,751
iShares iBoxx $ High Yield Corporate Bond ETF		12,948		25,230		(4,740	)		33,438		2,917,800		122,130			10,698			(4,061	)
iShares iBoxx $ Investment Grade Corporate Bond ETF		17,126		33,644		(12,717	)		38,053		4,625,722		111,475			37,206			86,374
iShares MBS ETF		21,583		—		(21,583	)		—		—		10,214			(32,706	)		51,711
iShares TIPS Bond ETF		4,125		—		(4,125	)		—		—		1,417			14,081			(171	)
iShares U.S. Credit Bond ETF		36,344		13,268		(1,755	)		47,857		5,361,420		143,319			(4,279	)		121,867
iShares U.S. Treasury Bond ETF		80,879		—		(80,879	)		—		—		—			(14,746	)		24,286
										$	22,870,907	$	498,490		$	3,682		$	259,859

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents net shares sold.

^(c)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

Portfolio Abbreviation

ETF — Exchange-Traded Fund

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock iShares^® Dynamic Fixed Income V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	20,855,707	$	—	$	—	$	20,855,707
Investments valued at NAV(a)								2,015,200
Total Investments							$	22,870,907

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock iShares® Dynamic Fixed Income V.I. Fund
ASSETS
Investments at value — affiliated (including securities loaned at value of $1,971,728) (cost — $22,673,238)	$	22,870,907
Receivables:
Securities lending income — affiliated		1,170
Capital shares sold		4,611
Dividends — affiliated		99
From the Manager		13,671
Prepaid expenses		94
Total assets		22,890,552
LIABILITIES
Bank overdraft		95
Cash collateral on securities loaned at value		2,015,199
Payables:
Capital shares redeemed		309
Officer’s and Directors’ fees		1,513
Other accrued expenses		24,898
Other affiliates		15
Professional fees		29,061
Distribution fees		924
Transfer agent fees		7,084
Total liabilities		2,079,098
NET ASSETS	$	20,811,454
NET ASSETS CONSIST OF
Paid-in capital	$	20,864,996
Undistributed net investment income		2,323
Accumulated net realized loss		(253,534	)
Net unrealized appreciation (depreciation)		197,669
NET ASSETS	$	20,811,454
NET ASSET VALUE
Class I — Based on net assets of $16,222,205 and 1,611,209 shares outstanding, 100 million shares authorized, $0.10 par value.	$	10.07
Class III — Based on net assets of $4,589,249 and 458,054 shares outstanding, 100 million shares authorized, $0.10 par value.	$	10.02

See notes to financial statements.

FINANCIAL STATEMENTS 7

Statement of Operations

Year Ended December 31, 2017

	BlackRock iShares® Dynamic Fixed Income V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	473,251
Securities lending income — affiliated — net		25,239
Total investment income		498,490
EXPENSES
Professional		54,201
Transfer agent		5,001
Transfer agent — class specific		30,919
Investment advisory		27,234
Accounting services		21,302
Printing		11,561
Distribution — class specific		8,718
Directors and Officer		8,572
Custodian		4,856
Miscellaneous		4,147
Total expenses		176,511
Less:
Transfer agent fees reimbursed — class specific		(19,382	)
Fees waived and/or reimbursed by the Manager		(64,773	)
Total expenses after fees waived and/or reimbursed		92,356
Net investment income		406,134
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments — affiliated		3,682
Net change in unrealized appreciation (depreciation) on investments — affiliated		259,859
Net realized and unrealized gain		263,541
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	669,675

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock iShares® Dynamic Fixed Income V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	406,134		$	284,384
Net realized gain (loss)		3,682			(37,207	)
Net change in unrealized appreciation (depreciation)		259,859			48,035
Net increase in net assets resulting from operations		669,675			295,212
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(327,096	)		(227,289	)
Class III		(82,905	)		(53,934	)
From return of capital:
Class I		—			(4,176	)
Class III		—			(1,103	)
Decrease in net assets resulting from distributions to shareholders		(410,001	)		(286,502	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		5,137,641			5,913,447
NET ASSETS
Total increase in net assets		5,397,315			5,922,157
Beginning of year		15,414,139			9,491,982
End of year	$	20,811,454		$	15,414,139
Undistributed net investment income, end of year	$	2,323		$	6,190

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 9

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock iShares® Dynamic Fixed Income V.I. Fund
	Class I
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	9.89		$	9.74		$	10.05		$	10.00
Net investment income(b)		0.23			0.22			0.24			0.12
Net realized and unrealized gain (loss)		0.16			0.12			(0.36	)		0.01
Net increase (decrease) from investment operations		0.39			0.34			(0.12	)		0.13
Distributions:(c)
From net investment income		(0.21	)		(0.19	)		(0.19	)		(0.08	)
From net realized gain		—			—			—			(0.00	)(d)
From return of capital		—			(0.00	)(d)		(0.00	)(d)		(0.00	)(d)
Total distributions		(0.21	)		(0.19	)		(0.19	)		(0.08	)
Net asset value, end of period	$	10.07		$	9.89		$	9.74		$	10.05
Total Return:(e)
Based on net asset value		3.91	%		3.50	%		(1.20	)%		1.30	%(f)
Ratios to Average Net Assets:(g)
Total expenses		0.92	%		1.00	%		1.91	%		7.16	%(h),(i)
Total expenses after fees waived and/or reimbursed		0.50	%		0.50	%		0.63	%		0.75	%(h)
Net investment income		2.29	%		2.19	%		2.33	%		1.83	%(h)
Supplemental Data:
Net assets, end of period (000)	$	16,222		$	12,208		$	8,346		$	3,624
Portfolio turnover rate		52	%		38	%		58	%		61	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.22	%		0.20	%		0.26	%		0.25	%

^(h)  Annualized.

⁽ⁱ⁾  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I and Class III would have been 7.71% and 8.93%, respectively.

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock iShares® Dynamic Fixed Income V.I. Fund
	Class III
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	9.85		$	9.70		$	10.03		$	10.00
Net investment income(b)		0.21			0.20			0.27			0.14
Net realized and unrealized gain (loss)		0.14			0.12			(0.42	)		(0.04	)
Net increase (decrease) from investment operations		0.35			0.32			(0.15	)		0.10
Distributions:(c)
From net investment income		(0.18	)		(0.17	)		(0.18	)		(0.07	)
From net realized gain		—			—			—			(0.00	)(d)
From return of capital		—			(0.00	)(d)		(0.00	)(d)		(0.00	)(d)
Total distributions		(0.18	)		(0.17	)		(0.18	)		(0.07	)
Net asset value, end of period	$	10.02		$	9.85		$	9.70		$	10.03
Total Return:(e)
Based on net asset value		3.60	%		3.32	%		(1.47	)%		1.03	%(f)
Ratios to Average Net Assets:(g)
Total expenses		1.22	%		1.15	%		2.06	%		8.57	%(h),(i)
Total expenses after fees waived and/or reimbursed		0.75	%		0.75	%		0.84	%		1.00	%(h)
Net investment income		2.04	%		2.00	%		2.71	%		1.98	%(h)
Supplemental Data:
Net assets, end of period (000)	$	4,589		$	3,206		$	1,146		$	78
Portfolio turnover rate		52	%		38	%		58	%		61	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.22	%		0.20	%		0.26	%		0.25	%

^(h)  Annualized.

⁽ⁱ⁾  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I and Class III would have been 7.71% and 8.93%, respectively.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 11

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock iShares^® Dynamic Fixed Income V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

On November 15, 2017, the Board of Directors the Company approved a proposal to close the Fund to new investors and thereafter to liquidate the Fund. Effective December 19, 2017, the Fund is no longer accepting purchase orders from new investors. The liquidation is expected to occur on or about March 29, 2018.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income are recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds the Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Exchange-traded funds (“ETFs”) traded on a recognized securities exchange are valued at the official closing price each day, if available. For ETFs traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. ETFs traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as affiliated investment companies in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

NOTESTO FINANCIAL STATEMENTS 13

Notes to Financial Statements  (continued)

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Securities Lending Agreements

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
JP Morgan Securities LLC	$	1,971,728	$	(1,971,728	)	$	—

^(a)  Cash collateral with a value of $2,015,199 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.150	%
$1 Billion — $3 Billion		0.140
$3 Billion — $5 Billion		0.135
Greater than $5 Billion		0.130

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $8,718.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

	Class I		Class III		Total
Transfer Agent Fees	$	23,470	$	7,449	$	30,919

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds. In addition, the Manager has contractually agreed to waive the management fee on assets estimated to be attributable to the Fund’s investments in other equity and fixed-income mutual funds managed by BlackRock or its affiliates, if any. This amount is included in fees waived and/or reimbursed by the Manager in the Consolidated Statement of Operations. For the year ended December 31, 2017, the amount waived was $64.

For the year ended December 31, 2017, the Fund reimbursed the Manager $169 for certain accounting services, which is included in accounting services in the Statement of Operations.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class III
	0.50%		0.75%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived and/or reimbursed $64,709, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements are as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	15,638	$	3,744	$	19,382

With respect to the contractual expense limitation, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:

(1) The Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and

(2) The Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.

This repayment applies only to the contractual expense limitation on net expenses and does not apply to any voluntary waivers that may be in effect from time to time.

On December 31, 2017, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expires December 31,
	2018		2019
Fund Level . . . . . . . . . . . . . . . . . . .	$	46,758	$	64,709
Class I . . . . . . . . . . . . . . . . . . . . . . .		15,057		15,638
Class III . . . . . . . . . . . . . . . . . . . . . .		1,390		3,744

The following fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by the Manager, expired on December 31, 2017:

Fund Level . . . . . . . . . . . . . . . . . . .	$	80,571
Class I . . . . . . . . . . . . . . . . . . . . . . .		9,548
Class III . . . . . . . . . . . . . . . . . . . . . .		282

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $5,556 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets or any lower threshold provided for by the fund’s investment restrictions. If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $14,482,679 and $9,357,120, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for the period ended December 31, 2014 and for each of the three years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	410,001	$	281,223
Tax return of capital		—		5,279
	$	410,001	$	286,502

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income		1,343
Capital loss carryforward	$	(135,005	)
Net unrealized gains1		80,120
	$	(53,542	)

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

As of December 31, 2017, the Fund had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains of $135,005.

During the year ended December 31, 2017, the Fund utilized $1,649 of its capital loss carryforward.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	22,790,787
Gross unrealized appreciation	$	132,926
Gross unrealized depreciation		(52,806	)
Net unrealized appreciation (depreciation)	$	80,120

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed.

Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets approximated by their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

Concentration Risk: The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Class I	Shares			Amount			Shares			Amount
Shares sold		621,660		$	6,262,804			699,521		$	7,089,699
Shares issued in reinvestment of distributions		32,482			327,096			23,404			231,465
Shares redeemed		(277,052	)		(2,798,626	)		(346,095	)		(3,495,708	)
Net increase		377,090		$	3,791,274			376,830		$	3,825,456
Class III
Shares sold		268,698		$	2,711,309			250,040		$	2,520,285
Shares issued in reinvestment of distributions		8,274			82,901			5,587			55,037
Shares redeemed		(144,397	)		(1,447,843	)		(48,249	)		(487,331	)
Net increase		132,575		$	1,346,367			207,378		$	2,087,991
Total Net Increase		509,665		$	5,137,641			584,208		$	5,913,447

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock iShares Dynamic Fixed Income V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock iShares Dynamic Fixed Income V.I. Fund, of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the periods presented, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 1 to the financial statements, on November 15, 2017, the Board of Directors approved a proposal to close the Fund to new investors and thereafter liquidate the Fund on or about March 29, 2018.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 19

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock iShares^® Equity Appreciation V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock iShares^® Equity Appreciation V.I. Fund

Investment Objective

BlackRock iShares^® Equity Appreciation V.I. Fund’s (the “Fund”) investment objective is to seek to provide growth of capital.

On November 15, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) approved a proposal to close the Fund to new investors and thereafter to liquidate the Fund. Effective December 19, 2017, the Fund is no longer accepting purchase orders from new investors. The liquidation is expected to occur on or about March 29, 2018.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its benchmark, the MSCI All Country World Index.

What factors influenced performance?

There were no significant detractors from absolute performance during the period. Relative to the benchmark, the Fund’s overweight exposure to iShares Core S&P Small-Cap and Mid-Cap ETFs were the primary detractors, as both underperformed U.S. large-cap stocks.

The largest contributor to Fund performance was exposure to the iShares Core S&P 500 ETF. This was followed by exposure to the iShares Core MSCI Emerging Markets ETF.

Describe recent portfolio activity.

During the period, the Fund increased exposure to international developed and emerging market equities, while reducing U.S. equity exposure to neutral relative to the Fund’s benchmark.

Describe portfolio positioning at period end.

At period end, the Fund was overweight U.S. equities relative to international developed stocks. The Fund’s top holdings included exposure to U.S. large-cap stocks. The Fund maintained exposure to emerging markets and U.S. large-, mid-, small-cap and minimum volatility stocks.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Affiliated Investment Companies
Equity Funds		91	%
Short-Term Securities		9

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock iShares^® Equity Appreciation V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund invests in a portfolio of underlying exchange-traded funds that seek to track fixed income indices.

^(c)  This unmanaged index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.

^(d)  Commencement of operations.

Performance Summary for the Period Ended December 31, 2017

	6-Month			Average Annual Total Returns
	Total Returns (b)			1 Year (b)			Since Inception (b)(c)
Class I(a)		10.91	%		21.87	%		6.27	%
Class III(a)		10.80			21.56			6.01
MSCI All Country World Index		11.21			23.97			8.15

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(c)  The Fund commenced operations on April 30, 2014.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,109.10	$	2.39	$	1,000.00	$	1,022.90	$	2.29		0.45	%
Class III		1,000.00		1,108.00		3.72		1,000.00		1,021.70		3.57		0.70

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock iShares^® Equity Appreciation V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments December 31, 2017 BlackRock iShares^® Equity Appreciation V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Affiliated Investment Companies — 109.7%(d)
Equity Funds — 100.1%
iShares Core MSCI Emerging Markets ETF		56,058	$	3,189,700
iShares Core S&P 500 ETF		17,905		4,813,759
iShares Core S&P Mid-Cap ETF		14,217		2,698,102
iShares Core S&P Small-Cap ETF		22,507		1,728,763
iShares Edge MSCI Min Vol USA ETF(a)		21,034		1,110,175
iShares MSCI Canada ETF(a)		23,957		710,085
iShares MSCI EAFE ETF		62,697		4,408,226
iShares MSCI EAFE Small-Cap ETF		15,600		1,006,200
				19,665,010

Security	Shares		Value
Short-Term Securities — 9.6%(b)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		64,669	$	64,669
SL Liquidity Series, LLC, Money Market Series, 1.48%(c)		1,823,613		1,823,430
				1,888,099
Total Affiliated Investment Companies — 109.7% (Cost: $18,451,329)				21,553,109
Liabilities in Excess of Other Assets — (9.7)%				(1,911,120	)
Net Assets — 100.0%			$	19,641,989

^(a)  Security, or a portion of the security, is on loan.

^(b)  Annualized 7-day yield as of period end.

^(c)  Security was purchased with the cash collateral from loaned securities.

^(d)  During the year ended December 31, 2017, investments in issuers considered to be affiliate of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Fund were as follows:

Affiliates	Shares Held at 12/31/16		Shares Purchased		Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		167,372		—		(102,703	)(b)		64,669	$	64,669	$	560		$	—		$	—
SL Liquidity Series, LLC, Money Market Series		4,742,241		—		(2,918,628	)(b)		1,823,613		1,823,430		9,990	(c)		938			31
iShares Core MSCI Emerging Markets ETF		13,608		48,250		(5,800	)		56,058		3,189,700		70,599			57,411			462,697
iShares Core S&P 500 ETF		12,333		7,652		(2,080	)		17,905		4,813,759		76,999			58,584			635,744
iShares Core S&P Mid-Cap ETF		8,825		10,852		(5,460	)		14,217		2,698,102		29,658			32,484			270,775
iShares Core S&P Small-Cap ETF		8,312		15,725		(1,530	)		22,507		1,728,763		19,707			12,307			165,855
iShares Core S&P U.S. Value ETF		—		34,518		(34,518	)		—		—		7,178			10,326			—
iShares Edge MSCI Min Vol Emerging Markets ETF		5,315		—		(5,315	)		—		—		—			(11,204	)		20,361
iShares Edge MSCI Min Vol USA ETF		—		22,134		(1,100	)		21,034		1,110,175		16,888			4,441			117,628
iShares Edge MSCI USA Momentum Factor ETF		4,774		—		(4,774	)		—		—		—			6,422			1,226
iShares MSCI Canada ETF		11,257		15,600		(2,900	)		23,957		710,085		13,987			11,023			68,419
iShares MSCI EAFE ETF		51,124		39,423		(27,850	)		62,697		4,408,226		130,425			112,152			699,381
iShares MSCI EAFE Small-Cap ETF		—		16,300		(700	)		15,600		1,006,200		23,187			5,591			152,129
iShares Russell 1000 ETF		24,511		1,386		(25,897	)		—		—		5,884			343,149			(271,256	)
										$	21,553,109	$	405,062		$	643,624		$	2,322,990

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents net shares sold.

^(c)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

Portfolio Abbreviation
ETF	Exchange-Traded Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment Companies	$	19,729,679	$	—	$	—	$	19,729,679
Investments valued at NAV(a)							$	1,823,430
Total Investments							$	21,553,109

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 5

Statement of Assets and Liabilities

December 31, 2017

	BlackRock iShares® Equity Appreciation V.I. Fund
ASSETS
Investments at value — affiliated (including securities loaned at value of $1,784,408) (cost — $18,451,329)	$	21,553,109
Cash		49
Receivables:
Securities lending income — affiliated		262
Capital shares sold		4,377
Dividends — affiliated		47
From the Manager		18,775
Prepaid expenses		96
Total assets		21,576,715
LIABILITIES
Cash collateral on securities loaned at value		1,823,575
Payables:
Accounting Fees		13,150
Capital shares redeemed		19,209
Investments purchased		26,015
Officer’s and Directors’ fees		1,478
Other accrued expenses		1,585
Printing fees		9,545
Professional fees		29,137
Distribution fees		463
Transfer agent fees		10,569
Total liabilities		1,934,726
NET ASSETS	$	19,641,989
NET ASSETS CONSIST OF
Paid-in capital	$	16,762,936
Undistributed net investment income		11,260
Accumulated net realized loss		(233,987	)
Net unrealized appreciation (depreciation)		3,101,780
NET ASSETS	$	19,641,989
NET ASSET VALUE
Class I — Based on net assets of $17,352,607 and 1,476,470 shares outstanding, 100 million shares authorized, $0.10 par value.	$	11.75
Class III — Based on net assets of $2,289,382 and 195,535 shares outstanding, 100 million shares authorized, $0.10 par value.	$	11.71

See notes to financial statements.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock iShares® Equity Appreciation V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	395,072
Securities lending income — affiliated — net		9,990
Total investment income		405,062
EXPENSES
Professional		54,050
Transfer agent — class specific		37,510
Investment advisory		25,320
Accounting services		21,157
Printing		12,295
Directors and Officer		8,542
Transfer agent		5,001
Distribution — class specific		4,731
Custodian		4,431
Miscellaneous		4,866
Total expenses		177,903
Less:
Fees waived and/or reimbursed by the Manager		(82,207	)
Transfer agent fees reimbursed — class specific		(20,036	)
Total expenses after fees waived and/or reimbursed		75,660
Net investment income		329,402
REALIZED AND UNREALIZED GAIN
Net realized gain from investments — affiliated		643,624
Net change in unrealized appreciation on investments — affiliated		2,322,990
Net realized and unrealized gain		2,966,614
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	3,296,016

See notes to financial statements.

FINANCIAL STATEMENTS 7

Statements of Changes in Net Assets

	BlackRock iShares® Equity Appreciation V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	329,402		$	202,833
Net realized gain (loss)		643,624			(209,490	)
Net change in unrealized appreciation (depreciation)		2,322,990			979,801
Net increase in net assets resulting from operations		3,296,016			973,144
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(289,582	)		(176,891	)
Class III		(33,311	)		(21,981	)
From return of capital:
Class I		(8,974	)		(3,409	)
Class III		(1,133	)		(470	)
Decrease in net assets resulting from distributions to shareholders		(333,000	)		(202,751	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		3,825,864			4,632,288
NET ASSETS
Total increase in net assets		6,788,880			5,402,681
Beginning of year		12,853,109			7,450,428
End of year	$	19,641,989		$	12,853,109
Undistributed net investment income, end of year	$	11,260		$	4,751

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock iShares® Equity Appreciation V.I. Fund
	Class I
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	9.81		$	9.12		$	9.93		$	10.00
Net investment income(b)		0.22			0.19			0.20			0.21
Net realized and unrealized gain (loss)		1.93			0.66			(0.84	)		(0.17	)
Net increase (decrease) from investment operations		2.15			0.85			(0.64	)		0.04
Distributions:(c)
From net investment income		(0.21	)		(0.16	)		(0.16	)		(0.11	)
From return of capital		(0.00	)(d)		(0.00	)(d)		(0.01	)		—
Total distributions		(0.21	)		(0.16	)		(0.17	)		(0.11	)
Net asset value, end of period	$	11.75		$	9.81		$	9.12		$	9.93
Total Return:(e)
Based on net asset value		21.87	%		9.31	%		(6.50	)%		0.37	%(f)
Ratios to Average Net Assets:(g)
Total expenses		1.02	%		1.29	%		2.08	%		7.84	%(h),(i)
Total expenses after fees waived and/or reimbursed		0.45	%		0.45	%		0.62	%		0.75	%(h)
Net investment income		1.99	%		2.06	%		1.98	%		3.04	%(h)
Supplemental Data:
Net assets, end of period (000)	$	17,353		$	11,305		$	6,948		$	3,749
Portfolio turnover rate		57	%		59	%		76	%		16	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.18	%		0.20	%		0.30	%		0.27	%

^(h)  Annualized.

⁽ⁱ⁾  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class I would have been 8.47%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 9

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock iShares® Equity Appreciation V.I. Fund
	Class III
	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Net asset value, beginning of period	$	9.78		$	9.10		$	9.92		$	10.00
Net investment income(b)		0.18			0.19			0.25			0.21
Net realized and unrealized gain (loss)		1.93			0.63			(0.91	)		(0.19	)
Net increase (decrease) from investment operations		2.11			0.82			(0.66	)		0.02
Distributions:(c)
From net investment income		(0.18	)		(0.14	)		(0.15	)		(0.10	)
From return of capital		(0.00	)(d)		(0.00	)(d)		(0.01	)		—
Total distributions		(0.18	)		(0.14	)		(0.16	)		(0.10	)
Net asset value, end of period	$	11.71		$	9.78		$	9.10		$	9.92
Total Return:(e)
Based on net asset value		21.56	%		9.05	%		(6.70	)%		0.16	%(f)
Ratios to Average Net Assets:(g)
Total expenses		1.32	%		1.44	%		2.18	%		10.67	%(h),(i)
Total expenses after fees waived and/or reimbursed		0.70	%		0.70	%		0.81	%		1.00	%(h)
Net investment income		1.67	%		2.06	%		2.58	%		3.01	%(h)
Supplemental Data:
Net assets, end of period (000)	$	2,289		$	1,548		$	502		$	22
Portfolio turnover rate		57	%		59	%		76	%		16	%

^(a)  Commencement of operations.

^(b)  Based on average shares outstanding.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Amount is greater than $(0.005) per share.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,									Period 04/30/2014 (a) to 12/31/2014
	2017			2016			2015
Investments in underlying funds		0.18	%		0.20	%		0.30	%		0.27	%

^(h)  Annualized.

⁽ⁱ⁾  Organization and/or offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Class III would have been 11.83%.

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock iShares^® Equity Appreciation V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

On November 15, 2017, the Board of Directors the Company approved a proposal to close the Fund to new investors and thereafter to liquidate the Fund. Effective December 19, 2017, the Fund is no longer accepting purchase orders from new investors. The liquidation is expected to occur on or about March 29, 2018.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The portion of distributions, if any, that exceeds a fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Exchange-traded funds (“ETFs”) traded on a recognized securities exchange are valued at the official closing price each day, if available. For ETFs traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. ETFs traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair

NOTESTO FINANCIAL STATEMENTS 11

Notes to Financial Statements  (continued)

value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as affiliated investment companies in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

As of December 31, 2017, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received  (a)			Net Amount
JP Morgan Securities LLC	$	1,784,408	$	(1,784,408	)	$	—

^(a)  Cash collateral with a value of $1,823,575 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.150	%
$1 Billion — $3 Billion		0.140
$3 Billion — $5 Billion		0.135
Greater than $5 Billion		0.130

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $4,731.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III		Total
$	32,524	$	4,986	$	37,510

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. In addition, the Manager has contractually agreed to waive the management fee on assets estimated to be attributable to the Fund’s investments in other equity and fixed-income mutual funds managed by BlackRock or its affiliates, if any. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $55.

For the year ended December 31, 2017, the Fund reimbursed the Manager $122 for certain accounting services, which is included in accounting services in the Statement of Operations.

With respect to the Fund, the Manager has contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class III
	0.45%		0.70%

NOTESTO FINANCIAL STATEMENTS 13

Notes to Financial Statements  (continued)

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, the Manager waived and/or reimbursed $82,152, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	17,509		$2,527	$	20,036

With respect to the contractual expense limitation, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:

(1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and

(2) the Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.

This repayment applies only to the contractual expense limitation on net expenses and does not apply to any voluntary waivers that may be in effect from time to time.

On December 31, 2017, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement were as follows:

	Expiring December 31,
	2018		2019
Fund Level	$	65,572	$	82,152
Class I	$	15,434	$	17,509
Class III	$	759	$	2,527

The following fund level and class specific waivers and/or reimbursements previously recorded by the fund, which were subject to recoupment by the Manager, expired on December 31, 2017:

Fund Level	$	79,049
Class I	$	12,427
Class III	$	168

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $2,172 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

6. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $13,367,436 and $9,541,236, respectively.

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for the period ended December 31, 2014 and for each of the three years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	322,893	$	198,872
Tax return of capital		10,107		3,879
	$	333,000	$	202,751

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Capital loss carryforward	$	(115,656	)
Net unrealized gains1		2,994,709
	$	2,879,053

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

As of December 31, 2017, the Fund had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains $115,656.

During the year ended December 31, 2017, the Fund utilized $558,008 of its capital loss carryforward.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	18,558,400
Gross unrealized appreciation	$	2,994,709
Gross unrealized depreciation		—
Net unrealized appreciation	$	2,994,709

8. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Class I	Shares			Amount			Shares			Amount
Shares sold		522,549		$	5,562,805			491,275		$	4,630,793
Shares issued in reinvestment of distributions		25,409			298,556			18,379			180,300
Shares redeemed		(223,469	)		(2,447,280	)		(119,440	)		(1,139,978	)
Net increase		324,489		$	3,414,081			390,214		$	3,671,115
Class III
Shares sold		64,223		$	689,644			119,182		$	1,115,318
Shares issued in reinvestment of distributions		2,941			34,444			2,295			22,451
Shares redeemed		(29,859	)		(312,305	)		(18,438	)		(176,596	)
Net increase		37,305		$	411,783			103,039		$	961,173
Total Net Increase		361,794		$	3,825,864			493,253		$	4,632,288

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock iShares Equity Appreciation V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock iShares Equity Appreciation V.I. Fund, of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the periods presented, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 1 to the financial statements, on November 15, 2017, the Board of Directors approved a proposal to close the Fund to new investors and thereafter liquidate the Fund on or about March 29, 2018.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 17

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Large Cap Focus Growth V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Large Cap Focus Growth V.I. Fund

Investment Objective

BlackRock Large Cap Focus Growth V.I. Fund’s (the “Fund”) investment objective is to seek long-term capital growth.

On March 27, 2017, the Fund’s Board approved a proposal to change the name of BlackRock Large Cap Growth V.I. Fund to BlackRock Large Cap Focus Growth V.I. Fund. The Board also approved certain changes to the Fund’s investment strategies. These changes were effective on June 12, 2017.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its benchmark, the Russell 1000^® Growth Index.

What factors influenced performance?

In sector terms, industrials and financials detracted from relative performance during the annual period. Weakness among professional services and electrical equipment holdings, coupled with an underweight to aerospace & defense, hindered returns in industrials. Within financials, banks were the main drag. Conversely, information technology (IT) was the prime contributor to performance due to strength among internet software & services and semiconductor holdings. Stock selection and an underweight to the consumer staples sector also proved advantageous.

On a stock-specific basis, Equifax Inc. and First Republic Bank were top detractors. Equifax shares declined after the company disclosed that data (social security numbers and birthdays) of 145 million Americans had been stolen by criminals due to failure by Equifax to properly maintain its software. In the investment adviser’s view, it is likely that the long-term ongoing impact of this breach on the majority of Equifax’s B2B businesses will be minimal; however, it is unclear what the more near-term costs will be (e.g. litigation and remediation). First Republic Bank had a strong 2017 third quarter, but the stock underperformed as cost growth was higher than expectations due to investments the company is making in its franchise (better technology), and net interest income margin was modestly lower than expected. Concerns that President Trump’s tax policy on the deductibility of mortgage interest would dampen demand for loans also weighed on sentiment. None of these factors alter the investment adviser’s long-term expectations that First Republic Bank will continue to take share in the high net worth retail banking segment with its unique model and very low market share.

Positions in Domino’s Pizza Inc. and Boston Scientific Corp. also weighed on returns, as did an underweight to Boeing Co.

The top individual contributors in the reporting period were IT holdings Tencent Holdings Ltd. and Activision Blizzard Inc. Tencent outperformed after several quarters of accelerating revenue growth. The company exceeded expectations in almost every segment (payments, mobile games, advertising and cloud). The investment adviser maintains a material overweight in the shares. Activision shares gained, most notably during the first half of the year, following strong earnings performance and increased investor confidence in video game secular growth.

Additional contributions came from positions in Lam Research Corp. and Centene Corp., as well as an underweight to Celgene Corp.

Describe recent portfolio activity.

During the 12-month period, the Fund’s exposure to the IT sector substantially increased, particularly within internet software & services, software and IT services. Exposure to financials increased as well, notably banks and diversified financial services. The largest reduction was in the health care sector, where biotechnology and health care providers & services exposure declined. The weighting in consumer staples also decreased, largely with respect to tobacco and food & staples retailing.

Describe portfolio positioning at period end.

Relative to the Russell 1000^® Growth Index, the Fund ended the period with its largest sector overweight in financials, followed by consumer discretionary and IT. The most notable underweights were in industrials and consumer staples.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Large Cap Focus Growth V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance related fees and expenses.

^(b)  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 large cap equity securities and derivatives that have similar economic characteristics to such securities. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name BlackRock Large Cap Growth V.I. Fund.

^(c)  An unmanaged index that measures the performance of the large cap growth segment of the U.S. equity universe and consists of those Russell 1000^® securities with higher price-to-book ratios and higher forecasted growth values.

Performance Summary for the Period Ended December 31, 2017

	6-Month			Average Annual Total Returns
	Total Returns (b)			1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		12.97	%		29.56	%		17.03	%		8.45	%
Class III(a)		12.86			29.23			16.75			8.18
Russell 1000® Growth Index		14.23			30.21			17.33			10.00

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to June 12, 2017 are the returns of the Fund when it followed different investment strategies under the name BlackRock Large Cap Growth V.I. Fund.

^(b)  For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,129.70	$	4.99	$	1,000.00	$	1,020.52	$	4.74		0.93	%
Class III		1,000.00		1,128.60		6.38		1,000.00		1,019.21		6.06		1.19

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock Large Cap Focus Growth V.I. Fund

Portfolio Information as of December 31, 2017

SECTOR ALLOCATION

Sector	Percent of Net Assets
Information Technology		40	%
Consumer Discretionary		22
Health Care		13
Financials		7
Industrials		7
Consumer Staples		4
Materials		3
Energy		2
Real Estate		1
Short-Term Securities		2
Liabilities in Excess of Other Assets		(1	)

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

DERIVATIVE FINANCIAL INSTRUMENTS 5

Schedule of Investments December 31, 2017 BlackRock Large Cap Focus Growth V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 99.8%
Airlines — 1.1%
Southwest Airlines Co.		25,561	$	1,672,968
Banks — 5.4%
Bank of America Corp.		104,027		3,070,877
First Republic Bank		24,773		2,146,333
US Bancorp		22,888		1,226,339
Wells Fargo & Co.		31,617		1,918,203
				8,361,752
Beverages — 4.3%
Constellation Brands, Inc., Class A		19,744		4,512,886
Dr Pepper Snapple Group, Inc.		21,851		2,120,858
				6,633,744
Biotechnology — 3.1%(a)
Alexion Pharmaceuticals, Inc.		22,990		2,749,374
Vertex Pharmaceuticals, Inc.		14,082		2,110,329
				4,859,703
Chemicals — 1.4%
DowDuPont, Inc.		30,714		2,187,451
Construction Materials — 1.9%
Vulcan Materials Co.		23,387		3,002,189
Diversified Financial Services — 2.0%
Berkshire Hathaway, Inc., Class B(a)		15,956		3,162,798
Energy Equipment & Services — 2.1%
Halliburton Co.		66,514		3,250,539
Equity Real Estate Investment Trusts (REITs) — 0.8%
Equinix, Inc.		2,750		1,246,355
Health Care Equipment & Supplies — 1.4%
Boston Scientific Corp.(a)		90,513		2,243,817
Health Care Providers & Services — 5.3%
Centene Corp.(a)		6,825		688,506
UnitedHealth Group, Inc.		34,079		7,513,056
				8,201,562
Hotels, Restaurants & Leisure — 1.8%
Domino’s Pizza, Inc.		14,443		2,729,149
Industrial Conglomerates — 1.3%
Honeywell International, Inc.		13,078		2,005,642
Internet & Direct Marketing Retail — 13.7%(a)
Amazon.com, Inc.		10,642		12,445,500
Netflix, Inc.		20,084		3,855,325
Priceline Group, Inc. (The)		2,841		4,936,919
				21,237,744
Internet Software & Services — 13.8%
Alibaba Group Holding Ltd., ADR(a)(b)		6,663		1,148,901
Alphabet, Inc., Class A(a)		5,367		5,653,598
Alphabet, Inc., Class C(a)		2,078		2,174,419
Facebook, Inc., Class A(a)		31,746		5,601,899
MercadoLibre, Inc.(b)		3,774		1,187,527
Tencent Holdings Ltd.		109,046		5,643,998
				21,410,342
IT Services — 6.7%
PayPal Holdings, Inc.(a)		35,469		2,611,228
Visa, Inc., Class A		67,957		7,748,457
				10,359,685
Life Sciences Tools & Services — 1.3%
Illumina, Inc.(a)		9,393		2,052,277

Security	Shares		Value
Machinery — 1.0%
Caterpillar, Inc.		10,006	$	1,576,746
Media — 1.4%
Comcast Corp., Class A		53,480		2,141,874
Pharmaceuticals — 1.3%
Zoetis, Inc.		28,528		2,055,157
Professional Services — 1.7%
Equifax, Inc.		22,404		2,641,880
Road & Rail — 2.1%
Union Pacific Corp.		24,254		3,252,461
Semiconductors & Semiconductor Equipment — 5.2%
ASML Holding NV, NYRS(b)		12,399		2,155,194
Broadcom Ltd.		6,039		1,551,419
NVIDIA Corp.(b)		13,885		2,686,748
Teradyne, Inc.		38,064		1,593,740
				7,987,101
Software — 12.4%
Activision Blizzard, Inc.		22,640		1,433,565
Adobe Systems, Inc.(a)		17,040		2,986,090
Autodesk, Inc.(a)		28,445		2,981,889
Electronic Arts, Inc.(a)		17,987		1,889,714
Microsoft Corp.		115,904		9,914,428
				19,205,686
Specialty Retail — 4.9%
Home Depot, Inc. (The)		20,058		3,801,593
Ulta Beauty, Inc.(a)		17,296		3,868,423
				7,670,016
Technology Hardware, Storage & Peripherals — 2.4%
Apple, Inc.		21,726		3,676,691
Total Common Stocks — 99.8% (Cost: $120,545,766)				154,825,329
Total Long-Term Investments — 99.8% (Cost: $120,545,766)				154,825,329
Short-Term Securities — 1.5%(c)(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		82,464		82,464
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)		2,198,635		2,198,415
Total Short-Term Securities — 1.5% (Cost: $2,280,879)				2,280,879
Total Investments — 101.3% (Cost: $122,826,645)				157,106,208
Liabilities in Excess of Other Assets — (1.3)%				(1,978,331	)
Net Assets — 100.0%			$	155,127,877

^(a)  Non-income producing security.

^(b)  Security, or a portion of the security, is on loan.

^(c)  Annualized 7-day yield as of period end.

^(d)  Security was purchased with the cash collateral from loaned securities.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Large Cap Focus Growth V.I. Fund

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		4,472,371		(4,389,907	)		82,464	$	82,464	$	19,776		$	9		$	—
SL Liquidity Series, LLC, Money Market Series		1,044,082		1,154,553			2,198,635		2,198,415		32,745	(b)		(1,070	)		16
								$	2,280,879	$	52,521		$	(1,061	)	$	16

^(a)  Includes net capital gain distributions, if applicable.

^(b)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Portfolio Abbreviations

ADR — American Depositary Receipts

NYRS — New York Registered Shares

REIT — Real Estate Investment Trust

Derivative Financial Instruments Categorized by Risk Exposure

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Net Realized Gain from:
Futures contracts	$	—	$	—	$	117,316	$	—	$	—	$	—	$	117,316
Total	$	—	$	—	$	117,316	$	—	$	—	$	—	$	117,316
Net Change in Unrealized Appreciation (Depreciation) on:
Future Contracts	$	—	$	—	$	19,346	$	—	$	—	$	—	$	19,346
	$	—	$	—	$	19,346	$	—	$	—	$	—	$	19,346

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	530,820

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Airlines	$	1,672,968	$	—	$	—	$	1,672,968
Banks		8,361,752		—		—		8,361,752
Beverages		6,633,744		—		—		6,633,744
Biotechnology		4,859,703		—		—		4,859,703
Chemicals		2,187,451		—		—		2,187,451
Construction Materials		3,002,189		—		—		3,002,189
Diversified Financial Services		3,162,798		—		—		3,162,798
Energy Equipment & Services		3,250,539		—		—		3,250,539
Equity Real Estate Investment Trusts (REITs)		1,246,355		—		—		1,246,355

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Large Cap Focus Growth V.I. Fund

	Level 1		Level 2		Level 3		Total
Health Care Equipment & Supplies	$	2,243,817	$	—	$	—	$	2,243,817
Health Care Providers & Services		8,201,562		—		—		8,201,562
Hotels, Restaurants & Leisure		2,729,149		—		—		2,729,149
Industrial Conglomerates		2,005,642		—		—		2,005,642
Internet & Direct Marketing Retail		21,237,744		—		—		21,237,744
Internet Software & Services		15,766,344		5,643,998		—		21,410,342
IT Services		10,359,685		—		—		10,359,685
Life Sciences Tools & Services		2,052,277		—		—		2,052,277
Machinery		1,576,746		—		—		1,576,746
Media		2,141,874		—		—		2,141,874
Pharmaceuticals		2,055,157		—		—		2,055,157
Professional Services		2,641,880		—		—		2,641,880
Road & Rail		3,252,461		—		—		3,252,461
Semiconductors & Semiconductor Equipment		7,987,101		—		—		7,987,101
Software		19,205,686		—		—		19,205,686
Specialty Retail		7,670,016		—		—		7,670,016
Technology Hardware, Storage & Peripherals		3,676,691		—		—		3,676,691
Short-Term Securities		82,464		—		—		82,464
Subtotal	$	149,263,795	$	5,643,998	$	—	$	154,907,793
Investments valued at NAV(a)							$	2,198,415
Total Investments							$	157,106,208

^(a)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Large Cap Focus Growth V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $2,152,824) (cost — $120,545,766)	$	154,825,329
Investments at value — affiliated (cost — $2,280,879)		2,280,879
Foreign currency at value (cost — $344)		350
Receivables:
Securities lending income — affiliated		475
Capital shares sold		435,546
Dividends — affiliated		970
Dividends — unaffiliated		25,903
Prepaid expenses		732
Total assets		157,570,184
LIABILITIES
Bank overdraft		1,383
Cash collateral on securities loaned at value		2,197,034
Payables:
Capital shares redeemed		3,815
Custodian fees		23,279
Investment advisory fees		85,068
Officer’s and Directors’ fees		4,144
Other accrued expenses		69,072
Other affiliates		602
Professional fees		13,683
Distribution fees		11,268
Transfer agent fees		32,959
Total liabilities		2,442,307
NET ASSETS	$	155,127,877
NET ASSETS CONSIST OF
Paid-in capital	$	117,437,051
Undistributed net investment income		17,082
Accumulated net realized gain		3,394,175
Net unrealized appreciation (depreciation)		34,279,569
NET ASSETS	$	155,127,877
NET ASSET VALUE
Class I — Based on net assets of $100,307,973 and 6,912,462 shares outstanding, 100 million shares authorized, $0.10 par value	$	14.51
Class III — Based on net assets of $54,819,904 and 3,816,732 shares outstanding, 100 million shares authorized, $0.10 par value	$	14.36

See notes to financial statements.

FINANCIAL STATEMENTS 9

Statement of Operations

Year Ended December 31, 2017

	BlackRock Large Cap Focus Growth V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	19,776
Dividends — unaffiliated		1,365,676
Securities lending income — affiliated — net		32,745
Foreign taxes withheld		(3,105	)
Total investment income		1,415,092
EXPENSES
Investment advisory		929,466
Transfer agent — class specific		283,717
Distribution — class specific		118,762
Professional		57,191
Printing		43,203
Accounting services		40,675
Custodian		30,252
Directors and Officer		22,336
Transfer agent		5,000
Miscellaneous		44,929
Total expenses		1,575,531
Less:
Transfer agent fees reimbursed — class specific		(182,871	)
Fees waived and/or reimbursed by the Manager		(1,935	)
Total expenses after fees waived and/or reimbursed		1,390,725
Net investment income		24,367
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(1,070	)
Investments — unaffiliated		27,091,042
Capital gain distributions from investment companies — affiliated		9
Foreign currency transactions		1,255
Futures contracts		117,316
		27,208,552
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		16
Investments — unaffiliated		9,213,751
Foreign currency translations		6
Futures contracts		19,346
		9,233,119
Net realized and unrealized gain		36,441,671
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	36,466,038

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock Large Cap Focus Growth V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	24,367		$	764,185
Net realized gain		27,208,552			12,038,187
Net change in unrealized appreciation (depreciation)		9,233,119			(3,672,031	)
Net increase in net assets resulting from operations		36,466,038			9,130,341
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(39,574	)		(578,884	)
Class III		(2,263	)		(173,673	)
From net realized gain:
Class I		(16,352,959	)		(7,321,271	)
Class III		(8,778,098	)		(3,320,713	)
Decrease in net assets resulting from distributions to shareholders		(25,172,894	)		(11,394,541	)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from capital share transactions		17,142,344			(7,345,802	)
NET ASSETS
Total increase (decrease) in net assets		28,435,488			(9,610,002	)
Beginning of year		126,692,389			136,302,391
End of year	$	155,127,877		$	126,692,389
Undistributed net investment income, end of year	$	17,082		$	16,427

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 11

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Large Cap Focus Growth V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	13.35		$	13.59		$	14.08		$	14.22		$	11.54
Net investment income(a)		0.02			0.09			0.08			0.09			0.09
Net realized and unrealized gain		3.92			0.99			0.31			1.92			3.82
Net increase from investment operations		3.94			1.08			0.39			2.01			3.91
Distributions:(b)
From net investment income		(0.01	)		(0.10	)		(0.09	)		(0.08	)		(0.10	)
From net realized gain		(2.77	)		(1.22	)		(0.79	)		(2.07	)		(1.13	)
Total distributions		(2.78	)		(1.32	)		(0.88	)		(2.15	)		(1.23	)
Net asset value, end of year	$	14.51		$	13.35		$	13.59		$	14.08		$	14.22
Total Return:(c)
Based on net asset value		29.56	%		7.89	%		2.73	%		14.16	%		33.92	%
Ratios to Average Net Assets:
Total expenses		1.01	%(d)		0.96	%(d)		0.95	%		0.96	%		0.97	%
Total expenses after fees waived and/or reimbursed		0.89	%(d)		0.84	%(d)		0.82	%		0.83	%		0.84	%
Net investment income		0.10	%(d)		0.68	%(d)		0.59	%		0.57	%		0.70	%
Supplemental Data:
Net assets, end of year (000)	$	100,308		$	87,346		$	98,485		$	108,329		$	107,378
Portfolio turnover rate		95	%		37	%		35	%		51	%		36	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Large Cap Focus Growth V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	13.24		$	13.50		$	13.99		$	14.14		$	11.49
Net investment income (loss)(a)		(0.02	)		0.06			0.05			0.05			0.06
Net realized and unrealized gain		3.88			0.96			0.30			1.92			3.79
Net increase from investment operations		3.86			1.02			0.35			1.97			3.85
Distributions:(b)
From net investment income		(0.00	)(c)		(0.06	)		(0.05	)		(0.05	)		(0.07	)
From net realized gain		(2.74	)		(1.22	)		(0.79	)		(2.07	)		(1.13	)
Total distributions		(2.74	)		(1.28	)		(0.84	)		(2.12	)		(1.20	)
Net asset value, end of year	$	14.36		$	13.24		$	13.50		$	13.99		$	14.14
Total Return:(d)
Based on net asset value		29.23	%		7.54	%		2.51	%		13.96	%		33.58	%
Ratios to Average Net Assets:
Total expenses		1.28	%(e)		1.22	%(e)		1.21	%		1.22	%		1.22	%
Total expenses after fees waived and/or reimbursed		1.14	%(e)		1.09	%(e)		1.07	%		1.09	%		1.09	%
Net investment income (loss)		(0.16	)%(e)		0.42	%(e)		0.35	%		0.32	%		0.45	%
Supplemental Data:
Net assets, end of year (000)	$	54,820		$	39,346		$	37,818		$	32,090		$	20,864
Portfolio turnover rate		95	%		37	%		35	%		51	%		36	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Amount is greater than $(0.005) per share.

^(d)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(e)  Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 13

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Large Cap Focus Growth V.I. Fund (the “Fund”) (formerly known as BlackRock Large Cap Growth V.I. Fund). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Foreign Currency: The Fund’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of the Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market — corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Deutsche Bank Securities Inc.	$	19,350	$	(19,350	)	$	—
JP Morgan Securities LLC		943,980		(943,980	)		—
Merrill Lynch, Pierce, Fenner & Smith		1,137,348		(1,137,348	)		—
Morgan Stanley		52,146		(52,146	)		—
	$	2,152,824	$	(2,152,824	)	$	—

^(a)  Collateral with a value of $2,197,034 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.65	%
$1 Billion — $3 Billion		0.61
$3 Billion — $5 Billion		0.59
$5 Billion — $10 Billion		0.57
Greater than $10 Billion		0.55

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $118,762.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III	Total
$	188,299	$95,418	$	283,717

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $1,935.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2019. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $1,398 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.07	%
Class III	0.07

The Manager has agreed not to reduce or discontinue this contractual reimbursement through April 30, 2019 unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements are as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	120,899	$	61,972	$	182,871

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class III
	1.25%	1.50%

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $11,992 for securities lending agent services.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to lend under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the period ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	12,147,796
Sales		12,312,319
Net realized gain		3,017,278

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $133,607,135 and $137,247,500, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions and the reclassification of distributions were reclassified to the following accounts:

Undistributed net investment income	$	18,125
Accumulated net realized gain	$	(18,125	)

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	2,327,022	$	752,557
Long-term capital gains		22,845,872		10,641,984
	$	25,172,894	$	11,394,541

As of period end, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	513,489
Undistributed long-term capital gains		2,891,852
Net unrealized gains(a)		34,285,485
	$	37,690,826

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and timing and recognition of partnership income.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	122,820,729
Gross unrealized appreciation	$	36,437,545
Gross unrealized depreciation		(2,152,066	)
Net unrealized appreciation (depreciation)	$	34,285,479

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued)

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: As of period end, the Fund invested a significant portion of its assets in securities in the information technology sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		299,156		$	4,606,186			218,881		$	2,963,754
Shares issued in reinvestment of distributions		1,121,874			16,392,533			586,592			7,900,155
Shares redeemed		(1,052,862	)		(16,192,812	)		(1,505,534	)		(20,544,211	)
Net increase (decrease)		368,168		$	4,805,907			(700,061	)	$	(9,680,302	)
Class III
Shares sold		722,465		$	10,907,398			529,948		$	6,982,045
Shares issued in reinvestment of distributions		607,374			8,780,361			261,607			3,494,386
Shares redeemed		(485,328	)		(7,351,322	)		(621,016	)		(8,141,931	)
Net increase		844,511		$	12,336,437			170,539		$	2,334,500
Total Net Increase (Decrease)		1,212,679		$	17,142,344			(529,522	)	$	(7,345,802	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Large Cap Focus Growth V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Large Cap Focus Growth V.I. Fund (formerly, BlackRock Large Cap Growth V.I. Fund) of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOFTHE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 21

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Managed Volatility V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Managed Volatility V.I. Fund

Investment Objective

BlackRock Managed Volatility V.I. Fund’s (the “Fund”) investment objective is to seek a level of current income and degree of stability of principal not normally available from an investment solely in equity securities, as well as the opportunity for capital appreciation greater than is normally available from an investment solely in debt securities.

At a meeting held on November 15, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) and, at a meeting held on December 1, 2017, the Board of Trustees of HIMCO VIT Portfolio Diversifier Fund (the “Target Fund”) approved a reorganization of the Target Fund with and into the Fund. The reorganization is subject to shareholder approval by the Target Fund’s shareholders and certain other conditions.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its blended benchmark (50% MSCI All Country World Index/50% Citi World Government Bond Index (hedged into USD) and outperformed its performance benchmark, the ICE BofAML 3-Month U.S. Treasury Bill Index.

The Fund held less overall exposure to broad stocks and bonds than the blended benchmark over the period. While this helped the Fund retain a lower correlation to broad markets (and enabled the Fund to maintain relatively low levels of risk), it also meant that the Fund’s return underperformed that of the blended benchmark over the period.

What factors influenced performance?

A cautious view on the Canadian dollar detracted from returns as the Bank of Canada looked past weakness in inflation and moved toward a more hawkish monetary policy stance over the 12-month period. Meanwhile, a tilt away from European fixed income acted as an additional headwind, as a persistent dovish stance by the European Central Bank and ongoing softness in inflation data supported the asset class.

The Fund’s overall exposure to equities supported returns as global stocks advanced against a backdrop of strong global growth, benign inflationary trends and supportive financial conditions. Within equities, a tilt to Japanese stocks boosted returns, particularly during the second half of the period, as market participants were encouraged by persistent strength in Japanese economic data and a convincing election victory for incumbent Prime Minister Shinzo Abe. Currency positioning was also a key contributor to returns during the 12 months. Specifically, a cautious view on the U.S. dollar boosted performance as core inflation softened during the first half of the year and optimistic expectations around fiscal stimulus failed to materialize. In addition, a constructive view on the euro boosted returns early in the period as European growth accelerated strongly. Within fixed income, an allocation to Australian bonds added to performance as inflation data disappointed and the Reserve Bank of Australia lagged the shift toward monetary tightening across other developed economies.

Describe recent portfolio activity.

The Fund adopted a more cautious stance on broad fixed income as the 12-month period progressed. The combination of disappointing inflation data and a moderation in global growth momentum supported a move lower in bond yields during the first half of the year. Entering the third quarter of 2017, signs of a recovery in economic activity and inflation globally led the Fund to adopt a more conservative view on government bonds, particularly given the outperformance of the asset class early in the year. Within equities, the Fund steadily increased its allocation to Japanese equities throughout the first half of the year on the view that investors were underestimating the strength of Japanese economic data. Japanese stocks performed very strongly during the early part of the fourth quarter of 2017 and the Fund reduced its allocation toward the end of the year. In terms of currencies, the Fund held sizable exposure to the euro against the U.S. dollar during the first half of the year as the European economy was strongly accelerating. This exposure supported returns and the Fund took profits on the position entering the second half of the year.

The Fund held a relatively high allocation to cash as a means of reducing overall portfolio volatility and in conjunction with less directional positioning with respect to both equities and fixed income. The cash position did not have a material impact on performance.

Describe portfolio positioning at period end.

The Fund held a preference for stocks relative to bonds at the end of the period, on the view that the expansion of the global economy has become increasingly broad-based. Within equities, the Fund favored exposure to U.S. and Japanese stocks given strength in economic activity across these two economies. Within fixed income, the Fund maintained a cautious stance on U.S. bonds given expectations for further monetary tightening.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Net Assets
Investment Companies		67	%
Money Market Funds		37
Non-Agency Mortgage-Backed Securities		—	(a)
Asset-Backed Securities		—	(a)
Other Interests		—	(a)
Liabilities in Excess of Other Assets		(4	)

^(a)  Representing less than 0.5% of the Fund’s net assets.

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub-classifications for reporting ease.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Managed Volatility V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  The Fund uses an asset allocation strategy, investing various percentages of its portfolio in three major categories: stocks, bonds and money market investments. The Fund’s total returns prior to January 22, 2013 are the returns of the Fund when it followed different investment strategies under the name BlackRock Balanced Capital V.I. Fund.

^(c)  A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising of 23 developed and 23 emerging market country indexes.

^(d)  A market capitalization weighted bond index consisting of government bond markets of 23 countries, including the United States.

^(e)  A customized weighted index comprised of the returns of 50% MSCI ACWI/50% Citigroup WGBI (hedged into USD).

^(f)  An unmanaged index that tracks 3-month U.S. Treasury securities. Effective June 2, 2014, the ICE BofAML 3-Month U.S. Treasury Bill Index was added to the performance benchmarks against which the Fund measures its performance.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		2.42	%		4.98	%		4.11	%		2.48	%
50% MSCI ACWI/50% Citigroup WGBI (hedged into USD)		6.18			12.59			7.04			4.69
MSCI ACWI		11.21			23.97			10.80			4.65
Citigroup WGBI (hedged into USD)		1.33			2.14			3.11			3.89
ICE BofAML 3-Month U.S. Treasury Bill Index		0.55			0.86			0.27			0.39

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to January 22, 2013 are the returns of the Fund when it followed different investment strategies under the name BlackRock Balanced Capital V.I. Fund.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the

redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the  Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the  Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,024.20	$	5.00	$	1,000.00	$	1,020.27	$	4.99		0.98	%

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated

FUND SUMMARY 3

Disclosure of Expenses BlackRock Managed Volatility V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments   December 31, 2017 BlackRock Managed Volatility V.I. Fund (Percentages shown are based on Net Assets)

Security		Par (000)		Value
Asset-Backed Securities — 0.2%(a)
CWABS, Inc. Asset-Backed Certificates Trust, Series 2004-5, Class A, 2.45%, 10/25/34	USD		7	$	6,861
Morgan Stanley ABS Capital I, Inc. Trust, Series 2005-HE1, Class A2MZ, 2.15%, 12/25/34			8		7,518
Structured Asset Investment Loan Trust, Series 2004-8, Class M4, 3.05%, 09/25/34			9		9,031
Structured Asset Securities Corp. Mortgage Pass-Through Certificates, Series 2004-23XS, Class 2A1, 1.85%, 01/25/35			7		6,953
Total Asset-Backed Securities — 0.2% (Cost: $30,958)					30,363
		Shares
Investment Companies — 66.9%
iShares 1-3 Year Credit Bond ETF(j)			15,923		1,664,590
iShares 3-7 Year Treasury Bond ETF(j)			6,491		792,941
iShares Core U.S. Aggregate Bond ETF(b)(j)			17,278		1,889,004
iShares MSCI EAFE ETF(j)			21,263		1,495,002
SPDR Bloomberg Barclays International Treasury Bond ETF(b)			136,622		3,884,163
Total Investment Companies — 66.9% (Cost: $9,884,516)					9,725,700
		Par (000)
Non-Agency Mortgage-Backed Securities — 0.3%
Collateralized Mortgage Obligations — 0.3%
Alternative Loan Trust, Series 2007-22, Class 2A16, 6.50%, 09/25/37	USD		23		16,095
CSMC Trust, Series 2011-5R, Class 2A1, 3.40%, 08/27/46(a)(c)			15		15,263
Impac Secured Assets Corp., Series 2004-3, Class 1A4, 2.35%, 11/25/34(a)			1		1,371
					32,729
Total Non-Agency Mortgage-Backed Securities — 0.3% (Cost: $33,237)					32,729
		Beneficial Interest (000)
Other Interests — (0.0)%(d)
Capital Markets — (0.0)%
Lehman Brothers Holdings, Inc.(e)(f)(g)	USD		25		—
Total Other Interests — (0.0)%					—
Total Long-Term Investments — 67.4% (Cost: $9,948,711)					9,788,792

Security	Shares		Value
Short-Term Securities — 36.6%(h)(j)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		3,387,049	$	3,387,049
SL Liquidity Series, LLC, Money Market Series, 1.48%(i)		1,935,844		1,935,650
Total Short-Term Securities — 36.6% (Cost: $5,322,699)				5,322,699
Total Investments — 104.0% (Cost: $15,271,410)				15,111,491
Liabilities in Excess of Other Assets — (4.0)%				(575,461	)
Net Assets — 100.0%			$	14,536,030

^(a)  Variable or floating rate security, which interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.

^(b)  Security, or a portion of the security, is on loan.

^(c)  Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(d)  Other interests represent beneficial interests in liquidation trusts and other reorganizational or private entities.

^(e)  Non-income producing security.

^(f)  Issuer filed for bankruptcy and/or is in default.

^(g)  Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

^(h)  Annualized 7-day yield as of period end.

⁽ⁱ⁾  Security was purchased with the cash collateral from loaned securities.

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock Managed Volatility V.I. Fund

^(j)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Fund were as follows:

Affiliate	Shares Held at 12/31/16		Shares Purchased		Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		5,383,858		—		(1,996,809	)(b)		3,387,049	$	3,387,049	$	28,605		$	13		$	—
SL Liquidity Series, LLC, Money Market Series		3,789,314		—		(1,853,470	)(b)		1,935,844		1,935,650		4,635	(c)		(440	)		379
iShares 1-3 Year Credit Bond ETF		15,923		—		—			15,923		1,664,590		27,519			—			(6,369	)
iShares 3-7 Year Treasury Bond ETF		6,491		—		—			6,491		792,941		11,975			—			(2,271	)
iShares Core U.S. Aggregate Bond ETF		17,278		—		—			17,278		1,889,004		43,839			—			21,943
iShares MSCI EAFE ETF		21,263		—		—			21,263		1,495,002		38,365			—			267,489
										$	11,164,236	$	154,938		$	(427	)	$	281,171

^(a)  Includes net capital gain distributions, if applicable.

^(b) Represents net shares sold.

^(c) Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
Nikkei 225 Index		2		03/08/18	$	404	$	3,274
S&P 500 E-Mini Index		7		03/16/18		937		7,751
								11,025
Short Contracts
Euro-Buxl		2		03/08/18		393		6,685
EURO STOXX 50 Index		18		03/16/18		754		15,706
U.S. Treasury 10 Year Note		11		03/20/18		1,365		4,280
U.S. Treasury Ultra Bond		11		03/20/18		1,844		(4,427	)
								22,244
							$	33,269

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	61,582	USD	47,240	Deutsche Bank AG		03/21/18	$	802
EUR	64,295	USD	76,317	National Australia Bank Ltd.		03/21/18		1,187
USD	45,224	HKD	352,493	Bank of America NA		03/21/18		38
USD	36,580	MXN	710,000	State Street Bank and Trust Co.		03/21/18		969
USD	2,261,533	JPY	253,148,000	Morgan Stanley & Co., Inc.		03/22/18		5,781
								8,777
USD	230,132	AUD	300,000	Deutsche Bank AG		03/21/18		(3,908	)
USD	360,540	CAD	458,000	Deutsche Bank AG		03/21/18		(4,189	)
USD	128,659	CHF	126,000	Morgan Stanley & Co., Inc.		03/21/18		(1,369	)
USD	49,134	DKK	307,846	Deutsche Bank AG		03/21/18		(726	)
USD	2,602,681	EUR	2,192,000	Morgan Stanley & Co., Inc.		03/21/18		(39,666	)
USD	674,158	GBP	500,000	Deutsche Bank AG		03/21/18		(2,653	)
USD	55,762	SEK	467,000	Credit Suisse International		03/21/18		(1,437	)
								(53,948	)
	Net Unrealized Depreciation						$	(45,171	)

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Managed Volatility V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Futures contracts
Net unrealized appreciation(a)	$	—	$	—	$	26,731	$	—	$	10,965	$	—	$	37,696
Forward foreign currency exchange contracts
Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		8,777		—		—		8,777
Total	$	—	$	—	$	26,731	$	8,777	$	10,965	$	—	$	46,473
Liabilities — Derivative Financial Instruments
Futures contracts
Net unrealized depreciation(a)	$	—	$	—	$	—	$	—	$	4,427	$	—	$	4,427
Forward foreign currency exchange contracts
Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		53,948		—		—		53,948
	$	—	$	—	$	—	$	53,948	$	4,427	$	—	$	58,375

^(a)  Includes cumulative appreciation (depreciation) on futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended December 31, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts		Total
Net Realized Gain (Loss) from:
Futures contracts	$	—	$	—	$	232,878		$	(138,417	)	$	(28,559	)	$		$	65,902
Forward foreign currency exchange contracts		—		—		—			(36,230	)		—			—		(36,230	)
Swaps		—		—		(20,358	)		—			—			—		(20,358	)
Total	$	—	$	—	$	212,520		$	(174,647	)	$	(28,559	)	$		$	9,314
Net Change in Unrealized Appreciation (Depreciation) On:
Futures contracts	$	—	$	—	$	49,650		$	(87,072	)	$	24,117		$		$	(13,305	)
Forward foreign currency exchange contracts		—		—		—			(45,969	)		—					(45,969	)
	$	—	$	—	$	49,650		$	(133,041	)	$	24,117		$		$	(59,274	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	7,827,617
Average notional value of contracts — short	$	8,437,541
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	4,992,639
Average amounts sold — in USD	$	169,573	(a)
Total Return Swaps
Average notional value	$	60,061,079

^(a)  Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter end.

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Managed Volatility V.I. Fund

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets		Liabilities
Derivative Financial Instruments:
Future contracts	$	—	$	8,299
Forward foreign currency exchange contracts		8,777		53,948
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	8,777	$	62,247
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		(8,299	)
Total derivative assets and liabilities subject to an MNA	$	8,777	$	53,948

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Received		Cash Collateral Received (b)		Net Amount of Derivative Assets (b)
Bank of America NA	$	38	$	—		$	—	$	—	$	38
Deutsche Bank AG		802		(802	)		—		—		—
Morgan Stanley & Co., Inc.		5,781		(5,781	)		—		—		—
National Australia Bank Ltd.		1,187		—			—		—		1,187
State Street Bank and Trust Co.		969		—			—		—		969
	$	8,777	$	(6,583	)	$	—	$	—	$	2,194

Counterparty	Derivative Liabilities Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities (c)
Credit Suisse International	$	1,437	$	—		$	—	$	—	$	1,437
Deutsche Bank AG		11,476		(802	)		—		—		10,674
Morgan Stanley & Co., Inc.		41,035		(5,781	)		—		—		35,254
	$	53,948	$	(6,583	)	$	—	$	—	$	47,365

^(a)  The amount of derivatives available for offset is limited to the amount of assets and/or liabilities that are subject to an MNA.

^(b)  Net amount represents the net amount receivable from the counterparty in the event of default.

^(c)  Net amount represents the net amount payable from the counterparty in the event of default.

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Managed Volatility V.I. Fund

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	$	—		$	30,363		$	—	$	30,363
Investment Companies		9,725,700			—			—		9,725,700
Non-Agency Mortgage-Backed Securities		—			32,729			—		32,729
Short-Term Securities		3,387,049			—			—		3,387,049
Subtotal	$	13,112,749		$	63,092		$	—	$	13,175,841
Investments valued at NAV(a)										1,935,650
Total Investments									$	15,111,491
Derivative Financial Instruments(b)
Assets:
Equity contracts	$	26,731		$	—		$	—	$	26,731
Foreign currency exchange contracts		—			8,777			—		8,777
Interest rate contracts		10,965			—			—		10,965
Liabilities:
Foreign currency exchange contracts		—			(53,948	)		—		(53,948	)
Interest rate contracts		(4,427	)		—			—		(4,427	)
	$	33,269		$	(45,171	)	$	—	$	(11,902	)

^(a) As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(b)  Derivative financial instruments are futures contracts and forward foreign currency exchange contracts. Futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 9

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Managed Volatility V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $1,897,973) (cost — $4,173,894)	$	3,947,255
Investments at value — affiliated (cost — $11,097,516)		11,164,236
Cash		592
Cash pledged for futures contracts		181,750
Foreign currency at value (cost — $1,326,950)		1,341,636
Receivables:
Securities lending income — affiliated		1,866
Dividends — affiliated		3,015
Unrealized appreciation on:
Forward foreign currency exchange contracts		8,777
Prepaid expenses		64
Other assets		159
Total assets		16,649,350
LIABILITIES
Cash collateral on securities loaned at value		1,935,650
Payables:
Accounting Fees		15,854
Capital shares redeemed		8,944
Printing fees		30,375
Professional fees		46,355
Variation margin on futures contracts		8,299
Investment advisory fees		2,837
Officer’s and Directors’ fees		1,479
Other affiliates		53
Other accrued expenses		9,526
Unrealized depreciation on:
Forward foreign currency exchange contracts		53,948
Total liabilities		2,113,320
NET ASSETS	$	14,536,030
NET ASSETS CONSIST OF
Paid-in capital	$	14,733,410
Distributions in excess of net investment income		(31,377	)
Accumulated net realized loss		(9,100	)
Net unrealized appreciation (depreciation)		(156,903	)
NET ASSETS	$	14,536,030
Class I — Based on net assets of $14,536,030 and 1,060,101 shares outstanding, 100 million shares authorized, $0.10 par value	$	13.71

See notes to financial statements.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock Managed Volatility V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	150,303
Dividends — unaffiliated		17,706
Interest — unaffiliated		314
Securities lending income — affiliated — net		4,635
Total investment income		172,958
EXPENSES
Investment advisory		83,633
Professional		34,616
Printing		30,289
Transfer agent — class specific		29,416
Accounting services		20,977
Directors and Officer		8,528
Transfer agent		5,001
Custodian		4,112
Miscellaneous		7,836
Total expenses		224,408
Less:
Fees waived and/or reimbursed by the Manager		(65,994	)
Transfer agent fees reimbursed — class specific		(29,416	)
Total expenses after fees waived and/or reimbursed		128,998
Net investment income		43,960
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — affiliated		(440	)
Investments — unaffiliated		5,813
Capital gain distributions from investment companies — affiliated		13
Forward foreign currency exchange contracts		(36,230	)
Foreign currency transactions		33,109
Futures contracts		65,902
Swaps . . . . .		(20,358	)
		47,809
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		281,171
Investments — unaffiliated		336,300
Forward foreign currency exchange contracts		(45,969	)
Foreign currency translations		85,887
Futures contracts		(13,305	)
		644,084
Net realized and unrealized gain		691,893
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	735,853

See notes to financial statements.

FINANCIAL STATEMENTS 11

Statements of Changes in Net Assets

	BlackRock Managed Volatility V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	43,960		$	29,723
Net realized gain		47,809			58,388
Net change in unrealized appreciation (depreciation)		644,084			172,795
Net increase in net assets resulting from operations		735,853			260,906
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income		(50,000	)		(135,000	)
From net realized gain		(98,699	)		—
Decrease in net assets resulting from distributions to shareholders		(148,699	)		(135,000	)
CAPITAL SHARE TRANSACTIONS
Shares sold		563,708			402,215
Shares issued in reinvestment of distributions		148,699			135,000
Shares redeemed		(2,658,517	)		(2,947,752	)
Net decrease in net assets derived from capital share transactions		(1,946,110	)		(2,410,537	)
NET ASSETS
Total decrease in net assets		(1,358,956	)		(2,284,631	)
Beginning of year		15,894,986			18,179,617
End of year	$	14,536,030		$	15,894,986
Distributions in excess of net investment income, end of year	$	(31,377	)	$	(31,273	)

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Managed Volatility V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	13.19		$	13.08		$	13.70		$	14.41		$	13.28
Net investment income (loss)(a)		0.04			0.02	(b)		(0.06	)		0.04			0.07
Net realized and unrealized gain (loss)		0.62			0.20			(0.01	)		0.29			1.60
Net increase (decrease) from investment operations		0.66			0.22			(0.07	)		0.33			1.67
Distributions:(c)
From net investment income		(0.05	)		(0.11	)		—			—			(0.13	)
From net realized gain		(0.09	)		—			(0.55	)		(1.04	)		(0.41	)
Total distributions		(0.14	)		(0.11	)		(0.55	)		(1.04	)		(0.54	)
Net asset value, end of year	$	13.71		$	13.19		$	13.08		$	13.70		$	14.41
Total Return:(d)
Based on net asset value		4.98	%		1.71	%(e)		(0.57	)%		2.28	%		12.62	%
Ratios to Average Net Assets:(f)
Total expenses		1.48	%		1.39	%		1.47	%		1.60	%		1.78	%
Total expenses after fees waived and/or reimbursed		0.89	%		0.94	%		1.00	%		1.07	%		1.23	%
Net investment income (loss)		0.29	%		0.18	%(b)		(0.46	)%		0.25	%		0.47	%
Supplemental Data:
Net assets, end of year (000)	$	14,536		$	15,895		$	18,180		$	21,283		$	24,092
Portfolio turnover rate(g)		0	%		1	%		13	%		64	%		241	%

^(a)  Based on average shares outstanding.

^(b)  Net investment income per share the ratio of net investment income to average net assets includes $0.02 per share and 0.19%, respectively, resulting from a one time payment from a third party administrator.

^(c)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(d)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(e)  Includes reimbursements of out of pocket expenses from a third party administrator. Excluding this amount, the Fund’s total return is 1.48%.

^(f)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,
	2017			2016			2015			2014			2013
Investments in underlying funds		0.23	%		0.25	%		0.23	%		0.23	%		0.22	%

^(g)  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2017			2016			2015			2014			2013
Portfolio turnover rate (excluding MDRs)		0	%		1	%		13	%		64	%		229	%

See notes to financial statements.

FINANCIAL HIGHLIGHTS 13

Notes to Financial Statements  

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Managed Volatility V.I. Fund (the “Fund”). The Fund is classified as diversified.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

Reorganization: At a meeting held on November 15, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) and, at a meeting held on December 1, 2017, the Board of Trustees of HIMCO VIT Portfolio Diversifier Fund (the “Target Fund”) approved a reorganization of the Target Fund with and into the Fund. The reorganization is subject to shareholder approval by the Target Fund’s shareholders and certain other conditions.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Defensive Positions: Investment policies may vary for temporary defensive purposes during periods in which the investment adviser believes that conditions in the securities markets or other economic, financial or political conditions warrant. Under such conditions, the Fund may invest up to 100% of its total assets in U.S. Government securities, certificates of deposit, repurchase agreements that involve purchases of debt securities, bankers’ acceptances and other bank obligations, commercial paper, money market funds and/or other debt securities, or may hold its assets in cash. The investment adviser applies this defensive position as applicable and is consistent with the Fund’s investment policies.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts), that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distribution of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Fund.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund are charged to the Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but the Fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets.

• Exchange-traded funds (“ETFs”) traded on a recognized securities exchange are valued at the official closing price each day, if available. For ETFs traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. ETFs traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Futures contracts traded on exchanges are valued at their last sale price.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

NOTESTO FINANCIAL STATEMENTS 15

Notes to Financial Statements  (continued)

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a fund’s initial investment in the IOs may not fully recoup.

Securities Lending: A fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with a fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by a fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of a fund and any additional required collateral is delivered to a fund, or excess collateral returned by a fund, on the next business day. During the term of the loan, a fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as investment companies in a fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Securities lending transactions are entered into by a fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and a fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Deutsche Bank Securities Inc.	$	28,430	$	(28,430	)	$	—
JP Morgan Securities LLC		1,869,543		(1,869,543	)		—
	$	1,897,973	$	(1,897,973	)	$	—

^(a)  Cash collateral with a value of $1,935,650 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: The Fund enters into forward foreign currency exchange contracts to gain or reduce exposure, to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

NOTESTO FINANCIAL STATEMENTS 17

Notes to Financial Statements  (continued)

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.55	%
$1 Billion — $3 Billion		0.52
$3 Billion — $5 Billion		0.50
$5 Billion — $10 Billion		0.48
Greater than $10 Billion		0.47

With respect to the Fund, the Manager entered into sub-advisory agreements with BlackRock International Limited (“BIL”), BlackRock Asset Management North Asia Limited (“BNA”) and BlackRock (Singapore) Limited (“BSL”), each an affiliate of the Manager. The Manager pays BIL, BNA and BSL, for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by the Fund to the Manager.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund. For the year ended December 31, 2017, the Fund had no distribution fees.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $2,563.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the Fund waived $27,947 in investment advisory fees pursuant to these arrangements.

For the year ended December 31, 2017, the Fund reimbursed the Manager $183 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse all transfer agent fees for Class I Shares.

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were $29,416.

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitation as a percentage of average daily net assets is 1.00% for Class I.

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018 unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $35,484.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $871 for securities lending agent services.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

7. PURCHASES AND SALES

For the year ended December 31, 2017, sales of investments, including paydowns and excluding short-term securities, were $19,528. For the year ended December 31, 2017, there were no purchases.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to foreign currency transactions were reclassified to the following accounts:

Distributions in excess of net investment income	$	5,936
Accumulated net realized loss	$	(5,936	)

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income	$	93,042	$	135,000
Long-term capital gains		55,657		—
	$	148,699	$	135,000

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	20,935
Net unrealized losses(a)		(139,992	)
Qualified late-year losses(b)		(78,323	)
	$	(197,380	)

^(a) The difference between book-basis and tax-basis net unrealized losses was attributable primarily to the realization for tax purposes of unrealized gains/losses on certain futures and forward contracts and the timing and recognition of partnership income.

^(b) The Fund has elected to defer certain qualified late-year losses and recognize such losses in the tax taxable year.

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued)

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	15,268,988
Gross unrealized appreciation	$	181,488
Gross unrealized depreciation		(336,398	)
Net unrealized appreciation(depreciation)	$	(154,910	)

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

With exchange-traded futures, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		41,987		$	563,708			30,752		$	402,215
Shares issued in reinvestment of distributions		10,985			148,699			10,251			135,000
Shares redeemed		(197,978	)		(2,658,517	)		(226,177	)		(2,947,752	)
Net decrease		(145,006	)	$	(1,946,110	)		(185,174	)	$	(2,410,537	)

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 21

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Managed Volatility V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Managed Volatility V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Glossary of Terms Used in this Report

Currency
AUD	Australian Dollar
CAD	Canadian Dollar
CHF	Swiss Franc
DKK	Danish Krone
EUR	Euro
GBP	British Pound
HKD	Hong Kong Dollar
JPY	Japanese Yen
MXN	Mexican Peso
SEK	Swedish Krona
USD	United States Dollar
Portfolio Abbreviations
ABS	Asset-Backed Security
CWABS	Countrywide Asset-Backed Certificates
CSMC	Credit Suisse Mortgage Capital
ETF	Exchange-Traded Fund

GLOSSARYOF TERMS USEDINTHIS REPORT 23

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock S&P 500 Index V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock S&P 500 Index V.I. Fund

Investment Objective

BlackRock S&P 500 Index V.I. Fund’s (the “Fund”) investment objective is to seek investment results that, before expenses, correspond to the aggregate price and yield performance of the Standard and Poor’s (“S&P”) 500^® Index.

At a meeting held on November 15, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) and, at a meeting held on December 1, 2017, the Board of Trustees of HIMCO VIT Index Fund (the “Target Fund”) approved a reorganization of the Target Fund with and into the Fund. The reorganization is subject to shareholder approval by the Target Fund’s shareholders and certain other conditions.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund’s Class I and Class II Shares returned 21.50% and 21.31%, respectively, while the benchmark S&P 500^® Index returned 21.83% for the same period.

Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses.

Describe the market environment.

The reflation trade in the United States continued to gain steam in the first quarter of the year. Macro data highlighted continued economic growth and a strengthening labor market, which supported the U.S. Federal Reserve’s (the “Fed”) decision to increase the federal funds rate by 25 basis points (0.25%) in March, marking the second rate hike in the past six months. The Fed’s summary of economic projections indicated that they will maintain a gradual pace of tightening should current economic trends continue.

Expectations of the new administration’s policies also boosted market sentiment, sending several U.S. equity indices to record highs. The inauguration of President Trump in late January stoked risk-on appetite, as pledges of tax relief and increased fiscal spending were supportive of cyclical stocks. However, the final weeks of the first quarter saw some profit taking as investor optimism waned after the failed attempt to repeal the Affordable Care Act called into question whether the new administration will be able to push through further reforms in 2017. Despite these setbacks, U.S. equities in the first quarter finished strong and the 10-year Treasury yield added 31 basis points in the quarter.

In the second quarter of 2017, political risk was a headwind to U.S. equities. President Trump’s firing of FBI Director James Comey on May 9 and the subsequent developments regarding the investigation of pre-election correspondence between Trump administration members and Russian officials was an enduring source of negative market sentiment. The largest single day fall of the S&P 500^® in the quarter came in the wake of the House Oversight Committee’s request for all documents from the meetings between President Trump and Comey on May 17.

Although the Fed continued their monetary policy normalization, the yield on the 10-year U.S. Treasury compressed by nine basis points to 2.31% in the second quarter. The Fed increased the federal funds rate by 25 basis points at the June meeting, to between 1% and 1.25%, citing strength in the labor market and business spending, despite relatively weak inflation trends throughout the quarter.

Investors focused on sustained corporate earnings expansion, a subdued interest rate environment, and a healthy economic backdrop over threats from an increasingly hostile North Korea and a damaging hurricane season in the third quarter. This backdrop pushed volatility to the lowest levels in recorded history, with the Chicago Board Options Exchange Volatility Index averaging a record low of 10.94 in the quarter.

Domestic rates moved modestly higher as investors’ balanced news on the monetary, fiscal, and geopolitical fronts. In the September Federal Open Market Committee (“FOMC”) announcement, the committee revealed they would keep interest rates unchanged and initiate their balance sheet normalization in October. Additionally, amid short term hurricane related inflationary and economic growth pressures, the FOMC found inflation to remain somewhat below 2% in the near term, but expects it to stabilize around 2% by 2019. Real gross domestic product (“GDP”) growth was revised higher for 2017, from 2.2% to 2.4%. The 10-year U.S. Treasury yield ended the third quarter 2 basis points higher, to 2.33%.

The U.S. economy continued to demonstrate strength throughout the fourth quarter. Unemployment fell to 4.1%, the lowest level since 2000. Additional highlights that helped strengthen investor confidence in the macro picture included that nominal third quarter GDP surged 4.1% year-over-year, real GDP increased 2.3% year-over-year, and broad aggregate S&P 500^® earnings growth was 6.6%. This optimism was expressed throughout many soft indicators. For example, both the University of Michigan Consumer Sentiment Survey and the National Federation of Independent Business Small Business Optimism Index reached 13-year highs in the quarter.

The strongest returns in the S&P 500^® Index as of December 31 came from information technology (+38.84%). Increases were seen across most sectors, with notable results in materials (+23.84%) and consumer discretionary (+22.97%). In contrast, telecommunication services (-1.25%) and energy (-0.99%) experienced negative returns for the year.

Describe recent portfolio activity.

During the period, as changes were made to the composition of the S&P 500^® Index, the Fund purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.

Describe portfolio positioning at period end.

The Fund is positioned to match the risk characteristics of its benchmark index, irrespective of the market’s future direction.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock S&P 500 Index V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses.

^(b)  Under normal circumstances, the Fund invests at least 80% of its assets in the common stocks represented in the S&P 500^® Index and in derivative instruments linked to the S&P 500^® Index.

^(c)  An unmanaged index that covers 500 leading companies and captures approximately 80% coverage of available market capitalization.

Performance Summary for the Period Ended December 31, 2017

	6-Month Total Returns (b)			Average Annual Total Returns
				1 Year (b)			5 Years (b)			10 Years (b)
Class I(a)		11.32	%		21.50	%		15.40	%		8.14	%
Class II(a)		11.23			21.31			15.23			7.99
S&P 500® Index		11.42			21.83			15.79			8.50

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual						Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Annualized Expense Ratio
Class I	$	1,000.00	$	1,113.20	$	1.60	$	1,000.00	$	1,023.69	$	1.53		0.30	%
Class II		1,000.00		1,112.30		2.40		1,000.00		1,022.94		2.29		0.45

^(a) Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock S&P 500 Index V.I. Fund

Portfolio Information

SECTOR ALLOCATION

Sector	Percent of Net Assets
Information Technology		24	%
Financials		15
Health Care		14
Consumer Discretionary		12
Industrials		10
Consumer Staples		8
Energy		6
Materials		3
Utilities		3
Real Estate		3
Telecommunication Services		2
Short-Term Securities		2
Liabilities in Excess of Other Assets		(2	)

For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine sector sub classifications for reporting ease.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

DISCLOSUREOF EXPENSES / DERIVATIVE FINANCIAL INSTRUMENTS 5

Schedule of Investments December 31, 2017 BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 99.5%
Aerospace & Defense — 2.5%
Arconic, Inc.		4,058	$	110,580
Boeing Co. (The)		5,360		1,580,718
General Dynamics Corp.		2,660		541,177
L3 Technologies, Inc.		754		149,179
Lockheed Martin Corp.		2,390		767,309
Northrop Grumman Corp.		1,668		511,926
Raytheon Co.		2,770		520,344
Rockwell Collins, Inc.		1,552		210,482
Textron, Inc.		2,528		143,060
TransDigm Group, Inc.		459		126,051
United Technologies Corp.		7,115		907,661
				5,568,487
Air Freight & Logistics — 0.7%
CH Robinson Worldwide, Inc.(a)		1,323		117,866
Expeditors International of Washington, Inc.		1,706		110,361
FedEx Corp.		2,364		589,913
United Parcel Service, Inc., Class B		6,583		784,364
				1,602,504
Airlines — 0.5%
Alaska Air Group, Inc.		1,177		86,521
American Airlines Group, Inc.		4,080		212,282
Delta Air Lines, Inc.		6,284		351,904
Southwest Airlines Co.		5,230		342,304
United Continental Holdings, Inc.(b)		2,413		162,636
				1,155,647
Auto Components — 0.2%
Aptiv plc		2,547		216,062
BorgWarner, Inc.		1,915		97,837
Goodyear Tire & Rubber Co. (The)		2,394		77,350
				391,249
Automobiles — 0.5%
Ford Motor Co.		37,379		466,864
General Motors Co.		12,248		502,045
Harley-Davidson, Inc.(a)		1,612		82,019
				1,050,928
Banks — 6.6%
Bank of America Corp.		92,939		2,743,559
BB&T Corp.		7,559		375,834
Citigroup, Inc.		25,332		1,884,954
Citizens Financial Group, Inc.		4,714		197,894
Comerica, Inc.		1,666		144,625
Fifth Third Bancorp		6,760		205,098
Huntington Bancshares, Inc.		10,329		150,390
JPMorgan Chase & Co.		33,243		3,555,006
KeyCorp		10,303		207,812
M&T Bank Corp.		1,442		246,568
People’s United Financial, Inc.		3,317		62,028
PNC Financial Services Group, Inc. (The)(e)		4,559		657,818
Regions Financial Corp.		11,114		192,050
SunTrust Banks, Inc.		4,561		294,595
US Bancorp		15,104		809,272
Wells Fargo & Co.		42,461		2,576,109
Zions BanCorp.		1,914		97,289
				14,400,901
Beverages — 2.0%
Brown-Forman Corp., Class B		1,876		128,825
Coca-Cola Co. (The)		36,739		1,685,585
Constellation Brands, Inc., Class A		1,651		377,369
Dr Pepper Snapple Group, Inc.		1,742		169,079
Molson Coors Brewing Co., Class B		1,763		144,689

Security	Shares		Value
Beverages (continued)
Monster Beverage Corp.(b)		3,942	$	249,489
PepsiCo, Inc.		13,625		1,633,910
				4,388,946
Biotechnology — 2.8%
AbbVie, Inc.		15,273		1,477,052
Alexion Pharmaceuticals, Inc.(b)		2,136		255,444
Amgen, Inc.		6,955		1,209,474
Biogen, Inc.(b)		2,026		645,423
Celgene Corp.(b)		7,550		787,918
Gilead Sciences, Inc.		12,515		896,575
Incyte Corp.(b)		1,678		158,923
Regeneron Pharmaceuticals, Inc.(b)		736		276,707
Vertex Pharmaceuticals, Inc.(b)		2,418		362,361
				6,069,877
Building Products — 0.3%
Allegion plc		910		72,400
AO Smith Corp.		1,405		86,099
Fortune Brands Home & Security, Inc.		1,457		99,717
Johnson Controls International plc		8,866		337,883
Masco Corp.		3,027		133,006
				729,105
Capital Markets — 3.0%
Affiliated Managers Group, Inc.		536		110,014
Ameriprise Financial, Inc.		1,417		240,139
Bank of New York Mellon Corp. (The)		9,811		528,421
BlackRock, Inc.(e)		1,183		607,719
CBOE Holdings, Inc.		1,070		133,311
Charles Schwab Corp. (The)		11,431		587,211
CME Group, Inc.		3,274		478,168
E*TRADE Financial Corp.(b)		2,626		130,171
Franklin Resources, Inc.		3,145		136,273
Goldman Sachs Group, Inc. (The)		3,361		856,248
Intercontinental Exchange, Inc.		5,605		395,489
Invesco Ltd.		3,915		143,054
Moody’s Corp.		1,593		235,143
Morgan Stanley		13,337		699,792
Nasdaq, Inc.		1,105		84,897
Northern Trust Corp.		2,054		205,174
Raymond James Financial, Inc.		1,217		108,678
S&P Global, Inc.		2,443		413,844
State Street Corp.		3,548		346,320
T. Rowe Price Group, Inc.		2,327		244,172
				6,684,238
Chemicals — 2.2%
Air Products & Chemicals, Inc.		2,087		342,435
Albemarle Corp.		1,057		135,180
CF Industries Holdings, Inc.		2,227		94,737
DowDuPont, Inc.		22,419		1,596,681
Eastman Chemical Co.		1,379		127,751
Ecolab, Inc.		2,491		334,242
FMC Corp.		1,272		120,407
International Flavors & Fragrances, Inc.		763		116,441
LyondellBasell Industries NV, Class A		3,099		341,882
Monsanto Co.		4,209		491,527
Mosaic Co. (The)		3,363		86,295
PPG Industries, Inc.		2,438		284,807
Praxair, Inc.		2,743		424,287
Sherwin-Williams Co. (The)		790		323,932
				4,820,604
Commercial Services & Supplies — 0.3%
Cintas Corp.		823		128,248
Republic Services, Inc.		2,192		148,201

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Commercial Services & Supplies (continued)
Stericycle, Inc.(b)		799	$	54,324
Waste Management, Inc.		3,827		330,270
				661,043
Communications Equipment — 1.0%
Cisco Systems, Inc.		47,364		1,814,041
F5 Networks, Inc.(b)		600		78,732
Harris Corp.		1,148		162,614
Juniper Networks, Inc.		3,585		102,173
Motorola Solutions, Inc.		1,552		140,208
				2,297,768
Construction & Engineering — 0.1%
Fluor Corp.		1,309		67,610
Jacobs Engineering Group, Inc.		1,154		76,118
Quanta Services, Inc.(b)		1,515		59,251
				202,979
Construction Materials — 0.1%
Martin Marietta Materials, Inc.		598		132,182
Vulcan Materials Co.		1,267		162,645
				294,827
Consumer Finance — 0.8%
American Express Co.		6,902		685,438
Capital One Financial Corp.		4,637		461,753
Discover Financial Services		3,482		267,835
Navient Corp.		2,520		33,566
Synchrony Financial		7,048		272,123
				1,720,715
Containers & Packaging — 0.4%
Avery Dennison Corp.		856		98,320
Ball Corp.		3,353		126,911
International Paper Co.(a)		3,949		228,805
Packaging Corp. of America		909		109,580
Sealed Air Corp.		1,728		85,190
WestRock Co.		2,428		153,474
				802,280
Distributors — 0.1%
Genuine Parts Co.		1,411		134,059
LKQ Corp.(b)		2,961		120,424
				254,483
Diversified Consumer Services — 0.0%
H&R Block, Inc.(a)		2,021		52,991
Diversified Financial Services — 1.7%
Berkshire Hathaway, Inc., Class B(b)		18,437		3,654,582
Leucadia National Corp.		3,004		79,576
				3,734,158
Diversified Telecommunication Services — 2.1%
AT&T, Inc.		58,827		2,287,194
CenturyLink, Inc.(a)		9,315		155,374
Verizon Communications, Inc.		39,084		2,068,716
				4,511,284
Electric Utilities — 1.8%
Alliant Energy Corp.		2,215		94,381
American Electric Power Co., Inc.		4,704		346,073
Duke Energy Corp.		6,706		564,042
Edison International		3,137		198,384
Entergy Corp.		1,721		140,072
Eversource Energy		3,050		192,699
Exelon Corp.		9,198		362,493
FirstEnergy Corp.		4,262		130,502
NextEra Energy, Inc.		4,500		702,855
PG&E Corp.		4,900		219,667

Security	Shares		Value
Electric Utilities (continued)
Pinnacle West Capital Corp.		1,070	$	91,143
PPL Corp.		6,578		203,589
Southern Co. (The)		9,619		462,578
Xcel Energy, Inc.		4,846		233,141
				3,941,619
Electrical Equipment — 0.6%
Acuity Brands, Inc.		404		71,104
AMETEK, Inc.		2,227		161,391
Eaton Corp. plc		4,221		333,501
Emerson Electric Co.		6,158		429,151
Rockwell Automation, Inc.		1,225		240,529
				1,235,676
Electronic Equipment, Instruments & Components — 0.4%
Amphenol Corp., Class A		2,925		256,815
Corning, Inc.		8,326		266,349
FLIR Systems, Inc.		1,328		61,911
TE Connectivity Ltd.		3,369		320,190
				905,265
Energy Equipment & Services — 0.8%
Baker Hughes a GE Co.		4,101		129,756
Halliburton Co.		8,385		409,775
Helmerich & Payne, Inc.(a)		1,041		67,290
National Oilwell Varco, Inc.		3,672		132,265
Schlumberger Ltd.		13,272		894,400
TechnipFMC plc		4,167		130,469
				1,763,955
Equity Real Estate Investment Trusts (REITs) — 2.8%
Alexandria Real Estate Equities, Inc.		917		119,751
American Tower Corp.		4,109		586,231
Apartment Investment & Management Co., Class A		1,496		65,390
AvalonBay Communities, Inc.		1,321		235,679
Boston Properties, Inc.		1,487		193,355
Crown Castle International Corp.		3,892		432,051
Digital Realty Trust, Inc.		1,979		225,408
Duke Realty Corp.		3,418		93,004
Equinix, Inc.		749		339,462
Equity Residential		3,510		223,833
Essex Property Trust, Inc.		633		152,787
Extra Space Storage, Inc.		1,197		104,678
Federal Realty Investment Trust		696		92,436
GGP, Inc.		5,982		139,919
HCP, Inc.		4,501		117,386
Host Hotels & Resorts, Inc.		7,090		140,736
Iron Mountain, Inc.(a)		2,557		96,476
Kimco Realty Corp.		4,078		74,016
Macerich Co. (The)		1,041		68,373
Mid-America Apartment Communities, Inc.		1,090		109,610
Prologis, Inc.		5,098		328,872
Public Storage		1,432		299,288
Realty Income Corp.		2,700		153,954
Regency Centers Corp.		1,418		98,097
SBA Communications Corp.(b)		1,126		183,943
Simon Property Group, Inc.		2,978		511,442
SL Green Realty Corp.		931		93,966
UDR, Inc.		2,600		100,152
Ventas, Inc.		3,396		203,794
Vornado Realty Trust		1,662		129,935
Welltower, Inc.		3,548		226,256
Weyerhaeuser Co.		7,217		254,471
				6,194,751
Food & Staples Retailing — 1.8%
Costco Wholesale Corp.		4,187		779,284

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Food & Staples Retailing (continued)
CVS Health Corp.		9,705	$	703,613
Kroger Co. (The)		8,522		233,929
Sysco Corp.		4,593		278,933
Walgreens Boots Alliance, Inc.		8,318		604,053
Wal-Mart Stores, Inc.(a)		14,024		1,384,870
				3,984,682
Food Products — 1.2%
Archer-Daniels-Midland Co.		5,358		214,749
Campbell Soup Co.(a)		1,841		88,571
Conagra Brands, Inc.		3,914		147,440
General Mills, Inc.		5,445		322,834
Hershey Co. (The)		1,353		153,579
Hormel Foods Corp.(a)		2,579		93,850
JM Smucker Co. (The)(a)		1,076		133,682
Kellogg Co.		2,380		161,793
Kraft Heinz Co. (The)		5,720		444,787
McCormick & Co., Inc. (Non-Voting)(a)		1,163		118,521
Mondelez International, Inc., Class A		14,318		612,810
Tyson Foods, Inc., Class A		2,851		231,131
				2,723,747
Health Care Equipment & Supplies — 2.7%
Abbott Laboratories		16,677		951,756
Align Technology, Inc.(b)		687		152,645
Baxter International, Inc.		4,797		310,078
Becton Dickinson and Co.		2,541		543,908
Boston Scientific Corp.(b)		13,156		326,137
Cooper Cos., Inc. (The)		467		101,750
Danaher Corp.		5,865		544,389
DENTSPLY SIRONA, Inc.		2,183		143,707
Edwards Lifesciences Corp.(b)		2,023		228,012
Hologic, Inc.(b)		2,647		113,159
IDEXX Laboratories, Inc.(b)		832		130,108
Intuitive Surgical, Inc.(b)		1,074		391,946
Medtronic plc		12,969		1,047,247
ResMed, Inc.		1,368		115,856
Stryker Corp.		3,089		478,301
Varian Medical Systems, Inc.(b)		869		96,589
Zimmer Biomet Holdings, Inc.		1,936		233,617
				5,909,205
Health Care Providers & Services — 2.8%
Aetna, Inc.		3,124		563,538
AmerisourceBergen Corp.		1,545		141,862
Anthem, Inc.		2,460		553,525
Cardinal Health, Inc.		3,014		184,668
Centene Corp.(b)		1,646		166,048
Cigna Corp.		2,362		479,699
DaVita, Inc.(b)		1,445		104,401
Envision Healthcare Corp.(b)		1,175		40,608
Express Scripts Holding Co.(b)		5,426		404,997
HCA Healthcare, Inc.(b)		2,714		238,398
Henry Schein, Inc.(b)		1,504		105,099
Humana, Inc.		1,369		339,608
Laboratory Corp. of America Holdings(b)		975		155,522
McKesson Corp.		1,997		311,432
Patterson Cos., Inc.(a)		815		29,446
Quest Diagnostics, Inc.		1,296		127,643
UnitedHealth Group, Inc.		9,285		2,046,971
Universal Health Services, Inc., Class B		840		95,214
				6,088,679
Health Care Technology — 0.1%
Cerner Corp.(b)		3,026		203,922

Security	Shares		Value
Hotels, Restaurants & Leisure — 1.8%
Carnival Corp.		3,899	$	258,777
Chipotle Mexican Grill, Inc.(b)		238		68,789
Darden Restaurants, Inc.		1,176		112,919
Hilton Worldwide Holdings, Inc.		1,950		155,727
Marriott International, Inc., Class A		2,934		398,232
McDonald’s Corp.		7,638		1,314,652
MGM Resorts International		4,882		163,010
Norwegian Cruise Line Holdings Ltd.(b)		1,716		91,377
Royal Caribbean Cruises Ltd.		1,641		195,738
Starbucks Corp.		13,632		782,886
Wyndham Worldwide Corp.		971		112,510
Wynn Resorts Ltd.		768		129,477
Yum Brands, Inc.		3,229		263,519
				4,047,613
Household Durables — 0.4%
DR Horton, Inc.		3,271		167,050
Garmin Ltd.		1,053		62,727
Leggett & Platt, Inc.		1,262		60,235
Lennar Corp., Class A		1,955		123,634
Mohawk Industries, Inc.(b)		606		167,195
Newell Brands, Inc.		4,716		145,725
PulteGroup, Inc.		2,591		86,151
Whirlpool Corp.		695		117,205
				929,922
Household Products — 1.6%
Church & Dwight Co., Inc.		2,365		118,652
Clorox Co. (The)		1,243		184,884
Colgate-Palmolive Co.		8,413		634,761
Kimberly-Clark Corp.		3,370		406,624
Procter & Gamble Co. (The)		24,413		2,243,066
				3,587,987
Independent Power and Renewable Electricity Producers — 0.1%
AES Corp.		6,327		68,522
NRG Energy, Inc.		2,882		82,079
				150,601
Industrial Conglomerates — 1.9%
3M Co.		5,718		1,345,846
General Electric Co.		83,086		1,449,851
Honeywell International, Inc.		7,299		1,119,374
Roper Technologies, Inc.		979		253,561
				4,168,632
Insurance — 2.6%
Aflac, Inc.		3,767		330,667
Allstate Corp. (The)		3,438		359,993
American International Group, Inc.		8,613		513,163
Aon plc		2,394		320,796
Arthur J Gallagher & Co.		1,727		109,285
Assurant, Inc.		518		52,235
Brighthouse Financial, Inc.(b)		909		53,304
Chubb Ltd.		4,448		649,986
Cincinnati Financial Corp.		1,437		107,732
Everest Re Group Ltd.		393		86,955
Hartford Financial Services Group, Inc. (The)		3,418		192,365
Lincoln National Corp.		2,125		163,349
Loews Corp.		2,644		132,279
Marsh & McLennan Cos., Inc.		4,890		397,997
MetLife, Inc.		10,082		509,746
Principal Financial Group, Inc.		2,567		181,127
Progressive Corp. (The)		5,572		313,815
Prudential Financial, Inc.		4,062		467,049
Torchmark Corp.		1,029		93,341
Travelers Cos., Inc. (The)		2,622		355,648

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Insurance (continued)
Unum Group		2,150	$	118,013
Willis Towers Watson plc		1,265		190,623
XL Group Ltd.		2,453		86,247
				5,785,715
Internet & Direct Marketing Retail — 2.9%
Amazon.com, Inc.(b)		3,832		4,481,409
Expedia, Inc.		1,174		140,610
Netflix, Inc.(b)		4,146		795,866
Priceline Group, Inc. (The)(b)		467		811,525
TripAdvisor, Inc.(b)		1,081		37,251
				6,266,661
Internet Software & Services — 4.8%(b)
Akamai Technologies, Inc.		1,621		105,430
Alphabet, Inc., Class A		2,856		3,008,510
Alphabet, Inc., Class C		2,892		3,026,189
eBay, Inc.		9,307		351,246
Facebook, Inc., Class A		22,848		4,031,758
VeriSign, Inc.(a)		812		92,926
				10,616,059
IT Services — 4.0%
Accenture plc, Class A		5,921		906,446
Alliance Data Systems Corp.		461		116,854
Automatic Data Processing, Inc.		4,249		497,940
Cognizant Technology Solutions Corp., Class A		5,649		401,192
CSRA, Inc.		1,569		46,944
DXC Technology Co.		2,731		259,172
Fidelity National Information Services, Inc.		3,213		302,311
Fiserv, Inc.(b)		1,997		261,867
Gartner, Inc.(b)		867		106,771
Global Payments, Inc.		1,525		152,866
International Business Machines Corp.		8,249		1,265,562
Mastercard, Inc., Class A		8,899		1,346,953
Paychex, Inc.		3,052		207,780
PayPal Holdings, Inc.(b)		10,824		796,863
Total System Services, Inc.		1,600		126,544
Visa, Inc., Class A		17,375		1,981,097
Western Union Co. (The)		4,400		83,644
				8,860,806
Leisure Products — 0.1%
Hasbro, Inc.		1,080		98,161
Mattel, Inc.(a)		3,313		50,954
				149,115
Life Sciences Tools & Services — 0.8%
Agilent Technologies, Inc.		3,074		205,866
Illumina, Inc.(b)		1,399		305,667
IQVIA Holdings, Inc.(b)		1,385		135,591
Mettler-Toledo International, Inc.(b)		246		152,402
PerkinElmer, Inc.		1,056		77,215
Thermo Fisher Scientific, Inc.		3,842		729,519
Waters Corp.(b)		761		147,018
				1,753,278
Machinery — 1.7%
Caterpillar, Inc.		5,698		897,891
Cummins, Inc.		1,495		264,077
Deere & Co.		3,065		479,703
Dover Corp.		1,503		151,788
Flowserve Corp.		1,246		52,494
Fortive Corp.		2,910		210,538
Illinois Tool Works, Inc.		2,954		492,875
Ingersoll-Rand plc		2,394		213,521
PACCAR, Inc.		3,387		240,748

Security	Shares		Value
Machinery (continued)
Parker-Hannifin Corp.		1,272	$	253,866
Pentair plc		1,592		112,427
Snap-on, Inc.(a)		546		95,168
Stanley Black & Decker, Inc.		1,474		250,123
Xylem, Inc.		1,720		117,304
				3,832,523
Media — 2.7%
CBS Corp. (Non-Voting), Class B		3,474		204,966
Charter Communications, Inc., Class A(b)		1,858		624,213
Comcast Corp., Class A		44,688		1,789,754
Discovery Communications, Inc., Class A(b)		1,376		30,795
Discovery Communications, Inc., Class C(a)(b)		2,012		42,594
DISH Network Corp., Class A(b)		2,184		104,286
Interpublic Group of Cos., Inc. (The)		3,723		75,056
News Corp., Class A		3,669		59,475
News Corp., Class B		1,142		18,957
Omnicom Group, Inc.(a)		2,218		161,537
Scripps Networks Interactive, Inc., Class A		915		78,123
Time Warner, Inc.		7,460		682,366
Twenty-First Century Fox, Inc., Class A		10,098		348,684
Twenty-First Century Fox, Inc., Class B		4,208		143,577
Viacom, Inc., Class B		3,396		104,631
Walt Disney Co. (The)		14,470		1,555,670
				6,024,684
Metals & Mining — 0.3%
Freeport-McMoRan, Inc.(b)		12,864		243,901
Newmont Mining Corp.		5,141		192,890
Nucor Corp.		3,046		193,665
				630,456
Multiline Retail — 0.5%
Dollar General Corp.		2,496		232,153
Dollar Tree, Inc.(b)		2,270		243,594
Kohl’s Corp.		1,585		85,955
Macy’s, Inc.(a)		2,918		73,504
Nordstrom, Inc.		1,117		52,923
Target Corp.		5,208		339,822
				1,027,951
Multi-Utilities — 1.0%
Ameren Corp.		2,316		136,621
CenterPoint Energy, Inc.		4,147		117,609
CMS Energy Corp.		2,710		128,183
Consolidated Edison, Inc.		2,978		252,981
Dominion Energy, Inc.		6,162		499,492
DTE Energy Co.		1,729		189,256
NiSource, Inc.		3,209		82,375
Public Service Enterprise Group, Inc.		4,865		250,548
SCANA Corp.		1,364		54,260
Sempra Energy		2,399		256,501
WEC Energy Group, Inc.		3,008		199,821
				2,167,647
Oil, Gas & Consumable Fuels — 5.2%
Anadarko Petroleum Corp.		5,242		281,181
Andeavor		1,381		157,904
Apache Corp.(a)		3,689		155,750
Cabot Oil & Gas Corp.		4,431		126,727
Chesapeake Energy Corp.(b)		8,706		34,476
Chevron Corp.		18,198		2,278,208
Cimarex Energy Co.		909		110,907
Concho Resources, Inc.(b)		1,425		214,063
ConocoPhillips		11,454		628,710
Devon Energy Corp.		5,035		208,449
EOG Resources, Inc.		5,540		597,821

SCHEDULE OF INVESTMENTS 9

Schedule of Investments  (continued) December 31, 2017 BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Oil, Gas & Consumable Fuels (continued)
EQT Corp.		2,312	$	131,599
Exxon Mobil Corp.		40,597		3,395,533
Hess Corp.		2,588		122,852
Kinder Morgan, Inc.		18,401		332,506
Marathon Oil Corp.		8,245		139,588
Marathon Petroleum Corp.		4,679		308,720
Newfield Exploration Co.(b)		1,908		60,159
Noble Energy, Inc.		4,662		135,851
Occidental Petroleum Corp.		7,332		540,075
ONEOK, Inc.		3,671		196,215
Phillips 66		4,117		416,435
Pioneer Natural Resources Co.		1,630		281,745
Range Resources Corp.		2,163		36,901
Valero Energy Corp.		4,192		385,287
Williams Cos., Inc. (The)		7,909		241,145
				11,518,807
Personal Products — 0.2%
Coty, Inc., Class A		4,524		89,982
Estee Lauder Cos., Inc. (The), Class A		2,141		272,421
				362,403
Pharmaceuticals — 4.6%
Allergan plc		3,186		521,166
Bristol-Myers Squibb Co.		15,681		960,931
Eli Lilly & Co.		9,283		784,042
Johnson & Johnson		25,739		3,596,253
Merck & Co., Inc.		26,205		1,474,555
Mylan NV(b)		5,154		218,066
Perrigo Co. plc		1,255		109,386
Pfizer, Inc.		57,109		2,068,488
Zoetis, Inc.		4,669		336,355
				10,069,242
Professional Services — 0.3%
Equifax, Inc.		1,158		136,551
IHS Markit Ltd.(b)		3,480		157,122
Nielsen Holdings plc		3,183		115,861
Robert Half International, Inc.		1,201		66,704
Verisk Analytics, Inc.(b)		1,499		143,904
				620,142
Real Estate Management & Development — 0.1%
CBRE Group, Inc., Class A(b)		2,865		124,083
Road & Rail — 1.0%
CSX Corp.		8,563		471,051
JB Hunt Transport Services, Inc.		820		94,284
Kansas City Southern		997		104,904
Norfolk Southern Corp.		2,742		397,316
Union Pacific Corp.		7,542		1,011,382
				2,078,937
Semiconductors & Semiconductor Equipment — 3.9%
Advanced Micro Devices, Inc.(a)(b)		7,722		79,382
Analog Devices, Inc.		3,528		314,098
Applied Materials, Inc.		10,218		522,344
Broadcom Ltd.		3,896		1,000,882
Intel Corp.		44,839		2,069,768
KLA-Tencor Corp.		1,510		158,656
Lam Research Corp.		1,552		285,677
Microchip Technology, Inc.(a)		2,257		198,345
Micron Technology, Inc.(b)		11,049		454,335
NVIDIA Corp.		5,806		1,123,461
Qorvo, Inc.(a)(b)		1,233		82,118
QUALCOMM, Inc.(a)		14,124		904,219
Skyworks Solutions, Inc.		1,756		166,732

Security	Shares		Value
Semiconductors & Semiconductor Equipment (continued)
Texas Instruments, Inc.		9,443	$	986,227
Xilinx, Inc.		2,405		162,145
				8,508,389
Software — 5.2%
Activision Blizzard, Inc.		7,244		458,690
Adobe Systems, Inc.(b)		4,723		827,659
ANSYS, Inc.(b)		813		119,991
Autodesk, Inc.(b)		2,096		219,724
CA, Inc.		3,001		99,873
Cadence Design Systems, Inc.(b)		2,705		113,123
Citrix Systems, Inc.(b)		1,371		120,648
Electronic Arts, Inc.(b)		2,950		309,927
Intuit, Inc.		2,327		367,154
Microsoft Corp.		73,913		6,322,518
Oracle Corp.		29,190		1,380,103
Red Hat, Inc.(b)		1,694		203,449
salesforce.com, Inc.(b)		6,566		671,242
Symantec Corp.		5,930		166,396
Synopsys, Inc.(b)		1,454		123,939
				11,504,436
Specialty Retail — 2.3%
Advance Auto Parts, Inc.		700		69,783
AutoZone, Inc.(b)		263		187,090
Best Buy Co., Inc.		2,437		166,862
CarMax, Inc.(b)		1,749		112,163
Foot Locker, Inc.		1,202		56,350
Gap, Inc. (The)		2,086		71,049
Home Depot, Inc. (The)		11,188		2,120,462
L Brands, Inc.(a)		2,366		142,481
Lowe’s Cos., Inc.		7,979		741,568
O’Reilly Automotive, Inc.(b)		815		196,040
Ross Stores, Inc.		3,694		296,444
Signet Jewelers Ltd.(a)		557		31,498
Tiffany & Co.		978		101,663
TJX Cos., Inc. (The)		6,092		465,794
Tractor Supply Co.(a)		1,203		89,924
Ulta Beauty, Inc.(b)		563		125,921
				4,975,092
Technology Hardware, Storage & Peripherals — 4.3%
Apple, Inc.		49,191		8,324,593
Hewlett Packard Enterprise Co.		15,282		219,450
HP, Inc.		16,003		336,223
NetApp, Inc.		2,597		143,666
Seagate Technology plc(a)		2,772		115,980
Western Digital Corp.		2,843		226,104
Xerox Corp.		2,045		59,612
				9,425,628
Textiles, Apparel & Luxury Goods — 0.7%
Hanesbrands, Inc.(a)		3,493		73,039
Michael Kors Holdings Ltd.(b)		1,462		92,033
NIKE, Inc., Class B(a)		12,589		787,442
PVH Corp.		745		102,221
Ralph Lauren Corp.		531		55,059
Tapestry, Inc.		2,713		119,996
Under Armour, Inc., Class A(b)		1,793		25,873
Under Armour, Inc., Class C(b)		1,805		24,043
VF Corp.		3,136		232,064
				1,511,770
Tobacco — 1.3%
Altria Group, Inc.		18,282		1,305,518
Philip Morris International, Inc.		14,880		1,572,072
				2,877,590

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock S&P 500 Index V.I. Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Trading Companies & Distributors — 0.2%
Fastenal Co.(a)		2,741	$	149,905
United Rentals, Inc.(b)		818		140,623
WW Grainger, Inc.(a)		497		117,416
				407,944
Water Utilities — 0.1%
American Water Works Co., Inc.		1,708		156,265
Total Common Stocks — 99.5% (Cost: $66,887,273)				218,486,893
Total Long-Term Investments — 99.5% (Cost: $66,887,273)				218,486,893
Short-Term Securities — 2.6%(c)(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%		2,592,667		2,592,667
SL Liquidity Series, LLC, Money Market Series, 1.48%(d)		3,040,710		3,040,406
Total Short-Term Securities — 2.6% (Cost: $5,633,073)				5,633,073
Total Investments — 102.1% (Cost: $72,520,346)				224,119,966
Liabilities in Excess of Other Assets — (2.1)%				(4,528,499	)
Net Assets — 100.0%			$	219,591,467

^(a)  Security, or a portion of the security, is on loan.

^(b)  Non-income producing security.

^(c) Annualized 7-day yield as of period end.

^(d) Security was purchased with the cash collateral from loaned securities.

^(e)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Fund were as follows:

Affiliate	Shares Held at 12/31/16		Shares Purchased		Shares Sold			Shares Held at 12/31/17		Value at 12/31/17		Income			Net Realized Gain (Loss) (a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		3,269,017		—		(676,350	)(b)		2,592,667	$	2,592,667	$	26,018		$	1		$	—
SL Liquidity Series, LLC, Money Market Series		4,528,572		—		(1,487,862	)(b)		3,040,710		3,040,406		16,850	(c)		(1,800	)		(226	)
BlackRock, Inc.		1,224		—		(41	)		1,183		607,719		12,172			11,037			150,237
PNC Financial Services Group, Inc. (The)		4,925		—		(366	)		4,559		657,818		12,576			34,211			96,249
										$	6,898,610	$	67,616		$	43,449		$	246,260

^(a)  Includes net capital gains distributions, if applicable.

^(b)  Represents net shares sold.

^(c)  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Portfolio Abbreviations

REIT—Real Estate Investment Trust

S&P—Standard & Poor’s

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
S&P 500 E-Mini Index		21		03/16/18	$	2,810	$	(3,655	)

SCHEDULE OF INVESTMENTS 11

Schedule of Investments  (continued) December 31, 2017 BlackRock S&P 500 Index V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Liabilities — Derivative Financial Instruments
Futures contracts
Net unrealized depreciation(a)	$	—	$	—	$	3,655	$	—	$	—	$	—	$	3,655

^(a)  Includes cumulative appreciation (depreciation) on futures, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

For the year ended 31 December, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Net Realized Gain (Loss) from:
Futures contracts	$	—	$	—	$	606,203	$	—	$	—	$	—	$	606,203
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	$	—	$	—	$	3,472	$	—	$	—	$	—	$	3,472

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	2,986,010

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2		Level 3		Total
Investments:
Assets:
Long-Term Investments
Common Stocks(a)	$	218,486,893		$	—	$	—	$	218,486,893
Short-Term Securities		2,592,667			—		—		2,592,667
Subtotal	$	221,079,560		$	—	$	—	$	221,079,560
Investments valued at NAV(b)									3,040,406
Total Investments								$	224,119,966
Derivative Financial Instruments(c)
Liabilities:
Equity contracts	$	(3,655	)	$	—	$	—	$	(3,655	)

^(a)  See above Schedule of Investments for values in each industry.

^(b)  As of December 31, 2017, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(c)  Derivative financial instruments are futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

During the year ended December 31, 2017, there were no transfers between levels.

See notes to financial statements.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Assets and Liabilities

December 31, 2017

	BlackRock S&P 500 Index V.I. Fund
ASSETS
Investments at value — unaffiliated (including securities loaned at value of $2,951,673) (cost — $66,472,564)	$	217,221,356
Investments at value — affiliated (cost — $6,047,782)		6,898,610
Cash pledged for futures contracts		91,000
Receivables:
Investments sold		156,720
Securities lending income — affiliated		456
Dividends — affiliated		1,337
Dividends — unaffiliated		222,360
From the Manager		904
Prepaid expenses		11,031
Total assets		224,603,774
LIABILITIES
Bank overdraft		5
Cash collateral on securities loaned at value		3,041,765
Payables:
Capital shares redeemed		1,815,228
Distribution fees		417
Variation margin on futures contracts		10,200
Investment advisory fees		30,388
Officer’s and Directors’ fees		3,877
Other affiliates		330
Other accrued expenses		110,097
Total liabilities		5,012,307
NET ASSETS	$	219,591,467
NET ASSETS CONSIST OF
Paid-in capital	$	70,949,643
Undistributed net investment income		15,576
Accumulated net realized loss		(2,969,717	)
Net unrealized appreciation (depreciation)		151,595,965
NET ASSETS	$	219,591,467
NET ASSET VALUE
Class I — Based on net assets of $216,250,992 and 9,478,333 shares outstanding, 100 million shares authorized, $0.10 par value	$	22.82
Class II — Based on net assets of $3,340,475 and 147,642 shares outstanding, 100 million shares authorized, $0.10 par value	$	22.63

See notes to financial statements.

FINANCIAL STATEMENTS 13

Statement of Operations

Year Ended December 31, 2017

	BlackRock S&P 500 Index V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	50,766
Dividends — unaffiliated		4,157,073
Securities lending income — affiliated — net		16,850
Total investment income		4,224,689
EXPENSES
Investment advisory		638,136
Transfer agent — class specific		111,636
Professional		68,187
Accounting services		46,806
Printing		36,104
Directors and Officer		22,872
Custodian		19,667
Transfer agent		5,001
Distribution — class specific		4,157
Miscellaneous		21,541
Total expenses		974,107
Less:
Fees waived and/or reimbursed by the Manager		(214,951	)
Transfer agent fees reimbursed — class specific		(111,636	)
Total expenses after fees waived and/or reimbursed		647,520
Net investment income		3,577,169
REALIZED AND UNREALIZED GAIN
Net realized gain from:
Investments — affiliated		43,448
Investments — unaffiliated		10,334,133
Capital gain distributions from investment companies — affiliated		1
Futures contracts		606,203
		10,983,785
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		246,260
Investments — unaffiliated		26,412,574
Futures contracts		3,472
		26,662,306
Net realized and unrealized gain		37,646,091
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	41,223,260

See notes to financial statements.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statements of Changes in Net Assets

	BlackRock S&P 500 Index V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	3,577,169		$	3,478,726
Net realized gain		10,983,785			8,754,845
Net change in unrealized appreciation (depreciation)		26,662,306			8,499,712
Net increase in net assets resulting from operations		41,223,260			20,733,283
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(3,518,974	)		(3,462,212	)
Class II		(50,068	)		(37,791	)
From net realized gain:
Class I		(8,765,237	)		(9,370,529	)
Class II		(134,609	)		(114,078	)
Decrease in net assets resulting from distributions to shareholders		(12,468,888	)		(12,984,610	)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from capital share transactions		(6,721,848	)		981,987
NET ASSETS
Total increase in net assets		22,032,524			8,730,660
Beginning of year		197,558,943			188,828,283
End of year	$	219,591,467		$	197,558,943
Undistributed net investment income, end of year	$	15,576		$	7,449

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

FINANCIAL STATEMENTS 15

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock S&P 500 Index V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	19.90		$	19.08		$	20.63		$	19.43		$	15.43
Net investment income(a)		0.37			0.37			0.37			0.35			0.30
Net realized and unrealized gain (loss)		3.91			1.85			(0.14	)		2.25			4.61
Net increase from investment operations		4.28			2.22			0.23			2.60			4.91
Distributions:(b)
From net investment income		(0.39	)		(0.38	)		(0.42	)		(0.36	)		(0.31	)
From net realized gain		(0.97	)		(1.02	)		(1.36	)		(1.04	)		(0.60	)
Total distributions		(1.36	)		(1.40	)		(1.78	)		(1.40	)		(0.91	)
Net asset value, end of year	$	22.82		$	19.90		$	19.08		$	20.63		$	19.43
Total Return:(c)
Based on net asset value		21.50	%		11.60	%		1.05	%		13.30	%		31.87	%
Ratios to Average Net Assets:
Total expenses		0.46	%		0.46	%		0.46	%		0.46	%		0.46	%
Total expenses after fees waived and/or reimbursed		0.30	%		0.31	%		0.31	%		0.34	%		0.41	%
Net investment income		1.68	%		1.87	%		1.76	%		1.70	%		1.69	%
Supplemental Data:
Net assets, end of year (000)	$	216,251		$	195,261		$	187,048		$	204,029		$	199,825
Portfolio turnover rate		3	%		4	%		4	%		3	%		4	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c) Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock S&P 500 Index V.I. Fund
	Class II
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	19.75		$	18.94		$	20.49		$	19.31		$	15.34
Net investment income(a)		0.34			0.33			0.33			0.32			0.27
Net realized and unrealized gain (loss)		3.87			1.85			(0.13	)		2.22			4.58
Net increase from investment operations		4.21			2.18			0.20			2.54			4.85
Distributions:(b)
From net investment income		(0.36	)		(0.35	)		(0.39	)		(0.32	)		(0.28	)
From net realized gain		(0.97	)		(1.02	)		(1.36	)		(1.04	)		(0.60	)
Total distributions		(1.33	)		(1.37	)		(1.75	)		(1.36	)		(0.88	)
Net asset value, end of year	$	22.63		$	19.75		$	18.94		$	20.49		$	19.31
Total Return:(c)
Based on net asset value		21.31	%		11.47	%		0.89	%		13.11	%		31.67	%
Ratios to Average Net Assets:
Total expenses		0.60	%		0.62	%		0.61	%		0.60	%		0.60	%
Total expenses after fees waived and/or reimbursed		0.45	%		0.46	%		0.46	%		0.48	%		0.56	%
Net investment income		1.54	%		1.71	%		1.61	%		1.55	%		1.54	%
Supplemental Data:
Net assets, end of year (000)	$	3,340		$	2,298		$	1,780		$	1,962		$	1,828
Portfolio turnover rate		3	%		4	%		4	%		3	%		4	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 17

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock S&P 500 Index V.I. Fund (the “Fund”). The Fund’s classification changed from non-diversified to diversified during the reporting period. Class I and Class II Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class II Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

Reorganization: At a meeting held on November 15, 2017, the Board of Directors of BlackRock Variable Series Funds, Inc. (the “Company”) and, at a meeting held on December 1, 2017, the Board of Trustees of HIMCO VIT Portfolio Diversifier Fund (the “Target Fund”) approved a reorganization of the Target Fund with and into the Fund. The reorganization is subject to shareholder approval by the Target Fund’s shareholders and certain other conditions.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities are recognized on the accrual basis.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

• Futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of December 31, 2017, certain investments of the Fund were valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

NOTESTO FINANCIAL STATEMENTS 19

Notes to Financial Statements  (continued)

The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Fund’s securities lending agreements by counterparty which are subject to offset under an MSLA:

Counterparty	Securities Loaned at Value		Cash Collateral Received (a)			Net Amount
Citigroup Global Markets, Inc.	$	1,046,061	$	(1,046,061	)	$	—
Deutsche Bank Securities Inc.		370,780		(370,780	)		—
Goldman Sachs & Co.		46,140		(46,140	)		—
JP Morgan Securities LLC		324,497		(324,497	)		—
Morgan Stanley		1,164,195		(1,164,195	)		—
	$	2,951,673	$	(2,951,673	)	$	—

^(a)  Cash collateral with a value of $3,041,765 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment advisor, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to 0.30% of the average daily value of the Fund’s net assets.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.15% based upon the average daily net assets attributable to Class II.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class II was $4,157.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for the issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class II		Total
$	110,368	$	1,268	$	111,636

Expense Limitations, Waivers and Reimbursements: BlackRock has contractually agreed to waive 0.10% of its management fee through April 30, 2019. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of the outstanding voting securities of the Fund. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $212,711.

With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $2,240.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2019. The contractual agreement may be terminated upon 90 days’ notice by a majority of Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $2,131 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse all transfer agent fees for Class I and Class II.

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class II		Total
Transfer Agent Fees Reimbursed	$	110,368	$	1,268	$	111,636

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I		Class II
	1.25%		1.40%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2019, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash

NOTESTO FINANCIAL STATEMENTS 21

Notes to Financial Statements  (continued)

collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, the Fund retains 71.5% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 75% of securities lending income, and this amount retained can never be less than 65% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended December 31, 2017, the Fund paid BIM $5,942 for securities lending agent services.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	2,751,821
Sales		3,482,241
Net Realized Gain		1,387,501

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, excluding short-term securities, were $5,350,498 and $17,412,201, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income	$	3,811,505	$	3,831,956
Long term capital gains		8,657,383		9,152,654
	$	12,468,888	$	12,984,610

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	32,743
Undistributed long-term capital gains		1,789,749
Net unrealized gains(a)		146,819,332
	$	148,641,824

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain futures contracts and the timing and recognition of partnership income.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	77,300,635
Gross unrealized appreciation	$	148,303,475
Gross unrealized depreciation		(1,484,144	)
Net unrealized appreciation(depreciation)	$	146,819,331

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

NOTESTO FINANCIAL STATEMENTS 23

Notes to Financial Statements  (continued)

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		853,159		$	18,530,628			1,196,731		$	23,140,247
Shares issued in reinvestment of distributions		537,342			12,284,211			640,814			12,832,741
Shares redeemed		(1,723,846	)		(38,229,011	)		(1,829,715	)		(35,366,872	)
Net increase (decrease)		(333,345	)	$	(7,414,172	)		7,830		$	606,116
Class II
Shares sold		133,824		$	2,754,443			53,129		$	1,004,364
Shares issued in reinvestment of distributions		8,145			184,677			7,643			151,869
Shares redeemed		(110,703	)		(2,246,796	)		(38,371	)		(780,362	)
Net increase		31,266		$	692,324			22,401		$	375,871
Total Net Increase (Decrease)		(302,079	)	$	(6,721,848	)		30,231		$	981,987

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

24 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock S&P 500 Index V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock S&P 500 Index V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

REPORTOFTHE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 25

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock Total Return V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock Total Return V.I. Fund

Investment Objective

BlackRock Total Return V.I. Fund’s (the “Fund”) investment objective is to maximize total return, consistent with income generation and prudent investment management.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund’s Class I Shares outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, while the Fund’s Class III Shares underperformed.

What factors influenced performance?

Positive contributions to performance for the period came from allocations to U.S. securitized assets including non-agency mortgage-backed securities (“MBS”) and collateralized loan obligations (“CLOs”). Out-of-benchmark exposure to emerging market bonds and municipal bonds contributed positively as well.

The Fund’s positioning with respect to duration (and corresponding interest rate sensitivity) and macro strategies modestly detracted from performance relative to the benchmark.

Describe recent portfolio activity.

The Fund began 2017 positioned to benefit from reflation driven by firming global growth, with an underweight duration stance and an emphasis on carry-oriented (income) opportunities to be found lower in the capital structure. Within these overall themes, the Fund held an allocation to high yield credit and overweight exposure to securitized assets including commercial mortgage-backed securities (“CMBS”), asset-backed securities (“ABS”), CLO’s and non-agency MBS, as well as emerging markets. In addition, the Fund maintained exposure to Treasury inflation-protected securities (“TIPS”) to capture any benefit from rising market expectations for inflation. As the period progressed, the Fund reduced its duration underweight as volatility remained low, global growth started to plateau following a strong recovery, and inflation expectations declined. This shift was designed to increase the Fund’s income generation given the lack of any catalyst for rate volatility to increase substantially, and made with the view that the market should favor strategies designed to generate income given the large demand for fixed income assets and low supply.

In the second half of the year, the Fund maintained an underweight duration on the belief that strong, synchronized global growth alongside less accommodative monetary policy from developed market central banks would push rates higher into year end. The Fund maintained a preference for income-oriented opportunities in areas such as securitized assets and emerging markets as the demand for yield kept valuations rich in credit sectors. Given these valuation concerns, the Fund held a preference for idiosyncratic stories with less broad market sensitivity within its investment grade and high yield corporate credit allocations.

Describe portfolio positioning at period end.

At the close of the period, the Fund remained underweight to duration as accelerating global growth, the prospect of tax reform, and low market volatility drove risk assets and rates higher into year end. The Fund was also positioned in anticipation of a steeper yield curve. Further, the Fund was positioned with a focus on generating income through overweight positions to securitized assets as well as allocations to select investment grade and high yield corporate bonds, with a continued preference for idiosyncratic stories given overall rich valuations. In addition, the Fund maintained its overweight position in emerging markets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017 (continued) BlackRock Total Return V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance-related fees and expenses. The returns for Class III Shares prior to August 14, 2012, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class III Shares.

^(b)  Under normal circumstances, the Fund invests at least 80%, and typically invests 90% or more, of its assets in fixed income securities, such as corporate bonds and notes, mortgage-backed securities, asset-backed securities, convertible securities, preferred securities, government obligations and money market securities.

^(c)  A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S Treasury and U.S. Government agency issues with at least one year to maturity.

Performance Summary for the Period Ended December 31, 2017

	Standardized 30-Day Yield  (b)			Unsubsidized 30-Day Yield  (b)			6-Month Total Returns (c)			Average Annual Total Returns
										1 Year (c)			5 Years (c)			10 Years (c)
Class I(a)		2.68	%		2.49	%		1.08	%		3.60	%		2.39	%		3.91	%
Class III(a)		2.37			2.28			0.84			3.21			2.08			3.61	(d)
Bloomberg Barclays U.S. Aggregate Bond Index		—			—			1.24			3.54			2.10			4.01

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all distributions at net asset value on the ex-dividend/payable date. Insurance-related fees and expenses are not reflected in these returns.

^(b)  The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

^(c)  For the portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(d)  The returns for Class III Shares prior to August 14, 2012, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares, as adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual								Hypothetical (a)
					Including Interest Expense and Fees		Excluding Interest Expense and Fees				Including Interest Expense and Fees				Excluding Interest Expense and Fees
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Expenses Paid During the Period (c)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Ending Account Value 12/31/17		Expenses Paid During the Period (c)
Class I	$	1,000.00	$	1,010.80	$	3.41	$	3.45	$	1,000.00	$	1,020.92	$	4.33	$	1,021.78	$	3.47
Class III		1,000.00		1,008.40		5.67		5.01		1,000.00		1,019.56		5.70		1,020.21		5.04

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.85% for Class I and 1.12% for Class III), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

^(c)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.68% for Class I and 0.99% for Class III), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

FUND SUMMARY 3

Fund Summary  as of December 31, 2017 (continued) BlackRock Total Return V.I. Fund

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Net Assets
U.S. Government Sponsored Agency Securities		44	%
U.S. Treasury Obligations		33
Corporate Bonds		27
Asset-Backed Securities		12
Non-Agency Mortgage-Backed Securities		7
Municipal Bonds		6
Foreign Government Obligations		4
Borrowed Bond Agreements		—	(a)
Floating Rate Loan Interests		—	(a)
Borrowed Bonds		—	(a)
Money Market Funds		—	(a)
Options Purchased		—	(a)
Preferred Securities		—	(a)
Foreign Agency Obligations		—	(a)
Other Interests		—	(a)
TBA Sale Commitments		(17	)
Liabilities in Excess of Other Assets		(16	)

^(a)  Representing less than 0.5% of the Fund’s net assets.

CREDIT QUALITY ALLOCATION ^(a)

Credit Rating	Percent of Total Investments (b)
AAA/Aaa (c)		62	%
AA/Aa		4
A		8
BBB/Baa		13
BB/Ba		1
B		1
CCC/Caa		1
DD/Da		1
N/R		9

^(a)  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s or Moody’s Investors Service if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

^(b)  Total investments exclude short-term securities and options purchased.

^(c)  The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed unrated U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations to be of similar credit quality as investments rated AAA/Aaa.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Disclosure of Expenses BlackRock Total Return V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

The Benefits and Risks of Leveraging

The Fund may utilize leverage to seek to enhance returns and net asset value (“NAV”). However, these objectives cannot be achieved in all interest rate environments.

The Fund may utilize leverage by entering into reverse repurchase agreements.

In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by the Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Fund’s shareholders benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is distributed to the Fund’s shareholders, and the value of these portfolio holdings is reflected in the Fund’s per share NAV. However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other ongoing costs of leverage exceed the Fund’s return on assets purchased with leverage proceeds, income to shareholders is lower than if the Fund had not used leverage.

Furthermore, the value of the Fund’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can also influence the value of portfolio investments. As a result, changes in interest rates can influence the Fund’s NAV positively or negatively in addition to the impact on the Fund’s performance from leverage. Changes in the direction of interest rates are difficult to predict accurately, and there is no assurance that the Fund’s leveraging strategy will be successful.

The use of leverage also generally causes greater changes in the Fund’s NAV and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV of the Fund’s shares than if the Fund were not leveraged. In addition, the Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of the leverage instruments, which may cause the Fund to incur losses. The use of leverage may limit the Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. The Fund incurs expenses in connection with the use of leverage, all of which are borne by the Fund’s shareholders and may reduce income.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

DISCLOSURE OF EXPENSES / THE BENEFITSAND RISKSOF LEVERAGING / DERIVATIVE FINANCIAL INSTRUMENTS 5

Schedule of Investments December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Asset-Backed Securities — 12.2%
Accredited Mortgage Loan Trust, Series 2006-1, Class M2, 1.89%, 04/25/36(a)		USD	190	$	98,383
ACE Securities Corp. Home Equity Loan Trust(a):
Series 2003-OP1, Class A2, 2.27%, 12/25/33			122		117,945
Series 2007-HE4, Class A2A, 1.68%, 05/25/37			106		35,047
Adams Mill CLO Ltd., Series 2014-1A, Class A2R, 2.46%, 07/15/26(a)(b)			250		250,757
Ajax Mortgage Loan Trust(b)(c):
Series 2016-B, Class A, 4.00%, 09/25/65			93		92,848
Series 2016-C, Class A, 4.00%, 10/25/57			86		86,791
Series 2017-A, Class A, 3.47%, 04/25/57			342		342,258
Allegro CLO II Ltd., Series 2014-1A, Class A1R, 2.67%, 01/21/27(a)(b)			500		502,268
Allegro CLO V Ltd., Series 2017-1A, Class A, 2.61%, 10/16/30(a)(b)			250		249,896
ALM V Ltd.(a)(b):
Series 2012-5A, Class A1R3, 2.26%, 10/18/27			290		290,187
Series 2012-5A, Class A2R3, 2.60%, 10/18/27			250		250,220
Series 2012-5A, Class BR3, 3.00%, 10/18/27			250		250,309
ALM XII Ltd., Series 2015-12A, Class A1R, 2.41%, 04/16/27(a)(b)			250		250,562
ALM XIV Ltd., Series 2014-14A, Class A1R, 2.53%, 07/28/26(a)(b)			1,250		1,250,288
American Airlines Pass-Through Trust, Series 2015-1, Class A, 3.38%, 05/01/27(a)			235		235,230
AMMC CLO 18 Ltd., Series 2016-18A, Class AL1, 3.03%, 05/26/28(a)(b)			170		171,104
AMMC CLO 19 Ltd., Series 2016-19A, Class C, 4.16%, 10/15/28(a)(b)			100		101,602
Anchorage Capital CLO 5 Ltd., Series 2014-5A, Class CR, 3.56%, 10/15/26(a)(b)			250		250,005
Anchorage Capital CLO 6 Ltd., Series 2015-6A, Class AR, 2.63%, 07/15/30(a)(b)			250		251,769
Anchorage Capital CLO 7 Ltd., Series 2015-7A, Class AR, 2.32%, 10/15/27(a)(b)			750		750,356
Anchorage Capital CLO Ltd.(a)(b):
Series 2014-5RA, Class B, 0.00%, 01/15/30(d)			250		250,000
Series 2014-5RA, Class C, 0.00%, 01/15/30			250		250,000
Apidos CLO XII, Series 2013-12A, Class A, 2.46%, 04/15/25(a)(b)			353		353,264
Apidos CLO XV, Series 2013-15A, Class A1R, 2.46%, 10/20/25(a)(b)			500		500,723
APS Resecuritization Trust, Series 2016-1, Class 1MZ, 6.00%, 07/31/57(a)(b)			225		72,712
Arbor Realty Collateralized Loan Obligation Ltd.(a)(b):
Series 2015-FL2A, Class A, 3.23%, 09/15/25			250		252,027
Series 2017-FL3, Class A, 2.23%, 12/15/27(d)			130		130,082
Arbor Realty Commercial Real Estate Notes Ltd.(a)(b):
Series 2016-FL1A, Class A, 3.18%, 09/15/26			130		132,066
Series 2017-FL2, Class A, 2.40%, 08/15/27			250		250,340
Ares XXVIII CLO Ltd., Series 2013-3A, Class B1R, 2.85%, 10/17/24(a)(b)			250		250,844
Ares XXXIII CLO Ltd., Series 2015-1A, Class B2R, 4.29%, 12/05/25(a)(b)			250		255,576
Ares XXXVII CLO Ltd., Series 2015-4A, Class A1R, 2.54%, 10/15/30(a)(b)			250		251,676
Argent Mortgage Loan Trust, Series 2005-W1, Class A2, 1.79%, 05/25/35(a)(d)			61		46,394
Atlas Senior Loan Fund IV Ltd., Series 2013-2A, Class A1LR, 2.40%, 02/17/26(a)(b)			250		250,241
Avery Point V CLO Ltd., Series 2014-5A, Class AR, 2.33%, 07/17/26(a)(b)			250		250,765

Security	Par (000)			Value
B2R Mortgage Trust(a)(b):
Series 2015-1, Class A1, 2.52%, 05/15/48		USD	75	$	74,364
Series 2015-2, Class A, 3.34%, 11/15/48			91		92,298
Babson CLO Ltd., Series 2015-2A, Class AR, 2.55%, 10/20/30(a)(b)			260		262,158
BankAmerica Manufactured Housing Contract Trust, Series 1998-2, Class B1, 7.93%, 12/10/25(a)			300		218,147
Battalion CLO IV Ltd., Series 2013-4A, Class A1R, 2.50%, 10/22/25(a)(b)			250		250,196
Bayview Financial Revolving Asset Trust(a)(b):
Series 2004-B, Class A1, 2.56%, 05/28/39			152		139,477
Series 2005-A, Class A1, 2.56%, 02/28/40			223		199,320
Series 2005-E, Class A1, 2.56%, 12/28/40			98		88,702
BCMSC Trust(a):
Series 2000-A, Class A2, 7.57%, 06/15/30			40		16,392
Series 2000-A, Class A3, 7.83%, 06/15/30			37		15,733
Series 2000-A, Class A4, 8.29%, 06/15/30			63		28,616
Bear Stearns Asset-Backed Securities I Trust(a):
Series 2007-FS1, Class 1A3, 1.72%, 05/25/35			84		85,633
Series 2007-HE2, Class 23A, 1.69%, 03/25/37			61		59,166
Series 2007-HE3, Class 1A4, 1.90%, 04/25/37			206		161,755
Bear Stearns Asset-Backed Securities Trust, Series 2005-4, Class M2, 2.53%, 01/25/36(a)			20		19,810
Bear Stearns Mortgage Funding Trust, Series 2006-SL1, Class A1, 1.83%, 08/25/36(a)			83		83,618
BlueMountain CLO Ltd.(a)(b):
Series 2013-2A, Class A1R, 2.54%, 10/22/30			250		251,418
Series 2013-3A, Class AR, 2.27%, 10/29/25			250		250,051
Series 2013-4A, Class AR, 2.37%, 04/15/25			250		250,693
Bsprt Issuer Ltd., Series 2017-FL1, Class A, 2.83%, 06/15/27(a)(b)			130		130,446
Canyon Capital CLO Ltd., Series 2006-1A, Class A1, 1.84%, 12/15/20(a)(b)			106		106,176
Carlyle Global Market Strategies CLO Ltd.(a)(b):
Series 2012-4A, Class AR, 2.81%, 01/20/29			300		304,341
Series 2014-1A, Class CR, 4.10%, 04/17/25			250		250,515
Carrington Mortgage Loan Trust(a):
Series 2005-FRE1, Class M1, 2.02%, 12/25/35			160		158,965
Series 2006-FRE2, Class A2, 1.67%, 10/25/36			81		53,618
Series 2006-FRE2, Class A3, 1.71%, 10/25/36			161		107,540
Series 2006-FRE2, Class A5, 1.63%, 10/25/36			27		17,977
Series 2006-NC2, Class A3, 1.70%, 06/25/36			287		283,849
Series 2006-NC4, Class A3, 1.71%, 10/25/36			100		89,146
Series 2006-NC5, Class A5, 1.61%, 01/25/37			70		64,389
Series 2007-HE1, Class A2, 1.70%, 06/25/37			367		362,626
Series 2007-RFC1, Class A4, 1.77%, 10/25/36			100		70,288
CBAM Ltd., Series 2017-1A, Class A1, 2.58%, 07/20/30(a)(b)			250		252,173
C-BASS Trust:
Series 2006-CB7, Class A4, 1.71%, 10/25/36(a)			67		47,948
Series 2006-CB9, Class A2, 1.66%, 11/25/36(a)			37		24,174
Series 2006-CB9, Class A4, 1.78%, 11/25/36(a)			17		11,193
Series 2007-CB1, Class AF2, 3.71%, 01/25/37(c)			184		90,770
Series 2007-CB1, Class AF4, 3.71%, 01/25/37(c)			76		37,653
Series 2007-CB5, Class A2, 1.50%, 04/25/37(a)			63		47,536
Cedar Funding VIII CLO Ltd., Series 2017-8A, Class A1, 2.62%, 10/17/30(a)(b)			510		512,569
CIFC Funding Ltd.(a):
Series 2013-2A, Class A1LR, 2.56%, 10/18/30(b)			230		231,918
Series 2014-2A, Class A1LR, 2.65%, 05/24/26(b)			500		502,546
Series 2014-3A, Class C1R, 3.26%, 07/22/26(b)			250		251,029
Series 2014-4A, Class A1R, 2.73%, 10/17/26(b)			250		250,507
Series 2014-V, 2.75%, 01/17/27			890		893,146
Series 2015-2A, Class AR, 2.42%, 04/15/27(b)			250		249,749

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Citicorp Residential Mortgage Trust, Series 2007-2, Class M1, 5.24%, 06/25/37(c)		USD	100	$	96,228
Citigroup Mortgage Loan Trust(a):
Series 2006-NC1, Class A2D, 1.80%, 08/25/36			100		81,327
Series 2007-AHL2, Class A3B, 1.75%, 05/25/37			271		201,782
Series 2007-AHL2, Class A3C, 1.82%, 05/25/37			123		92,285
Citigroup Mortgage Loan Trust, Inc., Series 2006-WFH4, Class M3, 1.87%, 11/25/36(a)			100		84,881
Colony American Homes, Series 2015-1A, Class A, 2.63%, 07/17/32(a)(b)			95		95,162
Conseco Finance Corp.(a):
Series 1997-3, Class M1, 7.53%, 03/15/28			64		63,512
Series 1997-6, Class M1, 7.21%, 01/15/29			42		41,549
Series 1998-8, Class M1, 6.98%, 09/01/30			118		98,059
Series 1999-5, Class A5, 7.86%, 03/01/30			50		39,868
Series 1999-5, Class A6, 7.50%, 03/01/30			36		27,745
Series 2001-D, Class B1, 3.98%, 11/15/32			74		73,787
Conseco Finance Securitizations Corp.:
Series 2000-1, Class A5, 8.06%, 09/01/29(a)			58		31,587
Series 2000-4, Class A6, 8.31%, 05/01/32(a)			153		82,191
Series 2000-5, Class A7, 8.20%, 05/01/31			152		103,374
Countrywide Asset-Backed Certificates(a):
Series 2003-BC3, Class A2, 2.17%, 09/25/33			125		122,404
Series 2006-S10, Class A3, 1.87%, 10/25/36			52		49,251
Series 2006-SPS1, Class A, 1.77%, 12/25/25			3		3,087
Series 2007-S3, Class A3, 1.93%, 05/25/37			91		82,589
Credit-Based Asset Servicing & Securitization LLC:
Series 2006-CB2, Class AF4, 3.43%, 12/25/36(c)			17		13,818
Series 2006-MH1, Class B1, 6.25%, 10/25/36(b)(c)			100		102,856
Series 2006-SL1, Class A2, 5.56%, 09/25/36(b)(c)			91		18,632
Series 2007-CB6, Class A4, 1.58%, 07/25/37(a)(b)			65		43,910
Series 2007-RP1, Class A, 1.86%, 05/25/46(a)(b)			48		42,155
CSMC Trust, Series 2017-1, 4.50%, 03/25/21(a)			665		670,747
CWABS Asset-Backed Certificates Trust(a):
Series 2005-16, Class 1AF, 5.07%, 05/25/36			169		209,488
Series 2005-16, Class 2AF3, 4.59%, 05/25/36			39		48,785
Series 2006-11, Class 3AV2, 1.49%, 09/25/46			11		10,914
CWABS Revolving Home Equity Loan Trust, Series 2004-U, Class 2A, 1.75%, 03/15/34(a)			35		31,002
CWABS, Inc. Asset-Backed Certificates Trust, Series 2004-5, Class A, 2.45%, 10/25/34(a)			137		138,942
CWHEQ Home Equity Loan Trust:
Series 2006-S5, Class A4, 5.84%, 06/25/35			9		11,020
Series 2006-S5, Class A5, 6.16%, 06/25/35			16		17,394
Series 2007-S1, Class A3, 5.81%, 11/25/36(a)			35		35,032
CWHEQ Revolving Home Equity Loan Resuritization Trust(a)(b):
Series 2006-RES, Class 4Q1B, 1.78%, 12/15/33(d)			27		24,445
Series 2006-RES, Class 5B1B, 1.67%, 05/15/35(d)			17		14,789
Series 2006-RES, Class 5F1A, 1.72%, 12/15/35			271		246,835
CWHEQ Revolving Home Equity Loan Trust(a):
Series 2005-B, Class 2A, 1.66%, 05/15/35			30		27,677
Series 2006-H, Class 1A, 1.63%, 11/15/36			96		76,684
DCP Rights LLC, Series 2014-1A, Class A, 5.46%, 10/25/44(b)			216		222,170
Dryden 41 Senior Loan Fund, Series 2015-41A, Class A, 2.86%, 01/15/28(a)(b)			250		251,334
Dryden 53 CLO Ltd., Series 2017-53A, Class A, 0.00%, 01/15/31(a)(b)			800		800,000
Dryden XXV Senior Loan Fund, Series 2012-25A, Class ARR, 2.26%, 10/15/27(a)(b)			250		250,507

Security	Par (000)			Value
First Franklin Mortgage Loan Trust(a):
Series 2004-FFH3, Class M3, 2.60%, 10/25/34		USD	33	$	28,841
Series 2006-FF5, Class 2A3, 1.71%, 04/25/36			37		34,570
Series 2006-FF16, Class 2A3, 1.69%, 12/25/36			823		512,623
Series 2006-FF17, Class A5, 1.70%, 12/25/36			708		586,558
Series 2006-FFH1, Class M2, 1.95%, 01/25/36			122		75,191
Flatiron CLO Ltd., Series 2015-1A, Class AR, 2.25%, 04/15/27(a)(b)			250		250,358
Fremont Home Loan Trust, Series 2006-3, Class 1A1, 1.69%, 02/25/37(a)			283		227,799
GE-WMC Asset-Backed Pass-Through Certificates(a):
Series 2005-2, Class A2C, 1.80%, 12/25/35			30		29,747
Series 2005-2, Class M1, 1.99%, 12/25/35			184		109,555
GE-WMC Mortgage Securities Trust, Series 2006-1, Class A2B, 1.70%, 08/25/36(a)			718		457,665
GMACM Home Equity Loan Trust, Series 2006-HE4, Class A2, 1.51%, 12/25/36(a)			94		90,753
GSAA Home Equity Trust(a):
Series 2007-2, Class AF3, 5.92%, 03/25/37			30		12,415
Series 2007-4, Class A3B, 1.90%, 03/25/37			120		16,643
GSAMP Trust(a):
Series 2006-FM2, Class A2B, 1.67%, 09/25/36			84		40,201
Series 2007-H1, Class A1B, 1.75%, 01/25/47			32		21,698
Series 2007-HS1, Class M6, 3.80%, 02/25/47			40		40,853
GT Loan Financing I Ltd., Series 2013-1A, Class A, 2.65%, 10/28/24(a)(b)			250		250,419
Highbridge Loan Management Ltd., Series 6A-2015, Class A, 2.84%, 05/05/27(a)(b)			250		250,373
Home Equity Asset Trust, Series 2007-1, Class 2A3, 1.70%, 05/25/37(a)			90		74,212
Home Equity Mortgage Loan Asset-Backed Trust(a):
Series 2004-A, Class M2, 3.58%, 07/25/34			30		30,597
Series 2007-B, Class 2A3, 1.75%, 07/25/37			130		87,806
Home Equity Mortgage Trust, Series 2006-2, Class 1A1, 5.87%, 07/25/36(c)			80		31,055
Home Loan Mortgage Loan Trust, Series 2005-1, Class A3, 2.20%, 04/15/36(a)			32		29,632
Invitation Homes Trust(a)(b):
Series 2015-SFR3, Class A, 2.76%, 08/17/32			95		95,573
Series 2015-SFR3, Class E, 5.21%, 08/17/32			100		101,502
Irwin Home Equity Loan Trust, Series 2006-3, Class 2A3, 6.03%, 09/25/37(b)(c)			90		87,794
JPMorgan Mortgage Acquisition Trust:
Series 2006-CW1, Class M1, 1.82%, 05/25/36(a)			100		94,496
Series 2006-WF1, Class A3A, 5.83%, 07/25/36(c)			282		153,710
Series 2006-WF1, Class A5, 6.41%, 07/25/36(c)			62		33,743
Series 2006-WF1, Class A6, 6.00%, 07/25/36(c)			56		30,757
LCM 26 Ltd., Series 26A, Class A1, 0.00%, 01/20/31(a)(b)(d)			280		280,000
LCM XVIII LP, Series 18A, Class B1, 3.66%, 04/20/27(a)(b)			250		250,341
LCM Xxiv Ltd., Series 24A, Class A, 2.67%, 03/20/30(a)(b)			250		251,066
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class M1, 6.63%, 04/15/40(a)			90		93,792
Lendmark Funding Trust, Series 2017-1A, Class A, 2.83%, 01/22/24(b)			510		508,814
Litigation Fee Residual Funding LLC, Series 2015-1, Class A, 4.00%, 10/30/27(d)			103		102,912
Long Beach Mortgage Loan Trust(a):
Series 2006-2, Class 2A3, 1.74%, 03/25/46			830		423,677
Series 2006-2, Class 2A4, 1.84%, 03/25/46			251		130,903
Series 2006-3, Class 2A3, 1.73%, 05/25/46			394		183,704
Series 2006-4, Class 2A3, 1.71%, 05/25/36			435		224,169

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Long Beach Mortgage Loan Trust(a) (continued):
Series 2006-4, Class 2A4, 1.81%, 05/25/36		USD	483	$	253,563
Series 2006-9, Class 2A2, 1.66%, 10/25/36			61		30,281
Series 2006-9, Class 2A3, 1.71%, 10/25/36			374		186,594
Series 2006-9, Class 2A4, 1.78%, 10/25/36			139		69,722
Series 2006-10, Class 2A3, 1.71%, 11/25/36			97		48,214
Series 2006-10, Class 2A4, 1.77%, 11/25/36			73		36,489
Madison Avenue Manufactured Housing Contract Trust, Series 2002-A, Class B2, 4.80%, 03/25/32(a)			40		41,070
Madison Park Funding XIV Ltd., Series 2014-14A, Class A2R, 2.48%, 07/20/26(a)(b)			830		832,995
Madison Park Funding XVIII Ltd., Series 2015-18A, Class A1R, 2.55%, 10/21/30(a)(b)			510		512,831
Madison Park Funding XXVI Ltd., Series 2017-26A, Class AR, 2.52%, 07/29/30(a)(b)			250		251,950
Marble Point CLO XI Ltd., Series 2017-2A, Class A, 2.79%, 12/18/30(a)(b)			250		250,193
MASTR Asset Backed Securities Trust, Series 2006-HE2, Class A3, 1.70%, 06/25/36(a)			225		131,342
MASTR Resecuritization Trust, Series 2008-3, Class A1, 1.71%, 08/25/37(a)(b)			38		28,743
MASTR Specialized Loan Trust, Series 2006-3, Class A, 1.81%, 06/25/46(a)(b)			21		19,458
Merrill Lynch Mortgage Investors Trust(a):
Series 2006-OPT1, Class M1, 1.81%, 08/25/37			47		12,796
Series 2006-RM3, Class A2B, 1.64%, 06/25/37			29		8,685
Morgan Stanley ABS Capital I, Inc. Trust(a):
Series 2005-HE1, Class A2MZ, 2.15%, 12/25/34			155		151,613
Series 2005-HE5, Class M4, 2.42%, 09/25/35			148		67,986
Series 2007-NC1, Class A1, 1.68%, 11/25/36			506		323,037
Morgan Stanley IXIS Real Estate Capital Trust, Series 2006-2, Class A2, 1.66%, 11/25/36(a)			35		17,385
Mountain Hawk I CLO Ltd., Series 2013-1A, Class B1, 3.54%, 01/20/24(a)(b)			250		252,974
MP CLO III Ltd., Series 2013-1A, Class AR, 2.61%, 10/20/30(a)(b)			250		251,117
Navient Private Education Loan Trust(a)(b):
Series 2014-AA, Class A2B, 2.73%, 02/15/29			515		523,855
Series 2014-CTA, Class B, 3.23%, 10/17/44			200		203,072
Series 2016-AA, Class B, 3.50%, 12/16/58			100		96,671
Neuberger Berman CLO XVI Ltd., Series 2014-16A, Class B2R, 3.53%, 04/15/26(a)(b)			250		250,244
Neuberger Berman Loan Advisers CLO, Series 2017-26A, Class A, 2.56%, 10/18/30(a)(b)			250		251,115
Oakwood Mortgage Investors, Inc.(a):
Series 2001-D, Class A2, 5.26%, 01/15/19			26		20,159
Series 2001-D, Class A4, 6.93%, 09/15/31			15		13,023
Series 2002-B, Class M1, 7.62%, 06/15/32			81		67,520
OCP CLO Ltd.(a)(b):
Series 2017-13A, Class A1A, 2.56%, 07/15/30			300		302,432
Series 2017-14A, Class B, 3.56%, 11/20/30(d)			250		250,000
Octagon Investment Partners 24 Ltd.(a)(b):
Series 2015-1A, Class A1R, 2.34%, 05/21/27			470		470,229
Series 2015-1A, Class A2AR, 2.79%, 05/21/27			310		310,210
Octagon Investment Partners XIX Ltd., Series 2014-1A, Class AR, 2.46%, 04/15/26(a)(b)			457		457,339
Octagon Investment Partners XVI Ltd., Series 2013-1A, Class A, 2.47%, 07/17/25(a)(b)			451		451,779
Octagon Investment Partners XVII Ltd., Series 2013-1A, Class A2R, 3.05%, 10/25/25(a)(b)			250		250,716
OFSI Fund VI Ltd., Series 2014-6A, Class A2, 3.26%, 03/20/25(a)(b)			101		101,138
OHA Loan Funding Ltd., Series 2013-2A, Class A, 2.58%, 08/23/24(a)(b)			212		212,053

Security	Par (000)			Value
OneMain Financial Issuance Trust(b):
Series 2014-2A, Class B, 3.02%, 09/18/24		USD	100	$	100,044
Series 2014-2A, Class D, 5.31%, 09/18/24			200		201,904
Series 2016-2A, Class A, 4.10%, 03/20/28			200		202,584
Option One Mortgage Accep Corp. Asset-Backed Certificates, Series 2003-4, Class A2, 2.19%, 07/25/33(a)			199		197,330
Option One Mortgage Loan Trust:
Series 2007-CP1, Class 2A3, 1.76%, 03/25/37(a)			90		63,092
Series 2007-FXD2, Class 1A1, 5.82%, 03/25/37(c)			504		495,534
Origen Manufactured Housing Contract Trust, Series 2007-B, Class A1, 2.68%, 10/15/37(a)(b)			116		113,721
Ownit Mortgage Loan Trust, Series 2006-2, Class A2C, 6.00%, 01/25/37(c)			70		64,708
OZLM Funding II Ltd., Series 2012-2A, Class A1R, 2.82%, 10/30/27(a)(b)			1,043		1,045,484
OZLM Funding III Ltd., Series 2013-3A, Class BR, 4.36%, 01/22/29(a)(b)			320		326,331
OZLM Funding IV Ltd., Series 2013-4A, Class A1R, 2.61%, 10/22/30(a)(b)			390		392,553
OZLM Funding V Ltd., Series 2013-5A, Class BR, 3.70%, 01/17/26(a)(b)			250		250,388
OZLM IX Ltd., Series 2014-9A, Class CR, 4.91%, 01/20/27(a)(b)			250		250,796
Palmer Square CLO Ltd., Series 2013-1A, Class A2R, 2.92%, 05/15/25(a)(b)			400		400,079
Palmer Square Loan Funding Ltd., Series 2017-1A, Class A1, 2.06%, 10/15/25(a)(b)			420		420,061
Park Avenue Institutional Advisers CLO Ltd.(a)(b):
Series 2017-1A, Class A1, 2.63%, 11/14/29			280		280,965
Series 2017-1A, Class A2, 3.11%, 11/14/29			300		301,019
Progress Residential Trust(b):
Series 2016-SFR1, Class A, 2.96%, 09/17/33(a)			198		200,436
Series 2016-SFR1, Class E, 5.31%, 09/17/33(a)			100		102,644
Series 2016-SFR2, Class E, 5.01%, 01/17/34(a)			100		102,599
Series 2017-SFR1, Class A, 2.77%, 08/17/34			100		99,057
PRPM LLC, Series 2017-1A, Class A1, 4.25%, 01/25/22(b)(c)(d)			120		119,805
Race Point IX CLO Ltd., Series 2015-9A, Class A1AR, 2.57%, 10/15/30(a)(b)			250		251,220
Race Point X CLO Ltd., Series 2016-10A, Class A, 2.97%, 07/25/28(a)(b)			250		252,322
RAMP Trust(a):
Series 2006-RS6, Class A4, 1.82%, 11/25/36			239		199,817
Series 2007-RS1, Class A3, 1.72%, 02/25/37			180		99,562
RCO Mortgage LLC, Series 2015-NQM1, Class A, 5.05%, 11/25/45(a)(b)			5		4,597
Rockford Tower CLO Ltd.(a)(b):
Series 2017-1A, Class A, 2.73%, 04/15/29			250		251,796
Series 2017-1A, Class B, 3.16%, 04/15/29			250		251,508
Series 2017-2A, Class C, 3.54%, 10/15/29			250		250,554
Series 2017-3A, Class A, 2.80%, 10/20/30			250		249,711
Securitized Asset Backed Receivables LLC Trust,
Series 2006-WM4, Class A1, 1.74%, 11/25/36(a)(b)			110		68,658
SG Mortgage Securities Trust, Series 2006-OPT2, Class A3D, 1.76%, 10/25/36(a)			100		69,314
Silver Creek CLO Ltd., Series 2014-1A, Class AR, 2.60%, 07/20/30(a)(b)			250		251,697
SLM Private Credit Student Loan Trust, Series 2004-B, Class A3, 1.92%, 03/15/24(a)			373		371,862
SMB Private Education Loan Trust, Series 2015-B, Class B, 3.50%, 12/17/40(b)			100		100,098
Sound Point CLO XI Ltd., Series 2016-1A, Class A, 3.01%, 07/20/28(a)(b)			250		252,097

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Sound Point CLO XII Ltd., Series 2016-2A, Class A, 3.02%, 10/20/28(a)(b)		USD	250	$	252,537
Sound Point CLO XIV Ltd., Series 2016-3A, Class A, 2.89%, 01/23/29(a)(b)			260		262,346
Sound Point CLO XV Ltd., Series 2017-1A, Class A, 2.75%, 01/23/29(a)(b)			250		251,776
Soundview Home Loan Trust, Series 2004-WMC1, Class M2, 2.35%, 01/25/35(a)			4		3,974
SpringCastle America Funding LLC, Series 2016-AA, Class A, 3.05%, 04/25/29(b)			331		332,763
Stanwich Mortgage Loan Co. LLC(b)(c)(d):
Series 2016-NPL2, Class NOTE, 3.72%, 08/16/46			273		272,964
Series 2017-NPB1, Class A1, 3.60%, 05/17/22			559		560,259
Structured Asset Securities Corp. Mortgage Pass-Through Certificates, Series 2004-23XS, Class 2A1, 1.85%, 01/25/35(a)			139		135,580
Symphony CLO XII Ltd., Series 2013-12A, Class AR, 2.39%, 10/15/25(a)(b)			255		255,383
TCI-Flatiron CLO Ltd., Series 2017-1A, Class A, 2.15%, 11/17/30(a)(b)			250		251,318
THL Credit Wind River CLO Ltd., Series 2014-2A, Class A2, 2.81%, 07/15/26(a)(b)			250		250,147
TICP CLO III Ltd., Series 2014-3A, Class AR, 2.54%, 01/20/27(a)(b)			250		251,104
Turkish Airlines Pass-Through Trust, Series 2015-1, Class A, 4.20%, 03/15/27(b)			36		34,974
Union Pacific Railroad Co. Pass-Through Trust, Series 14-1, 3.23%, 05/14/26			102		104,253
United Airlines Pass-Through Trust, Series B, Class B, 4.75%, 04/11/22			15		15,131
Velocity Commercial Capital Loan Trust(a):
Series 2016-2, Class AFL, 3.13%, 10/25/46			94		95,148
Series 2016-2, Class M4, 7.23%, 10/25/46			100		107,404
Series 2017-1, Class AFL, 2.80%, 05/25/47(b)			140		140,714
Venture XIX CLO Ltd.(a)(b):
2.58%, 10/15/29			315		315,427
Series 2014-19A, Class AR, 2.73%, 01/15/27			250		250,334
Vibrant CLO III Ltd., Series 2015-3A, Class A1R, 2.84%, 04/20/26(a)(b)			250		250,730
Voya CLO Ltd.(a)(b):
Series 2013-2A, Class A1, 2.52%, 04/25/25			225		225,462
Series 2014-3A, Class A1R, 2.24%, 07/25/26(d)			250		250,000
Wachovia Asset Securitization Issuance II LLC Trust,
Series 2007-HE2A, Class A, 1.68%, 07/25/37(a)(b)			109		99,880
WaMu Asset-Backed Certificates WaMu Trust(a):
Series 2007-HE2, Class 2A3, 1.80%, 04/25/37			578		324,128
Series 2007-HE2, Class 2A4, 1.91%, 04/25/37			36		20,504
Washington Mutural Asset-Backed Certificates WMABS Trust(a):
Series 2006-HE4, Class 2A2, 1.73%, 09/25/36			171		86,484
Series 2006-HE5, Class 1A, 1.71%, 10/25/36			198		163,939
Series 2007-HE2, Class 2A2, 1.77%, 02/25/37			218		95,613
Wellfleet CLO Ltd., Series 2017-1A, Class A1, 2.68%, 04/20/29(a)(b)			250		251,660
WVUE, Series 2015-1A, Class A, 4.50%, 09/25/20(b)(c)(d)			25		24,753
Yale Mortgage Loan Trust, Series 2007-1, Class A, 1.95%, 06/25/37(a)(b)			100		44,588
York CLO-2 Ltd., Series 2015-1A, Class AR, 2.61%, 01/22/31(a)(b)(d)			250		250,000
Total Asset-Backed Securities — 12.2% (Cost: $50,902,965)					51,289,007

Security	Par (000)			Value
Corporate Bonds — 26.3%
Aerospace & Defense — 0.4%
BAE Systems Holdings, Inc.(b):
2.85%, 12/15/20		USD	39	$	39,176
4.75%, 10/07/44			8		8,932
Lockheed Martin Corp.:
3.55%, 01/15/26			44		45,688
3.60%, 03/01/35			139		140,120
4.50%, 05/15/36			18		20,183
4.07%, 12/15/42			94		98,958
4.09%, 09/15/52			56		58,621
Northrop Grumman Corp.:
2.93%, 01/15/25			360		357,861
3.85%, 04/15/45			100		100,791
United Technologies Corp.:
1.78%, 05/04/18(c)			284		283,565
4.15%, 05/15/45			98		104,396
4.05%, 05/04/47			265		277,370
					1,535,661
Air Freight & Logistics — 0.1%
FedEx Corp.:
4.90%, 01/15/34			185		209,708
3.90%, 02/01/35			194		197,082
					406,790
Airlines — 0.2%
American Airlines Group, Inc., 4.63%, 03/01/20(b)			69		70,121
Delta Air Lines, Inc., 2.88%, 03/13/20			871		876,054
Gol Finance, Inc., 7.00%, 01/31/25(b)			66		64,879
					1,011,054
Auto Components — 0.1%
Aptiv plc:
4.25%, 01/15/26			115		122,041
4.40%, 10/01/46			111		114,338
					236,379
Automobiles — 0.2%
Hyundai Capital America, 2.55%, 04/03/20(b)			786		779,585
Banks — 6.1%
Bank of America Corp.:
2.25%, 04/21/20			290		290,203
(LIBOR USD 3 Month + 0.66%), 2.37%, 07/21/21(e)			935		933,362
(LIBOR USD 3 Month + 0.63%), 2.33%, 10/01/21(e)			1,735		1,730,109
3.30%, 01/11/23			202		206,646
3.88%, 08/01/25			460		485,221
3.50%, 04/19/26			376		384,424
3.25%, 10/21/27			174		172,664
4.18%, 11/25/27			460		480,362
(LIBOR USD 3 Month + 1.37%), 3.59%, 07/21/28(e)			75		76,234
Barclays plc, 4.95%, 01/10/47			200		221,933
BB&T Corp., 2.45%, 01/15/20			96		96,318
BNP Paribas SA(b):
2.95%, 05/23/22			565		566,229
3.80%, 01/10/24			200		206,925
Citigroup, Inc.:
1.80%, 02/05/18			142		141,985
2.50%, 07/29/19			453		454,390
2.90%, 12/08/21			620		624,080
3.50%, 05/15/23			114		116,039
3.88%, 03/26/25			135		138,193

SCHEDULE OF INVESTMENTS 9

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Banks (continued)
Citigroup, Inc. (continued):
(LIBOR USD 3 Month + 1.56%), 3.89%, 01/10/28(e)		USD	145	$	150,087
(LIBOR USD 3 Month + 1.39%), 3.67%, 07/24/28(e)			555		563,075
4.13%, 07/25/28			637		656,527
Citizens Bank NA:
2.25%, 03/02/20			544		541,409
2.65%, 05/26/22			555		549,925
Credit Agricole SA, 3.25%, 10/04/24(b)			495		491,670
Credit Suisse Group Funding Guernsey Ltd., 2.75%, 03/26/20			250		250,975
Fifth Third Bank, 2.25%, 06/14/21			216		213,935
HSBC Holdings plc:
2.65%, 01/05/22			928		921,840
(USD Swap Rate 5 Year + 3.75%), 6.00%(e)(f)			380		399,475
(LIBOR USD 3 Month + 1.55%), 4.04%, 03/13/28(e)			124		129,226
Intesa Sanpaolo SpA(b):
3.13%, 07/14/22			465		461,647
5.02%, 06/26/24			611		625,617
JPMorgan Chase & Co.:
2.97%, 01/15/23			1,140		1,149,560
3.90%, 07/15/25			196		205,475
(LIBOR USD 3 Month + 1.38%), 3.54%, 05/01/28(e)			220		223,816
(LIBOR USD 3 Month + 1.36%), 3.88%, 07/24/38(e)			1,060		1,089,646
Lloyds Banking Group plc, 3.75%, 01/11/27			214		217,324
Mitsubishi UFJ Financial Group, Inc., 3.00%, 02/22/22			455		457,890
Mizuho Financial Group, Inc., 2.95%, 02/28/22			1,338		1,339,309
Royal Bank of Scotland Group plc(e):
(LIBOR USD 3 Month + 1.47%), 2.89%, 05/15/23			645		652,066
(LIBOR USD 3 Month + 1.48%), 3.50%, 05/15/23			495		496,079
Santander Holdings USA, Inc.(b):
3.70%, 03/28/22			115	��	116,384
3.40%, 01/18/23			410		408,402
Santander UK Group Holdings plc, 2.88%, 08/05/21			635		633,444
Sumitomo Mitsui Trust Bank Ltd.(b):
2.05%, 03/06/19			1,634		1,629,766
1.95%, 09/19/19			555		550,567
UBS Group Funding Switzerland AG(b):
4.13%, 09/24/25			200		209,891
4.25%, 03/23/28			500		526,844
UniCredit SpA, (USD Swap Rate 5 Year + 3.70%), 5.86%, 06/19/32(b)(e)			655		697,940
US Bancorp:
2.95%, 07/15/22			190		192,562
3.10%, 04/27/26			70		69,507
3.15%, 04/27/27			160		160,293
Washington Mutual Bank(d)(g)(h):
1.40%, 11/06/09			300		—
0.00%, 09/19/17(i)			250		—
Washington Mutual, Inc., 1.40%, 09/29/17(a)(d)(g)(h)			500		—
Wells Fargo & Co.:
2.60%, 07/22/20			77		77,474
2.55%, 12/07/20			95		95,385
2.10%, 07/26/21			180		176,986
2.63%, 07/22/22			830		825,536
					25,482,871

Security	Par (000)			Value
Beverages — 0.5%
Anheuser-Busch InBev Finance, Inc.:
2.65%, 02/01/21		USD	516	$	518,589
3.30%, 02/01/23			185		189,309
3.65%, 02/01/26			1,120		1,155,815
4.70%, 02/01/36			135		150,950
					2,014,663
Biotechnology — 0.9%
AbbVie, Inc.:
2.50%, 05/14/20			439		440,353
2.90%, 11/06/22			106		106,308
4.50%, 05/14/35			1,230		1,350,961
Amgen, Inc.:
2.13%, 05/01/20			107		106,431
4.40%, 05/01/45			222		241,544
Baxalta, Inc., 4.00%, 06/23/25			310		320,409
Gilead Sciences, Inc.:
2.35%, 02/01/20			20		20,093
2.50%, 09/01/23			117		115,505
4.60%, 09/01/35			27		30,423
4.00%, 09/01/36			650		687,654
4.50%, 02/01/45			105		116,700
4.15%, 03/01/47			48		51,056
					3,587,437
Building Products — 0.2%
CRH America Finance, Inc., 3.40%, 05/09/27(b)			210		209,952
Johnson Controls International plc, 5.13%, 09/14/45			180		211,297
LafargeHolcim Finance US LLC, 4.75%, 09/22/46(b)			240		254,262
					675,511
Capital Markets — 1.4%
Bank of New York Mellon Corp. (The), (LIBOR USD 3 Month + 3.13%), 4.62%(e)(f)			270		274,388
Blackstone Holdings Finance Co. LLC, 4.00%, 10/02/47(b)			240		239,047
Credit Suisse AG, 3.00%, 10/29/21			259		261,658
Credit Suisse Group AG, 4.28%, 01/09/28(b)			250		260,650
Goldman Sachs Group, Inc. (The):
2.63%, 01/31/19			263		264,136
2.00%, 04/25/19			68		67,795
2.60%, 04/23/20			138		138,188
2.75%, 09/15/20			65		65,325
2.63%, 04/25/21			143		142,900
2.35%, 11/15/21			498		490,450
(LIBOR USD 3 Month + 1.37%), 4.02%, 10/31/38(e)			140		143,975
Moody’s Corp., 2.75%, 12/15/21			230		230,288
Morgan Stanley:
2.80%, 06/16/20			239		241,156
2.75%, 05/19/22			1,190		1,185,632
3.75%, 02/25/23			193		200,018
3.70%, 10/23/24			126		130,199
(LIBOR USD 3 Month + 1.34%), 3.59%, 07/22/28(e)			860		867,915
(LIBOR USD 3 Month + 1.46%), 3.97%, 07/22/38(e)			250		258,874
Northern Trust Corp., (LIBOR USD 3 Month + 1.13%), 3.37%, 05/08/32(e)			195		194,277
State Street Corp., 2.65%, 05/19/26			103		100,200
					5,757,071
Chemicals — 0.1%
Agrium, Inc., 4.13%, 03/15/35(j)			46		47,522

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Chemicals (continued)
Dow Chemical Co. (The):
4.38%, 11/15/42		USD	23	$	24,200
4.63%, 10/01/44			103		112,599
Eastman Chemical Co., 4.80%, 09/01/42			59		64,872
EI du Pont de Nemours & Co., 2.20%, 05/01/20			105		104,908
Monsanto Co., 3.60%, 07/15/42			107		98,035
Sherwin-Williams Co. (The):
4.00%, 12/15/42			20		20,054
4.50%, 06/01/47			75		82,001
					554,191
Commercial Services & Supplies — 0.2%
Catholic Health Initiatives, 4.35%, 11/01/42			30		28,961
Pitney Bowes, Inc., 4.13%, 05/15/22			340		312,375
Waste Management, Inc., 3.90%, 03/01/35			336		352,251
					693,587
Communications Equipment — 0.0%
Harris Corp., 2.70%, 04/27/20			28		28,113
Juniper Networks, Inc., 3.30%, 06/15/20			63		63,817
					91,930
Construction & Engineering — 0.0%
Mexico City Airport Trust, 5.50%, 07/31/47(b)			200		197,500
Consumer Finance — 1.0%
AerCap Ireland Capital DAC:
4.63%, 10/30/20			462		484,306
3.50%, 05/26/22			531		538,891
American Express Credit Corp.:
2.25%, 08/15/19			177		177,370
3.30%, 05/03/27			100		101,477
Discover Financial Services, 4.10%, 02/09/27			104		106,531
Ford Motor Credit Co. LLC, 3.22%, 01/09/22			1,070		1,076,592
General Motors Financial Co., Inc.:
3.10%, 01/15/19			41		41,219
3.70%, 11/24/20			117		120,110
3.20%, 07/06/21			600		605,857
3.15%, 06/30/22			630		629,510
4.00%, 01/15/25			151		155,148
Synchrony Financial:
2.60%, 01/15/19			94		94,178
2.70%, 02/03/20			48		48,120
4.50%, 07/23/25			105		109,725
Tarjeta Naranja SA, (Argentina Deposit Rates Badlar Private Banks ARS 30 to 35 Days + 3.50%, 15.00% Floor), 24.71%, 04/11/22(b)(e)			108		105,030
					4,394,064
Containers & Packaging — 0.2%
International Paper Co., 4.35%, 08/15/48			470		490,698
Reynolds Group Issuer, Inc., 5.75%, 10/15/20			204		206,565
					697,263
Diversified Consumer Services — 0.1%
Northwestern University, 3.66%, 12/01/57			288		296,006
University of Notre Dame du Lac, 3.39%, 02/15/48			160		159,574
University of Southern California, 3.03%, 10/01/39			96		91,637
Wesleyan University, 4.78%, 07/01/2116			79		83,862
					631,079
Diversified Financial Services — 0.6%
ARI Investments LLC, (LIBOR USD 3 Month + 0.00%), 0.00%, 01/06/25(d)(e)			1,000		1,000,000
GE Capital International Funding Co. Unlimited Co., 4.42%, 11/15/35			545		589,830

Security	Par (000)			Value
Diversified Financial Services (continued)
Nationwide Building Society, (USD Swap Rate 5 Year + 1.85%), 4.12%, 10/18/32(b)(e)		USD	300	$	300,101
ORIX Corp., 2.90%, 07/18/22			155		154,458
Shell International Finance BV:
4.13%, 05/11/35			291		317,439
3.63%, 08/21/42			44		43,442
3.75%, 09/12/46			245		249,881
Woodside Finance Ltd., 3.65%, 03/05/25(b)			16		16,097
					2,671,248
Diversified Telecommunication Services — 1.3%
AT&T, Inc.:
4.25%, 03/01/27			240		244,660
3.90%, 08/14/27			330		332,205
5.25%, 03/01/37			254		268,636
5.15%, 02/14/50			810		820,096
Deutsche Telekom International Finance BV, 3.60%, 01/19/27(b)			150		150,728
Verizon Communications, Inc.:
(LIBOR USD 3 Month + 0.55%), 2.00%, 05/22/20(e)			2,640		2,655,350
4.13%, 03/16/27			500		521,356
4.50%, 08/10/33			400		419,532
4.40%, 11/01/34			75		76,428
					5,488,991
Electric Utilities — 1.4%
Baltimore Gas & Electric Co., 3.50%, 08/15/46			77		75,443
Duke Energy Corp.:
4.80%, 12/15/45			220		254,251
3.75%, 09/01/46			240		237,339
Emera US Finance LP:
2.15%, 06/15/19			147		146,428
2.70%, 06/15/21			222		221,459
Enel Finance International NV(b):
2.88%, 05/25/22			420		418,858
3.63%, 05/25/27			440		437,164
3.50%, 04/06/28			710		694,471
Entergy Corp., 2.95%, 09/01/26			210		204,318
Eversource Energy, 2.90%, 10/01/24			305		302,679
Exelon Corp.:
2.85%, 06/15/20			161		162,501
2.45%, 04/15/21			38		37,828
4.95%, 06/15/35			48		54,737
4.45%, 04/15/46			465		505,326
FirstEnergy Corp., 4.85%, 07/15/47			235		262,257
Genneia SA, 8.75%, 01/20/22(b)			65		71,434
MidAmerican Energy Co., 4.40%, 10/15/44			91		103,604
Northern States Power Co., 3.40%, 08/15/42			170		168,247
Oncor Electric Delivery Co. LLC, 4.55%, 12/01/41			120		138,698
Pampa Energia SA, 7.38%, 07/21/23(b)			53		57,770
Southern Co. (The), 4.40%, 07/01/46			235		250,269
Stoneway Capital Corp., 10.00%, 03/01/27(b)			150		159,494
Trans-Allegheny Interstate Line Co., 3.85%, 06/01/25(b)			250		259,334
Virginia Electric & Power Co.:
3.50%, 03/15/27			291		300,863
4.45%, 02/15/44			44		49,642
4.20%, 05/15/45			143		155,337
4.00%, 11/15/46			110		117,728
					5,847,479
Electrical Equipment — 0.0%
Eaton Corp., 2.75%, 11/02/22			118		118,345

SCHEDULE OF INVESTMENTS 11

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Electronic Equipment, Instruments & Components — 0.0%
Amphenol Corp., 3.20%, 04/01/24		USD	114	$	114,771
Tyco Electronics Group SA:
3.45%, 08/01/24			30		30,840
3.13%, 08/15/27			65		64,866
					210,477
Energy Equipment & Services — 0.2%
Halliburton Co., 3.80%, 11/15/25			760		789,843
Schlumberger Holdings Corp., 3.00%, 12/21/20(b)			164		166,124
					955,967
Equity Real Estate Investment Trusts (REITs) — 0.5%
American Tower Corp.:
3.30%, 02/15/21			81		82,485
3.45%, 09/15/21			77		78,701
3.00%, 06/15/23			1,040		1,037,277
4.40%, 02/15/26			16		16,825
Boston Properties LP, 3.65%, 02/01/26			280		284,448
Crown Castle International Corp.:
3.40%, 02/15/21			48		49,019
2.25%, 09/01/21			197		193,677
3.20%, 09/01/24			405		400,801
					2,143,233
Food & Staples Retailing — 0.2%
CVS Health Corp.:
4.00%, 12/05/23			235		244,333
5.13%, 07/20/45			125		143,262
Walgreens Boots Alliance, Inc.:
4.80%, 11/18/44			387		416,662
4.65%, 06/01/46			8		8,427
					812,684
Food Products — 0.1%
Arcor SAIC, 6.00%, 07/06/23(b)			23		24,409
Kraft Heinz Foods Co., 4.38%, 06/01/46			270		267,448
Tyson Foods, Inc., 3.95%, 08/15/24			185		194,559
					486,416
Gas Utilities — 0.0%
Dominion Energy Gas Holdings LLC, 4.60%, 12/15/44			97		106,718
Health Care Equipment & Supplies — 0.7%
Abbott Laboratories:
2.80%, 09/15/20			75		75,504
3.88%, 09/15/25			25		25,858
3.75%, 11/30/26			1,025		1,052,538
Becton Dickinson and Co.:
2.13%, 06/06/19			600		598,652
2.68%, 12/15/19			114		114,412
2.89%, 06/06/22			425		422,341
4.69%, 12/15/44			30		32,805
Boston Scientific Corp., 2.65%, 10/01/18			82		82,324
Medtronic, Inc., 4.38%, 03/15/35			270		304,375
Stryker Corp., 4.63%, 03/15/46			69		78,357
					2,787,166
Health Care Providers & Services — 0.8%
Aetna, Inc.:
4.50%, 05/15/42			88		94,247
4.13%, 11/15/42			32		32,409
4.75%, 03/15/44			60		66,984
3.88%, 08/15/47			260		256,235
AHS Hospital Corp., 5.02%, 07/01/45			49		59,301

Security	Par (000)			Value
Health Care Providers & Services (continued)
Anthem, Inc.:
1.88%, 01/15/18		USD	276	$	275,981
2.30%, 07/15/18			457		457,998
3.70%, 08/15/21			161		165,958
Baylor Scott & White Holdings, 4.19%, 11/15/45			40		42,876
Cigna Corp., 3.25%, 04/15/25			281		282,370
HCA, Inc., 3.75%, 03/15/19			210		211,837
Kaiser Foundation Hospitals, 4.15%, 05/01/47			320		345,773
Laboratory Corp. of America Holdings, 2.63%, 02/01/20			63		63,166
New York and Presbyterian Hospital (The), 3.56%, 08/01/36			40		40,313
Northwell Healthcare, Inc., 4.26%, 11/01/47			59		60,335
Ochsner Clinic Foundation, 5.90%, 05/15/45			35		45,699
RWJ Barnabas Health, Inc., 3.95%, 07/01/46			29		29,564
Southern Baptist Hospital of Florida, Inc., 4.86%, 07/15/45			35		40,305
SSM Health Care Corp., 3.82%, 06/01/27			297		307,994
Trinity Health Corp., 4.13%, 12/01/45			119		126,177
UnitedHealth Group, Inc.:
2.70%, 07/15/20			46		46,532
4.63%, 07/15/35			16		18,633
4.20%, 01/15/47			123		132,539
					3,203,226
Hotels, Restaurants & Leisure — 0.1%
Caesars Growth Properties Holdings LLC, 9.38%, 05/01/22			190		203,300
McDonald’s Corp.:
4.70%, 12/09/35			270		306,685
4.88%, 12/09/45			27		31,278
					541,263
Household Durables — 0.1%
Newell Brands, Inc.:
2.88%, 12/01/19			164		165,317
5.38%, 04/01/36			85		99,483
					264,800
Industrial Conglomerates — 0.1%
Cia Latinoamericana de Infraestructura & Servicios SA, 9.50%, 07/20/23(b)			4		4,260
General Electric Co., 4.50%, 03/11/44			216		239,278
Honeywell International, Inc., 3.81%, 11/21/47(b)			55		57,192
Ingersoll-Rand Luxembourg Finance SA, 4.65%, 11/01/44			16		17,715
					318,445
Insurance — 0.4%
Allstate Corp. (The), 4.20%, 12/15/46			134		146,205
American International Group, Inc., 3.88%, 01/15/35			89		89,336
Aon plc, 4.75%, 05/15/45			50		55,594
Marsh & McLennan Cos., Inc.:
3.75%, 03/14/26			18		18,799
4.35%, 01/30/47			28		31,015
MetLife, Inc., 4.60%, 05/13/46			165		188,209
Principal Financial Group, Inc., 4.30%, 11/15/46			300		320,880
Travelers Cos., Inc. (The):
4.60%, 08/01/43			120		138,546
4.00%, 05/30/47			170		181,023
Willis North America, Inc., 3.60%, 05/15/24			546		555,065
					1,724,672
Internet & Direct Marketing Retail — 0.1%
Amazon.com, Inc., 3.88%, 08/22/37(b)			575		610,132

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
IT Services — 0.2%
DXC Technology Co., 2.88%, 03/27/20		USD	124	$	124,603
Fidelity National Information Services, Inc.:
3.63%, 10/15/20			7		7,192
4.50%, 08/15/46			38		39,611
Total System Services, Inc., 4.80%, 04/01/26			235		254,245
Visa, Inc., 4.15%, 12/14/35			198		219,831
					645,482
Life Sciences Tools & Services — 0.2%
Thermo Fisher Scientific, Inc.:
4.15%, 02/01/24			359		380,811
3.65%, 12/15/25			398		408,436
					789,247
Media — 1.1%
CBS Corp., 2.30%, 08/15/19			96		95,933
Charter Communications Operating LLC:
4.46%, 07/23/22			405		422,556
4.91%, 07/23/25			79		83,992
3.75%, 02/15/28			410		392,865
6.38%, 10/23/35			99		115,595
6.48%, 10/23/45			150		174,889
5.38%, 05/01/47			385		394,760
Comcast Corp.:
3.38%, 08/15/25			279		286,333
4.25%, 01/15/33			35		38,149
4.40%, 08/15/35			196		214,286
3.20%, 07/15/36			380		361,348
4.75%, 03/01/44			380		435,772
4.60%, 08/15/45			45		50,475
3.40%, 07/15/46			65		61,500
Cox Communications, Inc., 3.15%, 08/15/24(b)			335		329,936
CSC Holdings LLC, 7.63%, 07/15/18			190		194,275
Discovery Communications LLC, 3.80%, 03/13/24			151		153,182
Interpublic Group of Cos., Inc. (The), 4.00%, 03/15/22			62		64,082
NBCUniversal Media LLC, 4.45%, 01/15/43			76		82,933
Time Warner Cable LLC:
5.00%, 02/01/20			58		60,529
4.13%, 02/15/21			160		164,765
4.00%, 09/01/21			22		22,659
5.50%, 09/01/41			63		65,664
4.50%, 09/15/42			9		8,444
Time Warner, Inc.:
2.10%, 06/01/19			260		259,497
3.60%, 07/15/25			50		50,112
4.85%, 07/15/45			156		163,836
Viacom, Inc.:
2.75%, 12/15/19			9		8,987
4.50%, 03/01/21			69		71,829
					4,829,183
Metals & Mining — 0.4%
Anglo American Capital plc, 3.63%, 09/11/24(b)			270		268,707
Barrick Gold Corp., 5.25%, 04/01/42			190		219,051
BHP Billiton Finance USA Ltd., 5.00%, 09/30/43			180		220,688
Glencore Funding LLC, 4.00%, 03/27/27(b)			440		441,768
Newmont Mining Corp.:
3.50%, 03/15/22			250		255,219
4.88%, 03/15/42			175		194,198
Nucor Corp., 5.20%, 08/01/43			40		48,461
Rio Tinto Finance USA plc, 4.13%, 08/21/42			110		117,712
Steel Dynamics, Inc., 5.13%, 10/01/21			96		98,400
					1,864,204

Security	Par (000)			Value
Multiline Retail — 0.1%
Target Corp., 2.50%, 04/15/26		USD	235	$	225,944
Multi-Utilities — 0.1%
Dominion Energy, Inc., 2.58%, 07/01/20			245		245,102
NiSource Finance Corp., 3.49%, 05/15/27			210		213,747
					458,849
Oil, Gas & Consumable Fuels — 1.9%
Andeavor Logistics LP, 5.50%, 10/15/19			210		217,984
Apache Corp.:
2.63%, 01/15/23			181		177,495
4.25%, 01/15/44			555		537,670
BP Capital Markets plc, 3.22%, 04/14/24			470		481,578
Cenovus Energy, Inc., 4.25%, 04/15/27			260		259,374
Concho Resources, Inc.:
3.75%, 10/01/27			590		597,703
4.88%, 10/01/47			70		76,120
Enbridge, Inc.:
2.90%, 07/15/22			205		203,759
3.70%, 07/15/27			165		165,696
Endeavor Energy Resources LP, 7.00%, 08/15/21(b)			210		217,497
Enterprise Products Operating LLC:
5.10%, 02/15/45			38		43,360
4.90%, 05/15/46			177		195,018
EOG Resources, Inc.:
2.45%, 04/01/20			343		343,981
4.15%, 01/15/26			85		90,466
Exxon Mobil Corp.:
1.82%, 03/15/19			529		528,155
4.11%, 03/01/46			118		132,070
Hess Corp., 5.80%, 04/01/47			400		445,117
Kinder Morgan Energy Partners LP:
4.30%, 05/01/24			288		299,854
4.25%, 09/01/24			397		411,165
Kinder Morgan, Inc., 5.05%, 02/15/46			520		539,727
Marathon Petroleum Corp., 5.85%, 12/15/45			125		143,984
MPLX LP:
4.13%, 03/01/27			210		215,090
5.20%, 03/01/47			68		74,625
Pioneer Natural Resources Co., 4.45%, 01/15/26			50		53,592
Resolute Energy Corp., 8.50%, 05/01/20			210		213,675
Spectra Energy Partners LP, 4.50%, 03/15/45			230		237,159
Sunoco Logistics Partners Operations LP, 5.40%, 10/01/47			275		276,857
TransCanada PipeLines Ltd.:
1.88%, 01/12/18			48		47,999
2.50%, 08/01/22			44		43,720
Valero Energy Corp., 3.65%, 03/15/25			305		313,192
Williams Partners LP, 4.00%, 09/15/25			310		317,196
					7,900,878
Paper & Forest Products — 0.0%
Georgia-Pacific LLC, 7.38%, 12/01/25			97		123,457
Pharmaceuticals — 0.4%
Allergan Funding SCS:
2.35%, 03/12/18			354		354,281
3.80%, 03/15/25			500		509,023
Merck & Co., Inc., 3.60%, 09/15/42			165		168,446
Pfizer, Inc., 4.00%, 12/15/36			510		558,696
					1,590,446
Road & Rail — 0.3%
Burlington Northern Santa Fe LLC:
4.15%, 04/01/45			80		86,936
4.70%, 09/01/45			35		41,005
4.13%, 06/15/47			120		131,487
CSX Corp., 4.25%, 11/01/66			124		123,899
Norfolk Southern Corp., 4.05%, 08/15/52(b)			112		116,084
Penske Truck Leasing Co. LP, 3.40%, 11/15/26(b)			273		269,554

SCHEDULE OF INVESTMENTS 13

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Road & Rail (continued)
Union Pacific Corp.:
3.38%, 02/01/35		USD	27	$	27,347
3.60%, 09/15/37			230		238,295
3.88%, 02/01/55			134		136,142
					1,170,749
Semiconductors & Semiconductor Equipment — 1.0%
Analog Devices, Inc.:
3.90%, 12/15/25			20		20,908
3.50%, 12/05/26			450		455,390
5.30%, 12/15/45			20		23,770
Applied Materials, Inc.:
3.30%, 04/01/27			218		221,727
4.35%, 04/01/47			129		144,711
Broadcom Corp.(b):
2.38%, 01/15/20			1,073		1,065,743
3.00%, 01/15/22			1,165		1,155,132
3.63%, 01/15/24			270		268,484
Lam Research Corp.:
2.75%, 03/15/20			121		121,857
2.80%, 06/15/21			116		116,728
QUALCOMM, Inc.:
2.60%, 01/30/23			290		282,871
4.80%, 05/20/45			78		83,892
Xilinx, Inc., 2.95%, 06/01/24			125		124,220
					4,085,433
Software — 0.8%
Autodesk, Inc., 3.50%, 06/15/27			425		416,893
Microsoft Corp.:
3.50%, 02/12/35			231		240,347
3.45%, 08/08/36			540		556,734
4.25%, 02/06/47			495		565,919
Oracle Corp.:
3.25%, 05/15/30			151		152,643
3.90%, 05/15/35			181		191,732
4.00%, 07/15/46			183		194,714
4.38%, 05/15/55			47		52,533
VMware, Inc., 2.30%, 08/21/20			1,190		1,183,253
					3,554,768
Specialty Retail — 0.1%
Home Depot, Inc. (The), 5.88%, 12/16/36			120		162,385
Lowe’s Cos., Inc., 4.38%, 09/15/45			150		165,791
					328,176
Technology Hardware, Storage & Peripherals — 0.7%
Apple, Inc.:
3.00%, 02/09/24			276		279,503
2.85%, 05/11/24			1,040		1,044,659
3.45%, 02/09/45			39		38,061
4.65%, 02/23/46			509		596,057
Hewlett Packard Enterprise Co.:
2.85%, 10/05/18			470		472,265
2.10%, 10/04/19(b)			445		441,954
3.60%, 10/15/20			228		232,788
HP, Inc., 3.75%, 12/01/20			16		16,511
					3,121,798
Thrifts & Mortgage Finance — 0.1%
BPCE SA, 3.00%, 05/22/22(b)			330		329,817
Tobacco — 0.3%
BAT Capital Corp., 4.39%, 08/15/37(b)			355		372,786
Reynolds American, Inc.:
2.30%, 06/12/18			60		60,070
3.25%, 06/12/20			25		25,403
4.45%, 06/12/25			590		629,085
					1,087,344
Trading Companies & Distributors — 0.2%
Air Lease Corp., 2.63%, 07/01/22			415		409,403
Aviation Capital Group LLC, 2.88%, 09/17/18(b)			160		160,537

Security	Par (000)			Value
Trading Companies & Distributors (continued)
GATX Corp.:
2.60%, 03/30/20		USD	59	$	58,985
3.85%, 03/30/27			86		87,437
					716,362
Wireless Telecommunication Services — 0.1%
Rogers Communications, Inc., 5.00%, 03/15/44			22		25,408
Sprint Spectrum Co. LLC, 3.36%, 09/20/21(b)			526		529,225
					554,633
Total Corporate Bonds — 26.3% (Cost: $108,982,347)					110,414,668
Floating Rate Loan Interests — 0.4%(k)
Capital Markets — 0.4%(d)
LSTAR Securities Financing Vehicle I, 1st Lien Term Loan, (LIBOR USD 1 Month + 2.50%), 3.86%, 04/07/20			1,115		1,105,619
LSTAR Securities Financing Vehicle II LLC, Term Loan, (LIBOR USD 1 Month + 2.00%), 3.36%, 06/01/20			500		494,357
					1,599,976
Total Floating Rate Loan Interests — 0.4% (Cost: $1,604,826)					1,599,976
Foreign Agency Obligations — 0.4%
Argentina — 0.1%
YPF SA:
8.88%, 12/19/18(b)			69		72,864
8.50%, 03/23/21(b)			12		13,572
8.75%, 04/04/24			68		78,098
6.95%, 07/21/27(b)			65		68,997
					233,531
Brazil — 0.2%
Petrobras Global Finance BV:
5.38%, 01/27/21			155		161,200
8.38%, 05/23/21			145		165,373
6.13%, 01/17/22			545		578,381
5.30%, 01/27/25(b)			26		26,078
7.38%, 01/17/27			27		29,727
6.00%, 01/27/28(b)			26		26,065
					986,824
Mexico — 0.1%
Petroleos Mexicanos, 6.50%, 03/13/27(b)			264		288,552
Total Foreign Agency Obligations — 0.4% (Cost: $1,484,472)					1,508,907
Foreign Government Obligations — 4.2%
Argentina — 0.3%
Republic of Argentina:
6.25%, 04/22/19			680		709,580
8.00%, 10/08/20			28		31,371
8.75%, 05/07/24			349		403,496
7.82%, 12/31/33		EUR	48		67,078
6.25%, 11/09/47			108		131,292
					1,342,817
Brazil — 0.0%
Federative Republic of Brazil, 0.00%, 01/01/19(i)		BRL	362		102,170
Colombia — 0.2%
Republic of Colombia, 3.88%, 04/25/27		USD	850		865,300

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Egypt — 0.2%
Arab Republic of Egypt:
0.00%, 10/16/18(i)		EGP	8,675	$	427,775
0.00%, 11/13/18(i)			5,400		263,341
0.00%, 11/27/18(i)			2,550		123,466
5.75%, 04/29/20		USD	145		151,610
					966,192
Hungary — 0.1%
Republic of Hungary, 5.38%, 03/25/24			280		316,742
Indonesia — 0.7%
Republic of Indonesia:
8.38%, 03/15/24		IDR	319,000		26,141
4.75%, 01/08/26		USD	400		434,537
8.38%, 09/15/26		IDR	2,856,000		237,838
4.35%, 01/08/27		USD	200		211,676
7.00%, 05/15/27		IDR	1,073,000		82,882
7.50%, 08/15/32			7,218,000		562,482
8.38%, 03/15/34			2,667,000		219,179
8.25%, 05/15/36			10,493,000		862,332
7.50%, 05/15/38			3,525,000		272,153
					2,909,220
Lebanon — 0.2%
Lebanese Republic:
6.10%, 10/04/22		USD	218		211,856
6.65%, 04/22/24			75		73,244
6.25%, 11/04/24			236		226,647
6.85%, 03/23/27			251		242,294
					754,041
Mexico — 1.3%
United Mexican States:
4.75%, 06/14/18		MXN	2,300		115,433
5.00%, 12/11/19			62,700		3,035,302
4.15%, 03/28/27		USD	2,204		2,285,548
					5,436,283
Panama — 0.1%
Republic of Panama, 3.75%, 03/16/25			280		292,040
Peru — 0.0%
Republic of Peru, 7.35%, 07/21/25			100		129,550
Philippines — 0.2%
Republic of the Philippines, 5.50%, 03/30/26			720		849,953
Russia — 0.3%
Russian Federation:
6.40%, 05/27/20		RUB	11,861		203,772
7.50%, 08/18/21			17,179		303,483
7.40%, 12/07/22			3,666		64,490
7.75%, 09/16/26			6,899		122,488
8.15%, 02/03/27			17,737		324,114
4.25%, 06/23/27		USD	200		205,900
7.05%, 01/19/28		RUB	7,314		123,396
					1,347,643
South Africa — 0.3%
Republic of South Africa:
5.50%, 03/09/20		USD	444		466,076
5.88%, 05/30/22			100		109,200
6.25%, 03/31/36		ZAR	5,016		291,680
6.50%, 02/28/41			2,224		126,882
8.75%, 02/28/48			2,410		176,613
					1,170,451

Security	Par (000)			Value
Tunisia — 0.0%
Banque Centrale de Tunisie, 4.50%, 06/22/20		EUR	50	$	62,755
Turkey — 0.2%
Republic of Turkey:
7.00%, 06/05/20		USD	276		297,754
5.63%, 03/30/21			100		105,260
7.38%, 02/05/25			208		239,521
6.00%, 03/25/27			200		212,943
					855,478
Uruguay — 0.1%
Republic of Uruguay, 4.38%, 10/27/27			270		289,130
Total Foreign Government Obligations — 4.2% (Cost: $17,851,220)					17,689,765
Municipal Bonds — 5.5%
Adams & Weld Counties School District No 27J Brighton, Series 2017, GO, 5.00%, 12/01/42			60		71,929
Alamo Community College District;
Series 2017, GO, 5.00%, 08/15/30			40		49,230
Series 2017, GO, 5.00%, 08/15/31			40		48,998
Series 2017, GO, 5.00%, 08/15/34			40		48,500
Series 2017, GO, 5.00%, 08/15/35			40		48,386
Series 2017, GO, 5.00%, 08/15/36			60		72,465
Series 2017, GO, 5.00%, 08/15/37			60		72,295
Series 2017, GO, 5.00%, 08/15/38			50		60,151
American Municipal Power, Inc., Series 2009B, RB, 6.45%, 02/15/44			30		41,214
Arizona Health Facilities Authority (Banner Health), Series 2007B, RB, VRDN, 1.71%, 01/01/37(a)			35		31,505
Bay Area Toll Authority;
Series 2010S-1, RB, 6.92%, 04/01/40			90		129,854
Series 2010S-1, RB, 7.04%, 04/01/50			190		300,166
Buckeye Tobacco Settlement Financing Authority, Series 2007A-2, RB, 5.88%, 06/01/47			180		173,439
California Health Facilities Financing Authority (Cedars- Sinai Medical Center), Series 2016A, RB, 5.00%, 08/15/33			40		47,810
California State Public Works Board (Various Capital Projects), Series 2009G, Sub-series G-2, RB, 8.36%, 10/01/34			35		53,603
Central Texas Regional Mobility Authority;
Series 2015A, RB, 5.00%, 01/01/45			30		33,829
Series 2016, RB, 5.00%, 01/01/46			30		33,918
Chesapeake Bay Bridge & Tunnel District (Parallel Thimble Shoal Tunnel Project);
Series 2016, RB, 5.00%, 07/01/41			30		34,860
Series 2016, RB, 5.00%, 07/01/51			25		28,086
Chino Valley Unified School District (San Bernardino County), Series 2017A, GO, 5.25%, 08/01/47			90		110,533
City & County of Denver Airport System;(l)
Series 2017A, RB, 5.00%, 11/15/28			40		48,617
Series 2017A, RB, 5.00%, 11/15/29			40		48,384
Series 2017A, RB, 5.00%, 11/15/30			30		36,114
Series 2017B, RB, 5.00%, 11/15/33			15		18,086
City and County of Honolulu, Hawaii, Series 2017A, GO, 5.00%, 09/01/41			30		36,002
City of Aurora, Series 2016, RB, 5.00%, 08/01/46			60		70,804
City of Houston Combined Utility System, Series 2016B, RB, 5.00%, 11/15/35			40		47,557
City of Long Beach, Series 2016, 5.00%, 05/15/47			80		96,459
City of Los Angeles Department of Airports, Series 2017A, RB, 5.00%, 05/15/47			50		58,916
City of Miami Beach Water & Sewer, Series 2017C, 5.00%, 09/01/47			40		47,254

SCHEDULE OF INVESTMENTS 15

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
City of Philadelphia;
Series 2017B, 5.00%, 07/01/42		USD	70	$	80,991
Series 2017B, 5.00%, 07/01/47			90		103,731
City of Phoenix Civic Improvement Corp., Series 2017A, 5.00%, 07/01/47			30		34,979
City of Riverside, Series 2010A, RB, 7.61%, 10/01/40			50		76,129
Clark County School District;
Series 2015C, GO, 5.00%, 06/15/27			5		5,992
Series 2015C, GO, 5.00%, 06/15/28			15		17,891
Colorado Health Facilities Authority (Catholic Health Initiatives), Series 2011A, RB, 5.25%, 02/01/31			25		26,801
Commonwealth Financing Authority, Series 2016A, RB, 4.14%, 06/01/38			60		63,606
Commonwealth of Massachusetts (Rail Enhancement & Accelerated Bridge Programs);
Series 2017F, GO, 5.00%, 11/01/39			70		84,283
Series 2017A, RB, 5.00%, 06/01/40			50		60,424
Series 2017F, GO, 5.00%, 11/01/40			130		156,276
Series 2017A, RB, 5.00%, 06/01/41			60		72,451
Series 2017F, GO, 5.00%, 11/01/41			70		84,081
Series 2017F, GO, 5.00%, 11/01/42			70		83,947
Series 2017A, RB, 5.00%, 06/01/43			60		72,334
Series 2017F, GO, 5.00%, 11/01/44			130		155,654
Series 2017F, GO, 5.00%, 11/01/45			70		83,747
Series 2017F, GO, 5.00%, 11/01/46			90		107,503
Commonwealth of Puerto Rico, Series 2014A, GO, 8.00%, 07/01/35(g)(h)			820		194,750
Connecticut State Health & Educational Facilities Authority (Hartford Healthcare Corporation);
Series 2015F, RB, 5.00%, 07/01/45			60		66,353
Series 2015L, RB, 5.00%, 07/01/45			90		102,519
Contra Costa Community College District, Series 2010B, GO, 6.50%, 08/01/34			10		13,009
County of Clark Department of Aviation, Series 2017C, RB, 5.00%, 07/01/21			60		65,770
County of Fairfax, Series 2017, RB, 5.00%, 07/15/44			30		36,242
County of Miami-Dade;
Series 2016B, RB, 2.50%, 10/01/24			80		77,283
Series 2017D, RB, 3.35%, 10/01/29			20		19,731
Series 2017D, RB, 3.45%, 10/01/30			35		35,381
Series 2017D, RB, 3.50%, 10/01/31			30		30,357
Series 2016A, GO, 5.00%, 07/01/35			30		35,431
Series 2015A, RB, 5.00%, 10/01/38			10		11,477
Dallas Area Rapid Transit;
Series 2016A, RB, 5.00%, 12/01/41			60		70,002
Series 2016A, RB, 5.00%, 12/01/46			90		104,655
District of Columbia, Series 2009E, RB, 5.59%, 12/01/34			95		117,410
Dutchess County Local Development Corp. (Health Quest Systems, Inc. Project), Series 2016B, RB, 5.00%, 07/01/46			100		114,737
East Bay Municipal Utility District (Alameda and Contra Costa Counties), Series 2017A, RB, 5.00%, 06/01/45			30		36,226
Eastern Municipal Water District Financing Authority, Series 2017D, 5.00%, 07/01/47			30		36,191
Florida State Board of Administration Finance Corp., Series 2016A, RB, 2.64%, 07/01/21			150		150,154
Golden State Tobacco Securitization Corp., Series 2007A-1, RB, 5.13%, 06/01/47			140		139,888
Grant County Public Utility District No. 2 (The Priest Rapids Project), Series 2015M, RB, 4.58%, 01/01/40			15		15,758

Security	Par (000)			Value
Great Lakes Water Authority Michigan Water Supply System, Series 2016C, RB, 5.25%, 07/01/33		USD	20	$	24,203
Health & Educational Facilities Authority of the State of Missouri (Saint Luke’s Health System, Inc.);
Series 2016, RB, 5.00%, 11/15/29			25		29,488
Series 2017A, RB, 3.65%, 08/15/57			100		101,635
Kentucky Economic Development Finance Authority (Owensboro Health, Inc.), Series 2015A, RB, 5.25%, 06/01/50			30		33,071
Lexington County Health Services District, Inc., Series 2016, 5.00%, 11/01/41			60		67,511
Los Angeles Community College District, Series 2010E, GO, 6.60%, 08/01/42			145		213,298
Los Angeles County Metropolitan Transportation Authority;
Series 2017A, RB, 5.00%, 07/01/32			70		86,509
Series 2017A, RB, 5.00%, 07/01/40			130		158,175
Series 2017A, RB, 5.00%, 07/01/41			90		109,421
Series 2017A, RB, 5.00%, 07/01/42			280		339,590
Los Angeles Department of Water & Power, Series 2010A, RB, 6.60%, 07/01/50			30		46,602
Los Angeles Unified School District, Series 2010I, GO, 6.76%, 07/01/34			150		207,168
Massachusetts Bay Transportation Authority;
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/39			30		35,967
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/40			30		35,939
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/41			40		47,882
Series 2017A, Sub-Series A-2, RB, 5.00%, 07/01/41			30		35,911
Series 2017A, Sub-Series A-1, RB, 5.00%, 07/01/42			40		47,845
Series 2017A, Sub-Series A-2, RB, 5.00%, 07/01/42			30		35,884
Series 2017A, Sub-Series A-2, RB, 5.00%, 07/01/43			30		35,856
Series 2017A, Sub-Series A-2, RB, 5.00%, 07/01/44			30		35,828
Series 2017A, Sub-Series A-2, RB, 5.00%, 07/01/45			30		35,800
Massachusetts Clean Water Trust (The);
Series 19, RB, 5.00%, 02/01/27			15		18,416
Series 19, RB, 5.00%, 02/01/28			35		42,825
Massachusetts Development Finance Agency (Partners Healthcare System Issue), Series 2016Q, RB, 5.00%, 07/01/47			50		57,774
Mesquite Independent School District, Series 2017B, GO, 5.00%, 08/15/42			60		71,102
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board (Vanderbilt University Medical Center), Series 2016A, RB, 5.00%, 07/01/46			60		68,073
Metropolitan St. Louis Sewer District, Series 2017A, 5.00%, 05/01/42			80		96,250
Metropolitan Transportation Authority;
Series 2017C-1, RB, 5.00%, 11/15/25			60		72,458
Series 2017C-1, RB, 5.00%, 11/15/26			160		195,906
Series 2010A, RB, 6.67%, 11/15/39			55		77,849
Series 2010C-1, RB, 6.69%, 11/15/40			30		42,443
Series 2017A, RB, 5.00%, 11/15/42			60		71,461
Series 2017A, Sub-Series A-1, RB, 5.25%, 11/15/57			80		95,394

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Metropolitan Washington Airports Authority (Dulles Metrorail and Capital Improvement Project);
Series 2016A, RB, 5.00%, 10/01/32		USD	90	$	106,100
Series 2009B, RB, 0.00%, 10/01/39(i)			30		13,663
Series 2009D, RB, 7.46%, 10/01/46			30		46,029
Miami-Dade County Educational Facilities Authority (University of Miami Issue), Series 2015B, RB, 5.07%, 04/01/50			30		33,612
Michigan Finance Authority (Henry Ford Health System);
Series 2016, RB, 5.00%, 11/15/41			30		33,941
Series 2017A-MI, RB, 5.00%, 12/01/47			190		209,418
Mississippi Hospital Equipment & Facilities Authority (Baptist Memorial Health Corporation), Series 2016A, RB, 5.00%, 09/01/46			60		66,013
Municipal Electric Authority of Georgia (General Resolution Projects);
Series 2009B, RB, 5.00%, 01/01/20			60		63,587
Series 2010A, RB, 6.64%, 04/01/57			40		51,274
New Jersey Educational Facilities Authority;
Series 2017I, 5.00%, 07/01/26			40		49,791
Series 2017I, 5.00%, 07/01/34			40		49,050
Series 2017I, 5.00%, 07/01/35			70		85,637
New Jersey Transportation Trust Fund Authority, Series 2016A, Sub-Series A-1, RB, 5.00%, 06/15/29			30		34,089
New Jersey Turnpike Authority, Series 2009F, RB, 7.41%, 01/01/40			60		92,611
New Orleans Aviation Board (North Terminal Project), Series 2015B, RB, 5.00%, 01/01/40			50		56,334
New York City Municipal Water Finance Authority;
Series 2010AA, RB, 5.75%, 06/15/41			35		47,781
Series 2010EE, RB, 6.01%, 06/15/42			25		35,176
Series 2011EE, RB, 5.38%, 06/15/43			200		219,966
Series 2011EE, RB, 5.50%, 06/15/43			240		265,910
Series 2011CC, RB, 5.88%, 06/15/44			40		55,336
Series 2017DD, RB, 5.00%, 06/15/47			270		319,313
New York City Transitional Finance Authority;
Series 2017A, RB, 2.28%, 05/01/26			45		42,216
Series 2017F, Sub-Series F-2, RB, 3.05%, 05/01/27			160		157,810
Series 2017B, RB, 5.00%, 08/01/31			20		24,147
Series 2016E, Sub-Series E-1, RB, 5.00%, 02/01/35			40		47,305
Series 2017A, Sub-Series A-1, RB, 5.00%, 05/01/36			40		47,442
Series 2015S-2, RB, 5.00%, 07/15/40			30		35,482
New York Convention Center Development Corp.;
Series 2015, RB, 5.00%, 11/15/40			30		34,493
Series 2016A, RB, 5.00%, 11/15/46			90		105,602
New York Liberty Development Corp., Series 2005, RB, 5.25%, 10/01/35			40		52,441
New York State Dormitory Authority;
Series 2016D, RB, 5.00%, 02/15/27			30		36,824
Series 2016D, RB, 5.00%, 02/15/28			30		36,665
Series 2016A, RB, 5.00%, 03/15/29			90		110,571
Series 2016A, RB, 5.00%, 02/15/31			30		36,116
Series 2015B, RB, 5.00%, 03/15/32			40		47,923
Series 2017B, RB, 5.00%, 02/15/34			60		72,522
Series 2017B, RB, 5.00%, 02/15/35			60		72,351
Series 2017B, RB, 5.00%, 02/15/36			60		72,238
Series 2017B, RB, 5.00%, 02/15/37			60		72,068
Series 2017B, RB, 5.00%, 02/15/38			60		71,955
Series 2017B, RB, 5.00%, 02/15/39			60		71,899
Series 2017B, RB, 5.00%, 02/15/40			130		155,658
Series 2010H, RB, 5.39%, 03/15/40			30		37,852

Security	Par (000)			Value
New York State Dormitory Authority (continued);
Series 2017B, RB, 5.00%, 02/15/41		USD	60	$	71,786
Series 2017B, RB, 5.00%, 02/15/42			110		131,505
Series 2017B, RB, 5.00%, 02/15/43			110		131,402
New York State Urban Development Corp.;
Series 2017B, RB, 2.86%, 03/15/24			190		188,645
Series 2017B, RB, 3.12%, 03/15/25			100		100,355
Series 2017D, 3.32%, 03/15/29			140		139,675
New York Transportation Development Corp. (LaGuardia Airport Terminal B Redevelopment Project);
Series 2016A, RB, 5.00%, 07/01/46			30		32,941
Series 2016A, RB, 5.25%, 01/01/50			280		310,646
North Texas Tollway Authority;
Series 2017A, RB, 5.00%, 01/01/35			50		58,954
Series 2017A, RB, 5.00%, 01/01/39			40		47,357
Series 2017B, RB, 5.00%, 01/01/39			40		46,746
Series 2017A, RB, 5.00%, 01/01/43			110		129,604
Series 2017B, RB, 5.00%, 01/01/43			30		34,905
Northwest Independent School District, Series 2017, GO, 5.00%, 02/15/42			80		94,030
Orange County Local Transportation Authority, Series 2010A, RB, 6.91%, 02/15/41			75		105,744
Oregon School Boards Association;
Series 2002B, GO, 5.48%, 06/30/22			170		191,061
Series 2002B, GO, 5.49%, 06/30/23			245		279,557
Series 2005A, GO, 4.76%, 06/30/28			160		176,189
Oxnard School District, Series 2016A, GO, 5.00%, 08/01/45			40		47,237
Palm Beach County School District, Series 2017A, COP, 5.00%, 08/01/26			170		207,616
Pennsylvania Turnpike Commission;
Series 2017B, Sub-Series B-1, RB, 5.00%, 06/01/42			30		34,096
Series 2017B, Sub-Series B-1, RB, 5.25%, 06/01/47			30		34,830
Port Authority of New York & New Jersey;
Series 181, RB, 4.96%, 08/01/46			80		99,150
Series 180-1, RB, 5.00%, 11/15/47			30		35,202
Series 174, RB, 4.46%, 10/01/62			115		132,794
Series 192, RB, 4.81%, 10/15/65			60		73,090
Public Power Generation Agency, Series 2016A, RB, 5.00%, 01/01/35			40		46,480
Richardson Independent School District, Series 2017, GO, 5.00%, 02/15/42			60		70,331
Royal Oak Hospital Finance Authority (William Beaumont Hospital Obligated Group), Series 2014D, RB, 5.00%, 09/01/39			40		44,619
Salt Lake City Corp.;
Series 2017A, RB, 5.00%, 07/01/47			105		121,768
Series 2017B, RB, 5.00%, 07/01/47			50		58,841
Salt River Project Agricultural Improvement & Power District (Arizona Salt River Project);
Series 2017A, RB, 5.00%, 01/01/30			30		37,469
Series 2017A, RB, 5.00%, 01/01/31			10		12,388
Series 2017A, RB, 5.00%, 01/01/34			30		36,775
Series 2017A, RB, 5.00%, 01/01/35			20		24,457
Series 2017A, RB, 5.00%, 01/01/36			40		48,835
Series 2015A, RB, 5.00%, 12/01/36			40		47,141
Series 2017A, RB, 5.00%, 01/01/37			90		109,612
Series 2017A, RB, 5.00%, 01/01/38			50		60,796
Series 2017A, RB, 5.00%, 01/01/39			30		36,448
San Antonio Education Facilities Corp. (Trinity University Project), Series 2017, 5.00%, 06/01/47			70		82,408

SCHEDULE OF INVESTMENTS 17

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
San Antonio Electric & Gas, Series 2010A, RB, 5.81%, 02/01/41		USD	90	$	119,629
San Diego Public Facilities Financing Authority, Series 2016A, RB, 5.00%, 05/15/39			50		59,508
San Diego Unified School District;
Series 2017I, GO, 5.00%, 07/01/41			80		96,886
Series 2012I, 5.00%, 07/01/47			50		60,319
San Francisco City & County Airport Comm-San Francisco International Airport;
Series 2016B, RB, 5.00%, 05/01/41			60		69,452
Series 2016B, RB, 5.00%, 05/01/46			30		34,606
Series 2017A, RB, 5.00%, 05/01/47			70		81,811
San Jose Redevelopment Agency Successor Agency, Series 2017A-T, 2.96%, 08/01/24			250		249,570
South Carolina Public Service Authority;
Series 2016D, RB, 2.39%, 12/01/23			292		277,975
Series 2012E, RB, 3.72%, 12/01/23			80		80,605
Series 2015B, RB, 5.00%, 12/01/24			30		35,253
Series 2015A, RB, 5.00%, 12/01/25			50		59,000
Series 2015A, RB, 5.00%, 12/01/26			20		23,466
Series 2016A, RB, 5.00%, 12/01/27			20		23,638
Series 2015A, RB, 5.00%, 12/01/28			40		46,550
Series 2016A, RB, 5.00%, 12/01/28			20		23,457
Series 2016A, RB, 5.00%, 12/01/29			40		46,716
Series 2016B, RB, 5.00%, 12/01/31			10		11,673
Series 2016B, RB, 5.00%, 12/01/32			20		23,260
Series 2014C, RB, 5.00%, 12/01/46			30		33,739
Series 2014A, RB, 5.00%, 12/01/49			60		66,765
Series 2010C, RB, 6.45%, 01/01/50			136		184,590
Series 2015A, RB, 5.00%, 12/01/50			60		67,369
State Board of Administration Finance Corp., Series 2013A, RB, 3.00%, 07/01/20(l)			130		131,702
State of California;
Series 2016, GO, 5.00%, 09/01/27			5		6,196
Series 2009, GO, 7.50%, 04/01/34			60		88,849
Series 2009, GO, 7.55%, 04/01/39			265		417,007
Series 2009, GO, 7.30%, 10/01/39			25		37,296
Series 2009, GO, 7.35%, 11/01/39			40		60,029
Series 2010, GO, 7.60%, 11/01/40			40		63,877
State of Delaware, Series 2017A, GO, 5.00%, 01/01/24			40		47,442
State of Georgia, Series 2016C-1, GO, 5.00%, 07/01/26			25		31,075
State of Illinois, Series 2003, GO, 5.10%, 06/01/33			220		219,635
State of Kansas Department of Transportation, Series 2015B, RB, 5.00%, 09/01/35			30		35,451
State of Maryland;
Series 2017B, GO, 5.00%, 08/01/24			160		191,624
Series 2017B, GO, 5.00%, 08/01/26			50		62,125
State of Ohio;
Series 2017A, GO, 5.00%, 05/01/27(m)			60		72,211
Series 2017A, GO, 5.00%, 05/01/30			40		47,930
Series 2017A, GO, 5.00%, 03/15/32			90		104,811
Series 2017A, GO, 5.00%, 05/01/32			60		71,311
Series 2017A, GO, 5.00%, 05/01/34			40		47,303
Series 2017A, GO, 5.00%, 05/01/35			40		47,214
Series 2017A, GO, 5.00%, 05/01/36			90		106,098
Series 2017A, GO, 5.00%, 05/01/37			70		82,366
State of Texas;
Series 2017, RB, TAN, 4.00%, 08/30/18			320		325,280
Series 2015B, GO, 5.00%, 10/01/36			170		202,785

Security	Par (000)			Value
State of Washington;
Series R-2015C, GO, 5.00%, 07/01/28		USD	5	$	5,964
Series R-2017A, GO, 5.00%, 08/01/28			30		36,586
Series R-2017A, GO, 5.00%, 08/01/29			30		36,455
Series R-2015C, GO, 5.00%, 07/01/30			180		213,406
Series R-2017A, GO, 5.00%, 08/01/30			30		36,272
Series 2018B, GO, 5.00%, 08/01/40			40		47,606
Series 2018A, GO, 5.00%, 08/01/40			80		95,213
Series 2016A-1, GO, 5.00%, 08/01/40			100		118,067
Series 2017D, GO, 5.00%, 02/01/41			60		70,831
Series 2018A, GO, 5.00%, 08/01/41			90		107,031
Series 2018B, GO, 5.00%, 08/01/41			40		47,569
Series 2018A, GO, 5.00%, 08/01/42			100		118,830
Series 2018B, GO, 5.00%, 08/01/42			40		47,532
State of Wisconsin;
Series 2017C, RB, 3.15%, 05/01/27			165		167,307
Series 2017-3, 5.00%, 11/01/29			90		111,058
Series 2017-3, 5.00%, 11/01/31			80		97,812
Series 2017B, GO, 5.00%, 05/01/32			40		47,392
Series 2017B, GO, 5.00%, 05/01/33			30		35,455
Series 2017-3, 5.00%, 11/01/33			50		60,712
Series 2017B, GO, 5.00%, 05/01/34			40		47,155
Series 2017B, GO, 5.00%, 05/01/36			50		58,760
Series 2017B, GO, 5.00%, 05/01/38			50		58,576
Sumter Landing Community Development District, Series 2016, RB, 4.17%, 10/01/47			100		108,418
Texas A&M University;
Series 2017B, RB, 2.76%, 05/15/26			175		171,470
Series 2017B, RB, 2.84%, 05/15/27			75		73,689
Texas Municipal Gas Acquisition & Supply Corp., Series 2008D, RB, 6.25%, 12/15/26			30		36,038
Texas Water Development Board (Master Trust);
Series 2015A, RB, 5.00%, 10/15/40			50		58,867
Series 2017A, RB, 5.00%, 10/15/42			100		120,514
Series 2015A, RB, 5.00%, 10/15/45			50		58,558
Tobacco Settlement Finance Authority, Series 2007A, RB, 7.47%, 06/01/47			130		126,361
Tobacco Settlement Financing Corp., Series 20071A, RB, 5.00%, 06/01/41			120		116,450
TSASC, Inc., Series 2017A, RB, 5.00%, 06/01/41			60		67,418
United Independent School District, Series 2017, GO, 5.00%, 08/15/47			50		59,542
University of California;
Series 2017, RB, 3.06%, 07/01/25			100		101,089
Series 2013AJ, RB, 4.60%, 05/15/31			65		72,245
Series 2010H, RB, 6.40%, 05/15/31			70		88,560
Series 2017M, RB, 5.00%, 05/15/47			80		95,648
Series 2009F, RB, 6.58%, 05/15/49			75		105,505
Series 2012AD, RB, 4.86%, 05/15/2112			20		22,325
University of Houston;
Series 2017A, RB, 5.00%, 02/15/33			30		35,333
Series 2017A, RB, 5.00%, 02/15/34			30		35,237
Series 2017A, RB, 5.00%, 02/15/35			70		82,053
Series 2017A, RB, 5.00%, 02/15/36			90		105,352
University of Massachusetts Building Authority (Project Revenue Bonds), Series 2015-1, RB, 5.00%, 11/01/31			40		47,727
University of Virginia;
Series 2017B, RB, 5.00%, 04/01/44			70		84,298
Series 2017B, RB, 5.00%, 04/01/46			60		72,146
Series 2017C, RB, 4.18%, 09/01/2117			85		88,640

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Virginia Commonwealth Transportation Board;
Series 2017, RB, 5.00%, 03/15/25		USD	60	$	72,236
Series 2017, RB, 5.00%, 03/15/26			80		97,862
Series 2017, RB, 5.00%, 09/15/26			100		123,215
Virginia Small Business Financing Authority (Transform 66 P3 Project), Series 2017, RB, 5.00%, 12/31/56			80		89,414
Weld County School District No. 4, Series 2016, GO, 5.25%, 12/01/41			50		60,522
West Virginia Hospital Finance Authority (West Virginia United Health System Obligated Group);
Series 2016A, RB, 5.00%, 06/01/19			25		26,109
Series 2016A, RB, 5.00%, 06/01/20			30		32,132
Series 2016A, RB, 5.00%, 06/01/21			30		32,891
Series 2016A, RB, 5.00%, 06/01/22			30		33,639
Series 2016A, RB, 5.00%, 06/01/23			25		28,559
Series 2016A, RB, 5.00%, 06/01/24			25		29,084
Wisconsin Health & Educational Facilities Authority (Thedacare, Inc.), Series 2015, RB, 5.00%, 12/15/44			30		33,227
Total Municipal Bonds — 5.5% (Cost: $23,124,509)					23,299,754
Non-Agency Mortgage-Backed Securities — 6.8%
Collateralized Mortgage Obligations — 2.8%
Ajax Mortgage Loan Trust:
Series 2016-A, Class A, 4.25%, 08/25/64(b)(c)			114		115,722
Series 2017-D, 3.75%, 12/01/27(d)			490		490,000
Alternative Loan Trust:
Series 2005-22T1, Class A1, 1.90%, 06/25/35(a)			182		164,757
Series 2005-72, Class A3, 1.85%, 01/25/36(a)			97		78,689
Series 2005-76, Class 2A1, 2.06%, 02/25/36(a)			31		28,252
Series 2006-11CB, Class 3A1, 6.50%, 05/25/36			81		62,996
Series 2006-15CB, Class A1, 6.50%, 06/25/36			13		10,119
Series 2006-OA14, Class 1A1, 2.79%, 11/25/46(a)			119		103,652
Series 2006-OA16, Class A4C, 1.89%, 10/25/46(a)			163		95,260
Series 2006-OA6, Class 1A2, 1.76%, 07/25/46(a)			51		47,365
Series 2006-OA8, Class 1A1, 1.74%, 07/25/46(a)			18		16,938
Series 2006-OC10, Class 2A3, 1.78%, 11/25/36(a)			59		47,097
Series 2006-OC7, Class 2A3, 1.80%, 07/25/46(a)			90		71,570
Series 2007-3T1, Class 1A1, 6.00%, 04/25/37			17		12,609
Series 2007-OA2, Class 1A1, 1.90%, 03/25/47(a)			374		306,854
Series 2007-OA3, Class 1A1, 1.69%, 04/25/47(a)			30		26,157
American Home Mortgage Assets Trust(a):
Series 2006-3, Class 2A11, 2.00%, 10/25/46			79		68,761
Series 2006-4, Class 1A12, 1.76%, 10/25/46			97		71,204
Series 2006-5, Class A1, 1.98%, 11/25/46			142		80,665
Series 2007-1, Class A1, 1.76%, 02/25/47			76		48,692
Angel Oak Mortgage Trust I LLC, Series 2016-1, Class A1, 3.50%, 07/25/46(b)(c)			55		54,842
Angel Oak Mortgage Trust LLC, Series 2015-1, Class A, 4.50%, 11/25/45(b)(c)			10		9,876
APS Resecuritization Trust(a)(b)(d):
Series 2016-3, Class 3A, 4.40%, 09/27/46			274		276,586
Series 2016-3, Class 4A, 4.15%, 04/27/47			76		77,188
Banc of America Funding Trust(a)(b)(d):
Series 2014-R2, Class 1C, 0.00%, 11/26/36			160		30,968
Series 2016-R2, Class 1A1, 4.70%, 05/01/33			102		104,343
Bear Stearns ALT-A Trust II, Series 2007-1, Class 1A1, 3.42%, 09/25/47(a)			113		92,901
Bear Stearns Mortgage Funding Trust(a):
Series 2007-AR2, Class A1, 1.72%, 03/25/37			201		179,343
Series 2007-AR3, Class 1A1, 1.69%, 03/25/37			22		20,487
Series 2007-AR4, Class 1A1, 1.75%, 09/25/47			87		81,090
Series 2007-AR4, Class 2A1, 1.76%, 06/25/37			29		27,370
Chase Mortgage Finance Trust, Series 2007-S6, Class 1A1, 6.00%, 12/25/37			1,099		918,075

Security	Par (000)			Value
Collateralized Mortgage Obligations (continued)
CHL Mortgage Pass-Through Trust:
Series 2006-OA4, Class A1, 2.02%, 04/25/46(a)		USD	170	$	89,709
Series 2006-OA5, Class 3A1, 1.75%, 04/25/46(a)			32		29,024
Series 2007-15, Class 2A2, 6.50%, 09/25/37			295		229,409
CIM Trust, Series 2017-6, Class A1, 3.02%, 06/25/57(a)(b)			652		645,266
Citicorp Mortgage Securities Trust, Series 2008-2, Class 1A1, 6.50%, 06/25/38			141		121,459
COLT LLC, Series 2015-1, Class A1V, 4.55%, 12/26/45(a)(b)			12		11,737
Credit Suisse Mortgage Capital Certificates, Series 2009-12R, Class 3A1, 6.50%, 10/27/37(b)			283		187,041
CSFB Mortgage-Backed Pass-Through Certificates, Series 2005-10, Class 10A1, 2.90%, 11/25/35(a)			53		21,786
CSMC Trust(a)(b):
Series 2013-5R, Class 1A6, 1.63%, 02/27/36			45		41,568
Series 2014-11R, Class 16A1, 3.17%, 09/27/47			69		69,381
Series 2015-6R, Class 5A1, 1.51%, 03/27/36			22		20,938
Series 2015-6R, Class 5A2, 1.51%, 03/27/36			60		32,809
Deephaven Residential Mortgage Trust, Series 2016-1A, Class A1, 4.00%, 07/25/46(b)			90		91,562
Deutsche Alt-A Securities Mortgage Loan Trust(a):
Series 2007-OA4, Class A2A, 1.72%, 08/25/47			254		179,674
Series 2007-RMP1, Class A2, 1.70%, 12/25/36			149		136,130
Deutsche Alt-B Securities Mortgage Loan Trust, Series 2006-AB3, Class A8, 6.36%, 07/25/36(a)			18		15,116
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes(a):
Series 2016-DNA4, Class M3, 5.35%, 03/25/29			250		279,041
Series 2017-DNA1, Class M2, 4.80%, 07/25/29			250		267,911
Series 2017-DNA2, Class M2, 5.00%, 10/25/29			250		271,954
Series 2017-DNA3, Class B1, 6.00%, 03/25/30			250		267,834
Series 2017-DNA3, Class M2, 4.05%, 03/25/30			280		289,995
Series 2017-HQA2, Class M2, 4.20%, 12/25/29			270		279,217
Federal National Mortgage Association(a):
Series 2016-C02, Class 1M2, 7.55%, 09/25/28(n)			20		23,742
Series 2016-C04, Class 1M2, 5.80%, 01/25/29			142		161,034
Series 2017-C01, Class 1B1, 7.30%, 07/25/29			62		71,749
Series 2017-C01, Class 1M2, 5.10%, 07/25/29			117		126,611
Series 2017-C04, Class 2M2, 4.40%, 11/25/29			57		58,836
Series 2017-C05, Class 1B1, 5.15%, 01/25/30			130		129,505
Series 2017-C05, Class 1M2, 3.75%, 01/25/30			76		76,514
Series 2017-C07, Class 1B1, 5.55%, 05/25/30			120		124,430
GreenPoint Mortgage Funding Trust, Series 2006-AR2, Class 4A1, 3.06%, 03/25/36(a)			30		28,098
GSMPS Mortgage Loan Trust(a)(b):
Series 2005-RP1, Class 1AF, 1.90%, 01/25/35			60		53,744
Series 2005-RP2, Class 1AF, 1.90%, 03/25/35			72		65,784
Series 2006-RP1, Class 1AF1, 1.90%, 01/25/36			54		46,479
HarborView Mortgage Loan Trust(a):
Series 2007-3, Class 2A1B, 1.73%, 05/19/47			241		189,382
Series 2007-4, Class 2A2, 1.74%, 07/19/47			226		196,983
Impac Secured Assets Corp., Series 2004-3, Class 1A4, 2.35%, 11/25/34(a)			34		34,003
IndyMac IMJA Mortgage Loan Trust, Series 2007-A2, Class 3A1, 7.00%, 10/25/37			163		117,617
IndyMac INDX Mortgage Loan Trust(a):
Series 2007-AR19, Class 3A1, 3.42%, 09/25/37			99		69,903
Series 2007-FLX5, Class 2A2, 1.79%, 08/25/37			205		180,823
JPMorgan Mortgage Trust, Series 2017-2, Class A6, 3.00%, 05/25/47(a)(b)			80		80,239
Lehman XS Trust, Series 2007-20N, Class A1, 2.70%, 12/25/37(a)			44		42,859

SCHEDULE OF INVESTMENTS 19

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Collateralized Mortgage Obligations (continued)
LSTAR Securities Investment Ltd.(a)(b):
Series 2017-2, Class A1, 3.36%, 02/01/22		USD	207	$	207,113
Series 2017-3, Class A1, 3.36%, 04/01/22(d)			297		298,619
Merrill Lynch Alternative Note Asset Trust, Series 2007-OAR2, Class A2, 1.76%, 04/25/37(a)			224		186,989
Morgan Stanley Resecuritization Trust, Series 2014-R8, Class 3B1, 1.75%, 06/26/47(a)(b)(d)			84		78,616
Mortgage Loan Resecuritization Trust, Series 2009-RS1, Class A85, 1.59%, 04/16/36(a)(b)			487		413,286
Nomura Asset Acceptance Corp. Alternative Loan Trust, Series 2007-2, Class A4, 1.97%, 04/25/47(a)			22		17,729
Nomura Resecuritization Trust, Series 2014-3R, Class 3A9, 1.85%, 11/26/35(a)(b)			100		91,452
RALI Trust(a):
Series 2006-QO6, Class A2, 1.78%, 06/25/46			57		26,906
Series 2007-QH1, Class A1, 1.71%, 02/25/37			89		81,457
Series 2007-QH6, Class A1, 1.74%, 07/25/37			50		46,725
Series 2007-QH9, Class A1, 2.39%, 11/25/37			51		44,327
RBSSP Resecuritization Trust, Series 2013-2, Class 1A2, 1.54%, 12/26/36(a)(b)			258		245,687
Reperforming Loan REMIC Trust, Series 2005-R3, Class AF, 1.95%, 09/25/35(a)(b)			8		7,448
Seasoned Credit Risk Transfer Trust(b)(d):
Series 2017-3, Class B, 0.00%, 07/25/56(i)			120		8,023
Series 2017-3, Class M2, 4.75%, 07/25/56(a)			100		97,553
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-3, Class 4A, 3.46%, 04/25/36(a)			99		85,650
Structured Asset Mortgage Investments II Trust(a):
Series 2006-AR4, Class 3A1, 1.74%, 06/25/36			119		111,284
Series 2006-AR5, Class 2A1, 1.76%, 05/25/46			74		62,834
Structured Asset Securities Corp. Mortgage Loan Trust, Series 2006-RF4, Class 2A1, 6.00%, 10/25/36(b)			50		43,510
WaMu Mortgage Pass-Through Certificates Trust(a):
Series 2005-AR2, Class B1, 2.08%, 01/25/45			106		73,195
Series 2006-AR15, Class 2A, 2.24%, 11/25/46			26		24,988
Washington Mutual Mortgage Pass-Through Certificates:
Series 2006-4, Class 1A1, 6.00%, 04/25/36			105		95,559
Series 2006-4, Class 3A1, 6.50%, 05/25/36(c)			58		48,368
Series 2006-8, Class A4, 4.51%, 10/25/36(c)			73		47,097
Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR16, Class CRB1, 3.53%, 10/25/35(a)			36		31,204
					11,752,943
Commercial Mortgage-Backed Securities — 3.6%
245 Park Avenue Trust, Series 2017-245P, Class E, 3.66%, 06/05/37(a)(b)			500		469,877
280 Park Avenue Mortgage Trust, Series 2017-280P, Class E, 3.60%, 09/15/34(a)(b)			190		189,526
AOA Mortgage Trust, Series 2015-1177, Class C, 3.01%, 12/13/29(a)(b)			100		99,245
BAMLL Commercial Mortgage Securities Trust(a)(b):
Series 2013-DSNY, Class A, 2.53%, 09/15/26			550		551,104
Series 2013-DSNY, Class E, 4.08%, 09/15/26			100		100,055
Series 2013-DSNY, Class F, 4.98%, 09/15/26			104		103,893
Series 2015-200P, Class F, 3.60%, 04/14/33			300		287,707
Series 2015-ASHF, Class B, 3.19%, 01/15/28			100		100,211
Series 2016-ISQ, Class E, 3.61%, 08/14/34(d)			200		180,391
Series 2017-SCH, Class CL, 2.75%, 11/15/32			100		100,028
Series 2017-SCH, Class DL, 3.25%, 11/15/32			100		100,000
Banc of America Commercial Mortgage Trust(a):
Series 2007-1, Class AMFX, 5.48%, 01/15/49			15		15,535
Series 2007-5, Class AM, 5.77%, 02/10/51			7		6,550
Bank of America NA, Series 2017-BNK9, Class A4, 3.54%, 11/15/54			50		51,523

Security	Par (000)			Value
Commercial Mortgage-Backed Securities (continued)
Bayview Commercial Asset Trust(a)(b):
Series 2005-2A, Class A1, 1.86%, 08/25/35		USD	69	$	65,573
Series 2005-4A, Class A1, 1.85%, 01/25/36			64		59,707
Series 2005-4A, Class M1, 2.00%, 01/25/36			47		43,502
Series 2006-1A, Class A2, 1.91%, 04/25/36			17		16,293
Series 2006-3A, Class A1, 1.80%, 10/25/36			30		28,528
Series 2006-3A, Class A2, 1.85%, 10/25/36			25		23,826
Series 2007-2A, Class A1, 1.82%, 07/25/37			44		42,167
Series 2007-4A, Class A1, 2.00%, 09/25/37			240		227,703
Series 2007-5A, Class A3, 2.55%, 10/25/37			64		61,656
BBCMS Trust, Series 2015-SRCH, Class A1, 3.31%, 08/10/35(b)			100		101,625
BHMS Mortgage Trust, Series 2014-ATLS, Class AFL, 2.86%, 07/05/33(a)(b)			581		584,101
BWAY Mortgage Trust(b):
Series 2013-1515, Class A2, 3.45%, 03/10/33			150		153,339
Series 2013-1515, Class C, 3.45%, 03/10/33			105		104,748
Series 2013-1515, Class F, 3.93%, 03/10/33(a)			100		98,083
BXP Trust(b):
Series 2017-CC, Class D, 3.55%, 08/13/37(a)(d)			60		57,376
Series 2017-CC, Class E, 3.55%, 08/13/37(a)(d)			110		97,488
Series 2017-GM, Class A, 3.38%, 06/13/39			110		112,369
Series 2017-GM, Class D, 3.42%, 06/13/39(a)			310		297,325
Series 2017-GM, Class E, 3.42%, 06/13/39(a)			80		74,821
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class D, 4.35%, 10/15/34(a)(b)			100		102,047
CCRESG Commercial Mortgage Trust, Series 2016-HEAT, Class D, 5.49%, 04/10/29(a)(b)			20		20,091
CCUBS Commercial Mortgage Trust, Series 2017-C1, Class A4, 3.54%, 11/15/50(a)			92		94,614
CD Mortgage Trust:
Series 2006-CD3, Class AM, 5.65%, 10/15/48			30		30,172
Series 2017-CD3, Class A4, 3.63%, 02/10/50			30		31,313
CFCRE Commercial Mortgage Trust, Series 2016-C3, Class A3, 3.87%, 01/10/48			10		10,478
CGBAM Commercial Mortgage Trust, Series 2015-SMRT, Class E, 3.79%, 04/10/28(a)(b)			100		99,817
CGDBB Commercial Mortgage Trust(a)(b):
Series 2017-BIOC, Class A, 2.27%, 07/15/28			190		190,236
Series 2017-BIOC, Class D, 3.08%, 07/15/28			110		110,000
Series 2017-BIOC, Class E, 3.63%, 07/15/28			170		170,000
CGGS Commercial Mortgage Trust, Series 2016-RNDA, Class AFX, 2.76%, 02/10/33(b)			95		95,593
CGMS Commercial Mortgage Trust, Series 2017-B1, Class A4, 3.46%, 08/15/50			100		102,702
Chicago Skyscraper Trust(a)(b):
Series 2017-SKY, Class D, 3.73%, 02/15/30			100		100,621
Series 2017-SKY, Class E, 4.78%, 02/15/30			130		130,807
CHT 2017-COSMO Mortgage Trust, Series 2017-CSMO, Class A, 2.31%, 11/15/36(a)(b)			100		100,156
Citigroup Commercial Mortgage Trust:
Series 2016-C1, Class C, 4.95%, 05/10/49(a)			40		42,240
Series 2016-GC37, Class AS, 3.57%, 04/10/49			20		21,156
Series 2016-P3, Class C, 4.84%, 04/15/49(a)			10		10,579
CLNS Trust, Series 2017-IKPR, Class E, 4.93%, 06/11/32(a)(b)			125		125,273
Commercial Mortgage Pass-Through Certificates, Series 2014-CR14, Class A4, 4.24%, 02/10/47(a)			30		32,086
Commercial Mortgage Trust:
Series 2005-C6, Class F, 5.65%, 06/10/44(a)(b)			100		102,422
Series 2014-CR16, Class A4, 4.05%, 04/10/47			177		187,658

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)			Value
Commercial Mortgage-Backed Securities (continued)
Commercial Mortgage Trust (continued):
Series 2014-CR17, Class A5, 3.98%, 05/10/47		USD	169	$	178,666
Series 2014-CR19, Class A5, 3.80%, 08/10/47			50		52,452
Series 2014-TWC, Class E, 4.68%, 02/13/32(a)(b)			150		150,878
Series 2015-CR23, Class CMD, 3.69%, 05/10/48(a)(b)			350		346,048
Series 2015-CR25, Class A4, 3.76%, 08/10/48			100		104,764
Series 2015-LC19, Class C, 4.26%, 02/10/48(a)			20		20,374
Series 2015-LC19, Class D, 2.87%, 02/10/48(b)			50		41,312
Series 2015-LC21, Class C, 4.31%, 07/10/48(a)			150		148,047
Series 2016-667M, Class D, 3.18%, 10/10/36(a)(b)			100		93,972
Series 2017-DLTA, Class E, 3.44%, 08/15/35(a)(b)			110		108,555
Series 2017-DLTA, Class F, 4.06%, 08/15/35(a)(b)			100		98,486
Core Industrial Trust, Series 2015-TEXW, Class A, 3.08%, 02/10/34(b)			100		101,610
Countrywide Commercial Mortgage Trust, Series 2007-MF1, Class A, 6.29%, 11/12/43(a)(b)			1		1,371
Credit Suisse First Boston Mortgage Securities Corp., Series 2004-C4, Class F, 5.23%, 10/15/39(a)(b)			330		336,459
Credit Suisse Mortgage Capital Certificates, Series 2015-GLPB, Class A, 3.64%, 11/15/34(b)			100		104,060
CSMC Trust(b):
Series 2015-DEAL, Class D, 4.58%, 04/15/29(a)			100		100,000
Series 2017-PFHP, Class A, 2.43%, 12/15/20(a)			60		60,000
Series 2017-TIME, Class A, 3.65%, 11/13/39			100		102,960
DBJPM Mortgage Trust, Series 2016-C3, Class D, 3.49%, 09/10/49(a)(b)			89		73,214
DBUBS Mortgage Trust(b):
Series 2017-BRBK, Class A, 3.45%, 10/10/34			140		143,037
Series 2017-BRBK, Class E, 3.53%, 10/10/34(a)(d)			410		389,243
Series 2017-BRBK, Class F, 3.53%, 10/10/34(a)(d)			80		72,844
Eleven Madison Trust Mortgage Trust, Series 2015-11MD, Class A, 3.55%, 09/10/35(a)(b)			100		103,298
GAHR Commercial Mortgage Trust(a)(b):
Series 2015-NRF, Class AFL1, 2.78%, 12/15/34			14		14,340
Series 2015-NRF, Class EFX, 3.38%, 12/15/34			210		208,684
Series 2015-NRF, Class FFX, 3.38%, 12/15/34			160		157,962
GS Mortgage Securities Corp. II(a)(b):
Series 2013-KING, Class D, 3.44%, 12/10/27			124		124,012
Series 2013-KING, Class E, 3.44%, 12/10/27			460		455,129
GS Mortgage Securities Corp. Trust(a)(b):
Series 2017-500K, Class D, 2.78%, 07/15/32			10		10,010
Series 2017-500K, Class E, 2.98%, 07/15/32			20		20,017
Series 2017-500K, Class F, 3.28%, 07/15/32			10		10,015
GS Mortgage Securities Trust:
Series 2014-GC22, Class D, 4.65%, 06/10/47(a)(b)			110		92,728
Series 2015-GC32, Class C, 4.41%, 07/10/48(a)(d)			30		30,489
Series 2015-GC32, Class D, 3.35%, 07/10/48			90		74,467
Series 2017-GS7, Class A4, 3.43%, 08/10/50			30		30,559
Series 2017-GS7, Class D, 3.00%, 08/10/50(b)			20		17,242
HMH Trust, Series 2017-NSS, Class A, 3.06%, 07/05/31(b)			110		109,460
IMT Trust(b):
Series 2017-APTS, Class AFX, 3.48%, 06/15/34			100		102,053
Series 2017-APTS, Class EFX, 3.50%, 06/15/34(a)			100		96,140
JPMBB Commercial Mortgage Securities Trust:
Series 2014-C21, Class A5, 3.77%, 08/15/47			50		52,363
Series 2015-C28, Class B, 3.99%, 10/15/48			80		79,793
Series 2015-C33, Class D1, 4.12%, 12/15/48(a)(b)			100		95,420
JPMCC Commercial Mortgage Securities Trust:
Series 2017-JP5, Class D, 4.65%, 03/15/50(a)(b)			100		98,749
Series 2017-JP7, Class B, 4.05%, 09/15/50			10		10,228

Security	Par (000)			Value
Commercial Mortgage-Backed Securities (continued)
JPMorgan Chase Commercial Mortgage Securities Trust(a):
Series 2015-JP1, Class C, 4.74%, 01/15/49		USD	140	$	147,116
Series 2015-JP1, Class D, 4.24%, 01/15/49			50		47,074
Series 2015-SGP, Class A, 3.18%, 07/15/36(b)			230		231,331
Series 2015-UES, Class D, 3.62%, 09/05/32(b)			130		131,351
Series 2015-UES, Class E, 3.62%, 09/05/32(b)			100		99,751
Series 2016-NINE, Class A, 2.85%, 10/06/38(b)			150		146,927
Series 2016-WPT, Class A, 2.93%, 10/15/33(b)			100		100,250
Series 2017-MAUI, Class E, 4.43%, 07/15/34(b)			100		100,032
Lehman Brothers Small Balance Commercial Mortgage Trust, Series 2007-1A, Class 1A, 1.80%, 03/25/37(a)(b)			68		63,224
Lone Star Portfolio Trust, Series 2015-LSP, Class A1A2, 3.28%, 09/15/28(a)(b)			46		46,078
Madison Avenue Trust, Series 2013-650M, Class D, 4.03%, 10/12/32(a)(b)			101		102,409
Merrill Lynch Mortgage Trust, Series 2005-MKB2, Class F, 6.32%, 09/12/42(a)(b)			100		106,085
Morgan Stanley Bank of America Merrill Lynch Trust:
Series 2014-C16, Class A5, 3.89%, 06/15/47			90		94,761
Series 2015-C26, Class D, 3.06%, 10/15/48(b)			110		88,769
Morgan Stanley Capital I Trust:
Series 2015-MS1, Class D, 4.03%, 05/15/48(a)(b)			100		85,846
Series 2017-CLS, Class F, 3.85%, 11/15/34(a)(b)			211		211,199
Series 2017-H1, Class A5, 3.53%, 06/15/50			100		103,269
Series 2017-H1, Class C, 4.28%, 06/15/50(a)			100		101,201
Series 2017-H1, Class D, 2.55%, 06/15/50(b)			140		113,802
Series 2017-PRME, Class D, 4.88%, 02/15/34(a)(b)			30		30,000
Morgan Stanley Capital I, Inc.:
Series 2017-HR2, Class A4, 3.59%, 12/15/50			100		103,124
Series 2017-JWDR, Class D, 3.20%, 11/15/34(a)(b)			30		30,010
Series 2017-JWDR, Class E, 4.30%, 11/15/34(a)(b)			60		60,038
Olympic Tower Mortgage Trust, Series 2017-OT, Class E, 3.95%, 05/10/39(a)(b)			190		181,512
Resource Capital Corp. Ltd.(a)(b):
Series 2017-CRE5, Class A, 2.28%, 07/15/34			96		96,453
Series 2017-CRE5, Class B, 3.48%, 07/15/34			40		40,000
STRIPs Ltd., Series 2012-1A, Class B, 0.50%, 12/25/44(b)(d)			20		20,130
Velocity Commercial Capital Loan Trust(a)(b):
Series 2015-1, Class AFL, 3.98%, 06/25/45			47		47,898
Series 2017-2, Class M3, 4.24%, 11/25/47			99		99,098
Series 2017-2, Class M4, 5.00%, 11/25/47			99		99,149
Wachovia Bank Commercial Mortgage Trust, Series 2006-C28, Class AJ, 5.63%, 10/15/48(a)			6		5,631
Waldorf Astoria Boca Raton Trust, Series 2016-BOCA, Class A, 2.83%, 06/15/29(a)(b)			120		120,185
Wells Fargo Commercial Mortgage Trust:
Series 2015-C27, Class C, 3.89%, 02/15/48			20		18,881
Series 2015-C31, Class A4, 3.70%, 11/15/48			140		146,081
Series 2015-NXS2, Class A5, 3.77%, 07/15/58(a)			110		115,270
Series 2017-C38, Class A5, 3.45%, 07/15/50			42		42,944
Series 2017-C39, Class C, 4.12%, 09/15/50			20		19,839
Series 2017-C39, Class D, 4.36%, 09/15/50(a)(b)			20		19,022
Series 2017-HSDB, Class A, 2.31%, 12/13/31(a)(b)			151		151,321
WFRBS Commercial Mortgage Trust, Series 2014-C21, Class A5, 3.68%, 08/15/47			60		62,478
Worldwide Plaza Trust, Series 2017-WWP, Class E, 3.60%, 11/10/36(a)(b)			100		92,459
					15,059,444

SCHEDULE OF INVESTMENTS 21

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security	Par (000)				Value
Interest Only Commercial Mortgage-Backed Securities — 0.4%(a)
Banc of America Commercial Mortgage Trust, Series 2017-BNK3, Class XB, 0.63%, 02/15/50		USD		1,000	$	49,720
BBCMS Trust, Series 2015-SRCH, Class XA, 0.96%, 08/10/35(b)				1,030		69,700
BB-UBS Trust, Series 2012-SHOW, Class XA, 0.60%, 11/05/36(b)				3,475		134,516
CD Mortgage Trust, Series 2017-CD3, Class XA, 1.04%, 02/10/50				498		36,742
CFCRE Commercial Mortgage Trust:
Series 2016-C4, Class XA, 1.75%, 05/10/58				180		19,128
Series 2016-C4, Class XB, 0.73%, 05/10/58				170		8,840
Citigroup Commercial Mortgage Trust, Series 2016-P3, Class XA, 1.71%, 04/15/49				995		99,206
Commercial Mortgage Trust:
Series 2015-3BP, Class XA, 0.06%, 02/10/35(b)				1,916		12,224
Series 2015-CR23, Class XA, 0.98%, 05/10/48				606		28,566
Series 2015-CR24, Class XA, 0.81%, 08/10/48				1,028		49,784
Series 2015-CR25, Class XA, 0.95%, 08/10/48				981		53,320
Series 2016-DC2, Class XA, 1.06%, 02/10/49				325		20,420
Series 2017-COR2, Class XA, 1.19%, 09/10/50				270		23,906
CSAIL Commercial Mortgage Trust, Series 2017-CX10, Class XB, 0.14%, 11/15/50				1,430		25,454
JPMBB Commercial Mortgage Securities Trust:
Series 2014-C22, Class XA, 0.92%, 09/15/47				1,292		59,783
Series 2014-C23, Class XA, 0.83%, 09/15/47				1,684		51,069
Series 2016-C1, Class XA, 1.39%, 03/15/49				992		76,456
JPMDB Commercial Mortgage Securities Trust, Series 2016-C4, Class XC, 0.75%, 12/15/49(b)				1,800		95,688
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2016-JP3, Class XC, 0.75%, 08/15/49(b)				900		37,953
Morgan Stanley Bank of America Merrill Lynch Trust:
Series 2014-C19, Class XF, 1.19%, 12/15/47(b)(d)				130		7,834
Series 2015-C22, Class XA, 1.14%, 04/15/48				39		2,232
Series 2015-C26, Class XD, 1.35%, 10/15/48(b)				120		10,748
Series 2016-C28, Class XA, 1.28%, 01/15/49				991		74,258
Series 2016-C29, Class XB, 0.96%, 05/15/49				1,020		72,203
Series 2016-C31, Class XA, 1.46%, 11/15/49				989		88,882
Morgan Stanley Capital I Trust(b):
Series 2016-UBS9, Class XD, 1.54%, 03/15/49				1,000		100,310
Series 2017-H1, Class XD, 2.20%, 06/15/50				110		16,898
One Market Plaza Trust(b):
Series 2017-1MKT, Class XCP, 0.09%, 02/10/32				1,880		10,566
Series 2017-1MKT, Class XNCP, 0.00%, 02/10/32(d)				376		2,256
Wells Fargo Commercial Mortgage Trust:
Series 2016-BNK1, Class XD, 1.27%, 08/15/49(b)				1,000		84,420
Series 2016-C33, Class XA, 1.80%, 03/15/59				394		39,734
Series 2017-C41, Class XA, 1.24%, 11/15/50				999		91,505
						1,554,321
Total Non-Agency Mortgage-Backed Securities — 6.8% (Cost: $27,870,955)						28,366,708
			Beneficial Interest (000)
Other Interests — (0.0)%(o)
Capital Markets — (0.0)%(d)(g)(h)
Lehman Brothers Holdings Capital Trust VII				185		—
Lehman Brothers Holdings, Inc.				1,365		—
						—
Total Other Interests — (0.0)%						—

Security		Par (000)		Value
Preferred Securities
Capital Trusts — 0.0%
Media — 0.0%
NBCUniversal Enterprise, Inc., 5.25%(b)(f)(h)	USD		200	$	212,500
Total Capital Trusts — 0.0% (Cost: $200,000)					212,500
		Shares
Trust Preferreds — 0.1%
Banks — 0.1%
Citigroup Capital XIII, 7.75%, 10/30/40(a)			13,971		383,923
Total Trust Preferreds — 0.1% (Cost: $381,375)					383,923
Total Preferred Securities — 0.1% (Cost: $581,375)					596,423
		Par (000)
U.S. Government Sponsored Agency Securities — 44.0%
Commercial Mortgage-Backed Securities — 0.2%
Federal Home Loan Mortgage Corp.:
Series K058, Class A2, 2.65%, 08/25/26	USD		40		39,530
Series KPLB, Class A, 2.77%, 05/25/25			90		89,723
Series K060, Class A2, 3.30%, 10/25/26			40		41,444
Federal Home Loan Mortgage Corp. Variable Rate Notes(a):
Series K059, Class A2, 3.12%, 09/25/26			90		91,993
Series K069, Class A2, 3.19%, 09/25/27			40		41,017
Series K061, Class A2, 3.35%, 11/25/26			50		51,989
Series K034, Class A2, 3.53%, 07/25/23			40		42,015
Series 2015-K48, Class B, 3.64%, 08/25/48(b)			30		30,328
Series 2017-K725, Class B, 3.88%, 02/25/24(b)			170		173,045
Series 2017-K64, Class B, 3.98%, 03/25/27(b)			60		60,674
Federal National Mortgage Association ACES Variable Rate Notes, Series 2017-M8, Class A2, 3.06%, 05/25/27(a)			34		34,402
					696,160
Interest Only Commercial Mortgage-Backed Securities — 0.1%
Federal Home Loan Mortgage Corp. Variable Rate Notes(a):
Series K721, Class X1, 0.34%, 08/25/22			356		4,661
Series K045, Class X1, 0.46%, 01/25/25			475		13,065
Series K064, Class X1, 0.61%, 03/25/27			918		43,687
Series K065, Class X1, 0.68%, 04/25/27			719		38,144
Series KW03, Class X1, 0.85%, 06/25/27			270		16,173
Series KIR1, Class X, 1.09%, 03/25/26			312		22,136
Series K056, Class X1, 1.27%, 05/25/26			317		27,293
Federal National Mortgage Association ACES Variable Rate Notes(a):
Series 2014-M13, Class X2, 0.13%, 08/25/24			3,560		28,814
Series 2017-M12, Class X, 0.33%, 06/25/27			568		12,600
Series 2013-M5, Class X2, 2.18%, 01/25/22			465		23,065
Government National Mortgage Association Variable Rate Notes:
Series 2015-48, 0.68%, 02/16/50(a)			207		10,454
Series 2017-151, 0.71%, 09/16/57(a)			479		33,413
Series 2017-111(LIBOR USD 1 Month + 0.00%), 0.74%, 02/16/59(e)			729		54,063
Series 2013-191, 0.76%, 11/16/53(a)			102		3,681

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security		Par (000)		Value
Interest Only Commercial Mortgage-Backed Securities (continued)
Government National Mortgage Association Variable Rate Notes (continued):
Series 2012-120, 0.79%, 02/16/53(a)	USD		762	$	33,912
Series 2017-100, 0.81%, 05/16/59(a)			308		21,169
Series 2015-173, 0.90%, 09/16/55(a)			234		15,484
Series 2016-152, 0.98%, 08/15/58(a)			1,117		86,630
Series 2016-87, 1.01%, 08/16/58(a)			274		20,930
Series 2016-110, 1.04%, 05/16/58(a)			200		16,220
Series 2016-125, 1.06%, 12/16/57(a)			302		22,709
Series 2016-119(LIBOR USD 1 Month + 0.00%), 1.13%, 04/16/58(e)			334		27,568
Series 2017-173, 1.37%, 09/16/57(a)			200		19,109
					594,980
Mortgage-Backed Securities — 43.7%
Federal Home Loan Mortgage Corp.:
2.50%, 02/01/24 - 09/01/30			457		456,858
2.50%, 01/15/33(n)			516		515,113
3.00%, 01/01/30 - 12/01/46			5,416		5,447,676
3.00%, 01/15/33 - 01/15/48(n)			12,770		12,800,804
3.50%, 09/01/30 - 10/01/47			9,452		9,799,907
3.50%, 01/15/48(n)			5,003		5,137,500
4.00%, 01/15/33 - 01/15/48(n)			1,684		1,756,398
4.00%, 08/01/40 - 08/01/47			3,775		3,989,892
4.50%, 02/01/39 - 11/01/47			1,478		1,576,054
4.50%, 01/15/48(n)			285		302,945
5.00%, 10/01/41 - 11/01/41			233		254,366
5.50%, 02/01/35 - 06/01/41			276		305,486
Federal National Mortgage Association:
2.50%, 04/01/30 - 03/01/32			2,914		2,913,442
2.50%, 01/25/33(n)			368		367,725
3.00%, 04/01/28 - 03/01/47			15,824		15,972,152
3.00%, 01/25/48(n)			37,316		37,315,620
3.50%, 03/01/29 - 11/01/47			10,321		10,675,364
3.50%, 01/25/33 - 02/25/48(n)			8,913		9,146,076
4.00%, 02/01/25 - 10/01/47			16,433		17,297,778
4.00%, 01/25/48(n)			4,221		4,414,063
4.50%, 02/01/25 - 12/01/47			4,267		4,588,561
4.50%, 01/25/48(n)			1,007		1,071,354
5.00%, 02/01/35 - 12/01/43			1,585		1,716,383
5.00%, 01/25/48(n)			710		763,097
5.50%, 02/01/35 - 03/01/40			788		871,731
5.50%, 01/25/48(n)			654		716,612
6.00%, 04/01/35 - 06/01/41			661		742,062
6.00%, 01/25/48(n)			172		192,365
6.50%, 05/01/40			184		206,022
Government National Mortgage Association:
3.00%, 01/15/48(n)			9,561		9,647,646
3.50%, 12/20/41 - 10/20/46			894		928,638
3.50%, 01/15/48(n)			12,112		12,521,194
4.00%, 04/20/39 - 02/20/47			1,470		1,542,010
4.00%, 01/15/48 - 02/15/48(n)			4,429		4,616,604
4.50%, 12/20/39 - 11/20/44			1,578		1,674,386
4.50%, 01/15/48(n)			832		872,690
5.00%, 12/15/38 - 07/20/44			250		271,212
					183,387,786
Total U.S. Government Sponsored Agency Securities — 44.0% (Cost: $185,144,139)					184,678,926

Security		Par (000)		Value
U.S. Treasury Obligations — 32.9%
U.S. Treasury Bonds:
4.25%, 05/15/39	USD		725	$	916,360
4.50%, 08/15/39			703		918,321
4.38%, 11/15/39			706		908,396
3.13%, 02/15/43			2,783		2,989,877
2.88%, 05/15/43 - 11/15/46			3,593		3,692,624
3.63%, 08/15/43			2,657		3,101,010
3.75%, 11/15/43			3,128		3,727,085
3.00%, 02/15/47			506		532,150
2.75%, 11/15/47(p)			629		630,032
U.S. Treasury Notes:
1.25%, 04/30/19 - 05/31/19			16,804		16,667,886
1.75%, 11/30/19 - 09/30/22(p)			33,894		33,659,281
1.50%, 04/15/20 - 03/31/23			12,460		12,310,363
2.63%, 08/15/20 - 11/15/20			12,773		13,001,875
1.88%, 12/15/20 - 04/30/22			7,502		7,435,645
1.63%, 11/15/22 - 04/30/23			3,654		3,555,516
2.00%, 11/30/22 - 11/15/26(p)			22,608		22,217,728
2.13%, 11/30/24 - 05/15/25			5,066		4,996,658
2.25%, 11/15/25 - 11/15/27(p)			6,745		6,660,270
Total U.S. Treasury Obligations — 32.9% (Cost: $138,289,811)					137,921,077
Total Long-Term Investments — 132.8% (Cost: $555,836,630)					557,365,211
Short-Term Securities — 0.6%
Borrowed Bond Agreements — 0.1%
Barclays Bank plc, 0.20%, Open (Purchased on 06/09/17 to be repurchased at GBP 476,049, collateralized by United Kingdom Gilt Inflation Linked Bonds, 0.13%, due at 03/22/26, par and fair value of GBP 403,000 and $640,326 respectively)(q)(r)	GBP		476		642,402
Total Borrowed Bond Agreements — 0.1% (Cost: $606,239)					642,402
		Shares
Money Market Funds — 0.5%(s)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%(t)			1,809,877		1,809,877
JPMorgan US Treasury Plus Money Market Fund, Agency Class, 1.14%			167,969		167,969
Total Money Market Funds — 0.5% (Cost: $1,977,846)					1,977,846
Total Short-Term Securities — 0.6% (Cost: $2,584,085)					2,620,248
Total Options Purchased — 0.0% (Cost: $777,222)					267,001
Total Investments Before Borrowed Bonds and TBA Sale Commitments — 133.4% (Cost: $559,197,937)					560,252,460

SCHEDULE OF INVESTMENTS 23

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

Security		Par (000)		Value
Borrowed Bonds — (0.1)%
Foreign Government Obligations — (0.1)%
United Kingdom Gilt Inflation Linked Bonds, 0.13%, 03/22/26	GBP		403	$	(640,326	)
Total Borrowed Bonds — (0.1)% (Proceeds: $595,127)					(640,326	)
TBA Sale Commitments — (17.5)%(n)
Mortgage-Backed Securities — (17.5)%
Federal Home Loan Mortgage Corp.:
3.00%, 01/15/48			9,194		(9,192,206	)
3.50%, 01/15/33 - 01/15/48			4,892		(5,048,392	)
Federal National Mortgage Association:
3.00%, 01/25/33 - 02/25/48			40,267		(40,255,123	)
3.50%, 01/25/48			4,454		(4,573,006	)
4.00%, 01/25/33 - 02/25/48			11,404		(11,913,858	)
4.50%, 01/25/48 - 02/25/48			2,014		(2,141,448	)
Government National Mortgage Association:
4.00%, 01/15/48			100		(104,242	)
4.50%, 01/15/48			100		(105,203	)
Total TBA Sale Commitments — (17.5)% (Proceeds: $73,392,818)					(73,333,478	)
Total Investments Net of Borrowed Bonds and TBA Sale Commitments — 115.8% (Cost: $485,209,992)					486,278,656
Liabilities in Excess of Other Assets — (15.8)%					(66,489,338	)
Net Assets — 100.0%				$	419,789,318

^(a) Variable or floating rate security, which interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.

^(b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(c) Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

^(d) Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

^(e) Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

^(f)  Perpetual security with no stated maturity date.

^(g)  Issuer filed for bankruptcy and/or is in default.

^(h)  Non-income producing security.

⁽ⁱ⁾  Zero-coupon bond.

^(j)  Issuer is a U.S. branch of a foreign domiciled bank.

^(k)  Variable rate security. Rate shown is the rate in effect as of period end.

^(l)  When-issued security.

^(m)  U.S. Government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.

⁽ⁿ⁾  Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Securities LLC	$	1,835,491		$	(768	)
Barclays Capital, Inc.		669,718			(1,254	)
BNP Paribas SA		1,292,506			(13,648	)
Citigroup Global Markets Inc.		2,214,323			(6,032	)
Credit Suisse Securities USA LLC		5,271,036			251
Daiwa Capital Markets America, Inc.		9,972,000			6,233
Deutsche Bank Securities, Inc.		(731,243	)		(1,427	)
Goldman Sachs International		1,203,214			(1,675	)
JP Morgan Chase Bank		(19,609,695	)		26,758
Mizuho Securities USA, Inc.		410,492			7,035
Morgan Stanley & Co., Inc.		6,613,166			(6,110	)
Nomura Securities International, Inc.		2,739,705			414
RBC Dain Rauscher, Inc.		5,934,792			566
Wells Fargo Securities LLC		11,008,824			(4,524	)

^(o)  Other interests represent beneficial interests in liquidation trusts and other reorganizational or private entities.

^(p)  All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

^(q)  Certain agreements have no stated maturity and can be terminated by either party at any time.

^(r)  The amount to be repurchased assumes the maturity will be the day after the period end.

^(s)  Annualized 7-day yield as of period end.

^(t) During the year ended December 31, 2017, investments in issuers considered to be an affiliate of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity			Shares Held at 12/31/17		Value at 12/31/17		Income		Net Realized Gain (Loss) (a)		Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		3,798,256		(1,988,379	)		1,809,877	$	1,809,877	$	34,705	$	10	$	—

^(a)  Includes net capital gain distributions, if applicable.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

24 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

Reverse Repurchase Agreements

Counterparty	Interest Rate			Trade Date			Maturity Date		Face Value		Face Value Including Accrued Interest		Type of Underlying Collateral	Remaining Contractual Maturity of the Agreements
Barclays Capital, Inc.		0.75	%		12/29/2017			01/02/18	$	2,397,650	$	2,397,800	U.S. Treasury Obligations	Overnight
BNP Paribas SA		1.15	%		12/29/2017			01/02/18		16,777,002		16,778,610	U.S. Treasury Obligations	Overnight
Deutsche Bank Securities, Inc.		0.75	%		12/29/2017			01/02/18		9,555,034		9,555,631	U.S. Treasury Obligations	Overnight
Merrill Lynch, Pierce, Fenner & Smith, Inc.		0.45	%		12/29/2017			01/02/18		8,706,210		8,706,536	U.S. Treasury Obligations	Overnight
									$	37,435,896	$	37,438,577
						��

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
U.S. Treasury Ultra Bond		48		03/20/18	$	8,048	$	68,958
U.S. Treasury 5 Year Note		73		03/29/18		8,480		(16,200	)
Bank Acceptance		109		12/17/18		21,203		127
								52,885
Short Contracts
Euro-Bund		34		03/08/18		6,596		67,951
U.S. Treasury 10 Year Note		385		03/20/18		47,758		(18,636	)
U.S. Treasury Long Bond		12		03/20/18		1,836		2,473
Long Gilt		25		03/27/18		4,225		(55,381	)
90-Day Eurodollar		86		12/17/18		21,038		(2,823	)
90-Day Eurodollar		21		03/18/19		5,134		3,245
								(3,171	)
							$	49,714

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	130,500	BRL	426,866	Barclays Bank plc		01/04/18	$	1,828
USD	810,160	BRL	2,671,464	BNP Paribas SA		01/04/18		4,889
COP	525,026,250	USD	175,000	Barclays Bank plc		01/05/18		889
USD	175,000	MXN	3,372,842	Barclays Bank plc		01/05/18		3,528
RUB	10,432,533	EUR	149,000	Bank of America NA		01/12/18		1,915
RUB	27,400,803	USD	463,000	Bank of America NA		01/12/18		11,841
USD	208,000	JPY	23,371,687	BNP Paribas SA		01/12/18		480
USD	122,390	MXN	2,332,866	Bank of America NA		01/12/18		3,950
ZAR	561,540	USD	43,800	Barclays Bank plc		01/12/18		1,521
CLP	72,053,300	USD	110,000	Credit Suisse International		01/16/18		7,084
JPY	2,361,290,705	USD	20,890,000	Goldman Sachs International		01/16/18		80,436
USD	20,890,000	JPY	2,347,095,950	Bank of America NA		01/16/18		45,626
USD	109,500	MXN	2,147,646	Barclays Bank plc		01/17/18		578
ZAR	538,287	USD	42,272	Goldman Sachs International		01/17/18		1,135
USD	322,715	MXN	6,182,731	Barclays Bank plc		01/22/18		9,474
IDR	406,087,022	USD	29,923	JP Morgan Chase Bank NA		01/26/18		55
CAD	109,500	MXN	1,664,761	Morgan Stanley & Co. International plc		01/29/18		2,929
IDR	8,971,753,000	USD	661,000	Deutsche Bank AG		01/29/18		1,196
IDR	1,919,856,000	USD	141,000	JP Morgan Chase Bank NA		01/29/18		703
INR	9,973,810	USD	154,000	Barclays Bank plc		01/29/18		1,943
RUB	7,467,600	USD	127,000	Credit Suisse International		01/29/18		1,879
RUB	12,199,285	USD	203,000	Bank of America NA		01/30/18		7,489
EUR	91,877	USD	107,750	Deutsche Bank AG		02/02/18		2,697
EUR	49,958	USD	58,396	Barclays Bank plc		02/12/18		1,692
CAD	112,388	USD	87,500	Barclays Bank plc		02/22/18		1,972

SCHEDULE OF INVESTMENTS 25

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
NOK	1,462,071	USD	175,000	Bank of America NA		02/22/18	$	3,327
CAD	64,259	USD	50,000	BNP Paribas SA		03/21/18		1,173
EUR	80,000	CAD	120,446	Deutsche Bank AG		03/21/18		519
EUR	80,000	USD	95,073	HSBC Bank plc		03/21/18		1,363
NOK	524,720	CAD	80,000	Bank of America NA		03/21/18		337
NOK	502,362	USD	60,000	JP Morgan Chase Bank NA		03/21/18		1,317
SEK	901,375	GBP	80,000	Morgan Stanley & Co. International plc		03/21/18		2,112
USD	50,000	BRL	165,600	BNP Paribas SA		03/21/18		498
USD	2,005,000	MXN	39,039,696	Barclays Bank plc		03/21/18		46,885
USD	30,000	MXN	579,450	Citibank NA		03/21/18		937
USD	25,000	MXN	482,401	Deutsche Bank AG		03/21/18		804
JPY	7,006,640	AUD	80,000	Bank of America NA		03/22/18		24
USD	60,000	ZAR	747,420	BNP Paribas SA		03/22/18		288
USD	1,254,764	TRY	4,871,628	BNP Paribas SA		06/25/18		34,739
USD	493,399	TRY	1,962,372	Citibank NA		06/25/18		1,953
USD	1,322	TRY	5,000	BNP Paribas SA		08/20/18		91
USD	586,100	TRY	2,362,137	Citibank NA		08/20/18		4,640
								298,736
BRL	363,146	USD	111,600	Bank of America NA		01/04/18		(2,135	)
BRL	578,160	USD	175,200	Barclays Bank plc		01/04/18		(923	)
BRL	1,905,980	USD	583,000	BNP Paribas SA		01/04/18		(8,472	)
BRL	508,872	USD	156,000	Goldman Sachs International		01/04/18		(2,608	)
USD	85,140	BRL	284,129	BNP Paribas SA		01/04/18		(506	)
MXN	3,352,460	USD	175,000	HSBC Bank plc		01/05/18		(4,564	)
USD	15,000	COP	45,277,500	BNP Paribas SA		01/05/18		(168	)
USD	160,000	COP	483,616,250	Royal Bank of Scotland		01/05/18		(2,016	)
USD	63,500	TRY	244,654	Goldman Sachs International		01/10/18		(907	)
USD	209,141	AUD	273,000	BNP Paribas SA		01/12/18		(3,867	)
USD	250,446	EUR	212,000	Royal Bank of Scotland		01/12/18		(4,060	)
USD	80,000	RUB	4,734,480	Bank of America NA		01/12/18		(2,046	)
USD	872,480	RUB	52,163,427	Credit Suisse International		01/12/18		(31,482	)
USD	146,000	ZAR	1,990,580	Goldman Sachs International		01/12/18		(14,658	)
MXN	358,930	USD	18,250	BNP Paribas SA		01/17/18		(46	)
MXN	1,793,821	USD	91,250	UBS AG		01/17/18		(273	)
USD	435,678	ZAR	6,327,740	BNP Paribas SA		01/17/18		(74,593	)
MXN	3,810,363	USD	202,767	Citibank NA		01/22/18		(9,720	)
USD	180,018	IDR	2,455,619,647	Barclays Bank plc		01/26/18		(1,264	)
USD	309,774	IDR	4,227,479,412	Citibank NA		01/26/18		(2,312	)
USD	1,161,282	IDR	15,857,545,421	Deutsche Bank AG		01/26/18		(9,370	)
USD	441,351	IDR	6,012,034,309	JP Morgan Chase Bank NA		01/26/18		(2,475	)
USD	146,000	MXN	2,894,935	Bank of America NA		01/26/18		(546	)
USD	154,000	INR	10,098,242	JP Morgan Chase Bank NA		01/29/18		(3,889	)
BRL	2,365,928	USD	715,560	BNP Paribas SA		02/02/18		(4,943	)
USD	368,152	EUR	315,681	Bank of America NA		02/02/18		(11,335	)
USD	168,113	IDR	2,294,240,023	Deutsche Bank AG		02/08/18		(1,112	)
USD	93,681	EUR	79,445	Barclays Bank plc		02/09/18		(1,858	)
USD	63,512	EUR	53,551	Citibank NA		02/21/18		(929	)
USD	87,500	CAD	112,303	Bank of America NA		02/22/18		(1,904	)
GBP	80,000	SEK	898,932	JP Morgan Chase Bank NA		03/21/18		(1,813	)
MXN	1,070,410	USD	55,000	Deutsche Bank AG		03/21/18		(1,311	)
MXN	5,585,472	USD	288,000	JP Morgan Chase Bank NA		03/21/18		(7,849	)
NOK	790,000	SEK	790,706	Deutsche Bank AG		03/21/18		(422	)
USD	50,000	CAD	63,554	Citibank NA		03/21/18		(611	)
USD	50,000	CHF	48,705	Deutsche Bank AG		03/21/18		(262	)
USD	95,215	EUR	80,000	Deutsche Bank AG		03/21/18		(1,221	)
USD	55,505	NZD	80,000	Citibank NA		03/21/18		(1,136	)
JPY	6,579,349	SEK	480,000	Deutsche Bank AG		03/22/18		(168	)
TRY	6,834,000	USD	1,767,725	BNP Paribas SA		06/25/18		(56,255	)
TRY	4,091,000	USD	1,052,307	BNP Paribas SA		08/20/18		(45,271	)
USD	424,335	TRY	1,723,863	BNP Paribas SA		08/20/18		(8	)
								(321,308	)
	Net Unrealized Depreciation						$	(22,572	)

26 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

Exchange-Traded Options Purchased

Description	Number of Contracts		Expiration Date	Exercise Price			Notional Amount (000)			Value
Call
90-day Eurodollar Jun 19 Futures		1,787	06/15/18		USD	98.13		USD	438,373	$	134,025
Put
U.S. Treasury 10 Year Note Mar 18 Futures		240	01/26/18		USD	123.00		USD	29,520		30,000
										$	164,025

OTC Barrier Options Purchased

Description

Type of Option

Counterparty

Expiration Date

Exercise Price

Barrier Price/Range

Notional Amount (000)

Value

Put

EUR Currency

One-Touch

Morgan Stanley & Co. International plc

06/07/18

EUR

4.35

EUR

4.35

EUR

13

$

1,527

OTC Options Purchased

Description	Counterparty	Expiration Date		Exercise Price			Notional Amount (000)			Value
Call:
USD Currency	Morgan Stanley & Co. International plc		01/11/18		CLP	660.00		USD	146	$	—
USD Currency	Morgan Stanley & Co. International plc		01/25/18		ZAR	14.00		USD	110		15
USD Currency	Goldman Sachs International		02/16/18		TRY	4.20		USD	146		248
USD Currency	Royal Bank of Scotland		02/16/18		JPY	114.00		USD	175		752
USD Currency	Goldman Sachs International		03/05/18		KRW	1,303.00		USD	8,177		17
USD Currency	Goldman Sachs International		03/05/18		KRW	1,156.00		USD	8,177		11,186
USD Currency	HSBC Bank plc		03/05/18		KRW	1,190.00		USD	8,177		3,721
USD Currency	Deutsche Bank AG		05/16/18		MXN	20.00		USD	146		5,255
USD Currency	Bank of America NA		06/13/18		CHF	1.00		USD	275		1,774
USD Currency	BNP Paribas SA		06/13/18		CAD	1.29		USD	515		4,566
USD Currency	Citibank NA		06/13/18		SEK	8.53		USD	255		1,922
USD Currency	Deutsche Bank AG		06/13/18		JPY	113.40		USD	770		10,723
USD Currency	JP Morgan Chase Bank NA		07/19/18		MXN	20.00		USD	146		7,375
											47,554
Put:
USD Currency	JP Morgan Chase Bank NA		01/12/18		ZAR	13.50		USD	146		12,712
USD Currency	Deutsche Bank AG		01/31/18		RUB	59.00		USD	127		3,249
USD Currency	Morgan Stanley & Co. International plc		02/08/18		BRL	3.30		USD	183		2,181
EUR Currency	Deutsche Bank AG		02/15/18		TRY	4.32		EUR	181		149
USD Currency	Goldman Sachs International		02/16/18		TRY	3.86		USD	146		2,930
AUD Currency	Citibank NA		02/19/18		USD	0.76		AUD	146		191
AUD Currency	HSBC Bank plc		06/13/18		USD	0.76		AUD	850		7,370
EUR Currency	HSBC Bank plc		06/13/18		USD	1.17		EUR	3,245		25,113
											53,895
										$	101,449

SCHEDULE OF INVESTMENTS 27

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

Exchange-Traded Options Written

Description	Number of Contracts		Expiration Date	Exercise Price			Notional Amount (000)			Value
Call
90-day Eurodollar Jun 21 Futures		1,192	06/15/18		USD	97.88		USD	291,668		$(216,050)

OTC Options Written

Description	Counterparty	Expiration Date		Exercise Price			Notional Amount (000)			Value
Call
USD Currency	Morgan Stanley & Co. International plc		01/11/18		CLP	675.00		USD	146	$	—
CAD Currency	JP Morgan Chase Bank NA		01/18/18		MXN	15.00		CAD	73		(2,694	)
USD Currency	Bank of America NA		01/25/18		ZAR	14.12		USD	146		(13	)
USD Currency	Deutsche Bank AG		01/31/18		RUB	61.00		USD	127		(144	)
USD Currency	Morgan Stanley & Co. International plc		02/08/18		BRL	3.45		USD	90		(495	)
EUR Currency	Deutsche Bank AG		02/15/18		TRY	4.50		EUR	127		(5,133	)
USD Currency	Goldman Sachs International		02/16/18		TRY	4.04		USD	146		(723	)
AUD Currency	Citibank NA		02/19/18		USD	0.79		AUD	146		(897	)
USD Currency	Goldman Sachs International		03/05/18		KRW	1,190.00		USD	8,177		(3,734	)
USD Currency	Goldman Sachs International		03/05/18		KRW	1,212.00		USD	8,177		(1,580	)
USD Currency	HSBC Bank plc		03/05/18		KRW	1,303.00		USD	8,177		(17	)
USD Currency	Bank of America NA		06/13/18		CHF	1.05		USD	275		(331	)
USD Currency	BNP Paribas SA		06/13/18		CAD	1.36		USD	515		(1,191	)
USD Currency	Citibank NA		06/13/18		SEK	8.95		USD	255		(565	)
USD Currency	Deutsche Bank AG		06/13/18		JPY	119.00		USD	770		(2,229	)
USD Currency	JP Morgan Chase Bank NA		07/19/18		MXN	22.50		USD	146		(2,396	)
											(22,142	)
Put
USD Currency	JP Morgan Chase Bank NA		01/12/18		ZAR	13.00		USD	146		(6,801	)
CAD Currency	JP Morgan Chase Bank NA		01/18/18		MXN	15.00		CAD	73		(40	)
USD Currency	Credit Suisse International		01/26/18		RUB	58.50		USD	127		(2,302	)
EUR Currency	Deutsche Bank AG		02/15/18		TRY	4.10		EUR	127		(3	)
AUD Currency	HSBC Bank plc		06/13/18		USD	0.72		AUD	850		(2,026	)
EUR Currency	HSBC Bank plc		06/13/18		USD	1.11		EUR	3,245		(4,804	)
											(15,976	)
										$	(38,118	)

Centrally Cleared Credit Default Swaps — Sell Protection

Reference Obligation/Index

Financing Rate Received by the Fund

Payment Frequency

Termination Date

Credit Rating (a)

Notional Amount (000) (b)

Value

Upfront Premium Paid (Received)

Unrealized Appreciation (Depreciation)

CDX.NA.IG.29.V1

1.00

%

Quarterly

12/20/22

A

USD

1,842

$

44,420

$

42,449

$

1,971

^(a)  Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

^(b)  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

Centrally Cleared Interest Rate Swaps

Paid by the Fund		Received by the Fund		Effective Date			Termination Date		Notional Amount (000)		Value			Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Rate	Frequency	Rate	Frequency
28 day MXIBTIIE	Monthly	7.81%	Monthly		N/A			06/07/18	MXN	21,900	$	(71	)	$	—	$	(71	)
28 day MXIBTIIE	Monthly	7.85%	Monthly		N/A			06/12/18	MXN	21,900		(5	)		—		(5	)
7.36%	Monthly	28 day MXIBTIIE	Monthly		N/A			01/28/19	MXN	25,421		9,575			—		9,575
3 month LIBOR	Quarterly	2.05%	Semi-Annual		11/19/18	(a)		11/19/19	USD	103,670		(179,919	)		—		(179,919	)
3 month LIBOR	Quarterly	2.05%	Semi-Annual		11/19/18	(a)		11/19/19	USD	53,830		(96,035	)		—		(96,035	)
3 month LIBOR	Quarterly	2.16%	Semi-Annual		12/06/18	(a)		12/06/19	USD	53,490		(40,271	)		—		(40,271	)
28 day MXIBTIIE	Monthly	7.32%	Monthly		N/A			02/20/20	MXN	24,364		(16,750	)		—		(16,750	)

28 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

Paid by the Fund		Received by the Fund		Effective Date			Termination Date		Notional Amount (000)		Value			Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Rate	Frequency	Rate	Frequency
28 day MXIBTIIE	Monthly	7.16%	Monthly		N/A			04/29/20	MXN	24,200	$	(21,550	)	$	—	$	(21,550	)
3 month LIBOR	Quarterly	2.24%	Semi-Annual		11/01/19	(a)		11/01/21	USD	10,860		(20,762	)		—		(20,762	)
2.27%	Semi-Annual	3 month LIBOR	Quarterly		11/19/20	(a)		11/19/21	USD	108,170		87,325			—		87,325
2.28%	Semi-Annual	3 month LIBOR	Quarterly		11/19/20	(a)		11/19/21	USD	56,000		40,642			—		40,642
2.34%	Semi-Annual	3 month LIBOR	Quarterly		12/07/20	(a)		12/07/21	USD	55,990		12,517			—		12,517
3 month LIBOR	Quarterly	2.31%	Semi-Annual		12/09/19	(a)		12/08/21	USD	22,150		(15,808	)		—		(15,808	)
3 month LIBOR	Quarterly	2.39%	Semi-Annual		12/19/19	(a)		12/19/21	USD	11,070		7,829			—		7,829
28 day MXIBTIIE	Monthly	7.47%	Monthly		N/A			03/07/22	MXN	4,159		(2,997	)		—		(2,997	)
28 day MXIBTIIE	Monthly	7.45%	Monthly		N/A			03/07/22	MXN	8,319		(6,378	)		—		(6,378	)
28 day MXIBTIIE	Monthly	7.48%	Monthly		N/A			03/07/22	MXN	4,159		(2,920	)		—		(2,920	)
7.13%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/07/22	MXN	3,789		5,559			—		5,559
7.14%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/10/22	MXN	1,532		2,216			—		2,216
7.11%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/14/22	MXN	5,081		7,727			—		7,727
7.11%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/14/22	MXN	3,855		5,822			—		5,822
28 day MXIBTIIE	Monthly	6.32%	Monthly		N/A			07/17/25	MXN	1,733		(8,140	)		—		(8,140	)
3 month LIBOR	Quarterly	2.13%	Semi-Annual		N/A			08/25/25	USD	60		(458	)		—		(458	)
2.27%	Semi-Annual	3 month LIBOR	Quarterly		N/A			09/11/25	USD	91		(194	)		—		(194	)
											$	(233,046	)	$	—	$	(233,046	)

^(a)  Forward Swap.

Centrally Cleared Inflation Swaps

Paid by the Fund

Received by the Fund

Termination Date

Notional Amount (000)

Value

Upfront Premium Paid (Received)

Unrealized Appreciation (Depreciation)

Reference

Frequency

Rate

Frequency

UK Retail Price Index All Items Monthly

At Termination

3.46%

At Termination

10/15/26

GBP

742

$

8,903

$

—

$

8,903

OTC Credit Default Swaps — Buy Protection

Reference Obligation/Index	Financing Rate Paid by the Fund			Payment Frequency		Counterparty	Termination Date		Notional Amount (000)			Value			Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
United Mexican States		1.00	%		Quarterly	JP Morgan Chase Bank NA		06/20/20		USD	135	$	(1,477	)	$	604		$	(2,081	)
United Mexican States		1.00	%		Quarterly	Bank of America NA		09/20/20		USD	135		(1,509	)		942			(2,451	)
Argentine Republic		5.00	%		Quarterly	Goldman Sachs International		12/20/22		USD	195		(23,375	)		(16,509	)		(6,866	)
Argentine Republic		5.00	%		Quarterly	Goldman Sachs International		12/20/22		USD	350		(41,988	)		(29,170	)		(12,818	)
Federative Republic of Brazil		1.00	%		Quarterly	Barclays Bank plc		12/20/22		USD	165		4,613			5,963			(1,350	)
Loews Corp.		1.00	%		Quarterly	Barclays Bank plc		12/20/22		USD	120		(4,946	)		(3,903	)		(1,043	)
Republic of South Africa		1.00	%		Quarterly	Bank of America NA		12/20/22		USD	76		1,989			2,977			(988	)
Republic of South Africa		1.00	%		Quarterly	Morgan Stanley & Co. International plc		12/20/22		USD	132		3,451			5,165			(1,714	)
Republic of the Philippines		1.00	%		Quarterly	JP Morgan Chase Bank NA		12/20/22		USD	670		(12,918	)		(10,187	)		(2,731	)
United Mexican States		1.00	%		Quarterly	Barclays Bank plc		12/20/22		USD	154		413			675			(262	)
United Mexican States		1.00	%		Quarterly	Morgan Stanley & Co. International plc		12/20/22		USD	88		236			365			(129	)
United Mexican States		1.00	%		Quarterly	Morgan Stanley & Co. International plc		12/20/22		USD	88		236	��		386			(150	)
CMBX.NA.9.AAA		0.50	%		Monthly	Credit Suisse International		09/17/58		USD	150		(281	)		1,818			(2,099	)
CMBX.NA.9.AAA		0.50	%		Monthly	Deutsche Bank AG		09/17/58		USD	120		(226	)		1,474			(1,700	)
CMBX.NA.9.AAA		0.50	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		USD	100		(187	)		1,212			(1,399	)
CMBX.NA.9.AAA		0.50	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		USD	90		(169	)		1,091			(1,260	)
CMBX.NA.9.AAA		0.50	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		USD	230		(432	)		3,006			(3,438	)
CMBX.NA.6.AAA		0.50	%		Monthly	Deutsche Bank AG		05/11/63		USD	230		(1,485	)		—			(1,485	)
CMBX.NA.6.AAA		0.50	%		Monthly	Deutsche Bank AG		05/11/63		USD	140		(904	)		(20	)		(884	)
CMBX.NA.6.AAA		0.50	%		Monthly	Deutsche Bank AG		05/11/63		USD	200		(1,292	)		(149	)		(1,143	)
CMBX.NA.6.BBB-		3.00	%		Monthly	JPMorgan Securities LLC		05/11/63		USD	30		4,380			2,911			1,469
												$	(75,871	)	$	(31,349	)	$	(44,522	)

SCHEDULE OF INVESTMENTS 29

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

OTC Credit Default Swaps — Sell Protection

Reference Obligation/Index	Financing Rate Received by the Fund			Payment Frequency		Counterparty	Termination Date		Credit Rating (a)		Notional Amount (000) (b)			Value			Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
Transocean, Inc.		1.00	%		Quarterly	Goldman Sachs International		06/20/19		B		USD	15	$	(50	)	$	(135	)	$	85
Transocean, Inc.		1.00	%		Quarterly	Goldman Sachs International		06/20/19		B		USD	95		(313	)		(855	)		542
United Mexican States		1.00	%		Quarterly	Bank of America NA		06/20/20		BBB+		USD	135		1,478			(697	)		2,175
United Mexican States		1.00	%		Quarterly	JP Morgan Chase Bank NA		09/20/20		BBB+		USD	135		1,510			(823	)		2,333
CMBX.NA.3.AM		0.50	%		Monthly	Credit Suisse International		12/13/49		NR		USD	390		(152	)		(3,256	)		3,104
CMBX.NA.4.AM		0.50	%		Monthly	Deutsche Bank AG		02/17/51		NR		USD	95		(58	)		(1,557	)		1,499
CMBX.NA.8.A		2.00	%		Monthly	Goldman Sachs International		10/17/57		NR		USD	60		(2,577	)		(3,325	)		748
CMBX.NA.8.A		2.00	%		Monthly	Goldman Sachs International		10/17/57		NR		USD	60		(2,577	)		(6,020	)		3,443
CMBX.NA.9.A		2.00	%		Monthly	Credit Suisse International		09/17/58		NR		USD	60		(2,145	)		(1,862	)		(283	)
CMBX.NA.9.A		2.00	%		Monthly	Credit Suisse International		09/17/58		NR		USD	20		(715	)		(1,018	)		303
CMBX.NA.9.A		2.00	%		Monthly	JPMorgan Securities LLC		09/17/58		NR		USD	170		(6,076	)		(8,717	)		2,641
CMBX.NA.9.A		2.00	%		Monthly	JPMorgan Securities LLC		09/17/58		NR		USD	30		(1,072	)		(952	)		(120	)
CMBX.NA.9.A		2.00	%		Monthly	JPMorgan Securities LLC		09/17/58		NR		USD	50		(1,787	)		(1,329	)		(458	)
CMBX.NA.9.A		2.00	%		Monthly	JPMorgan Securities LLC		09/17/58		NR		USD	6		(209	)		(704	)		495
CMBX.NA.9.A		2.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	30		(1,072	)		(1,440	)		368
CMBX.NA.9.A		2.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	60		(2,145	)		(3,135	)		990
CMBX.NA.9.A		2.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	90		(3,217	)		(1,936	)		(1,281	)
CMBX.NA.9.A		2.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	60		(2,145	)		(2,970	)		825
CMBX.NA.9.BBB-		3.00	%		Monthly	Credit Suisse International		09/17/58		NR		USD	19		(2,102	)		(1,942	)		(160	)
CMBX.NA.9.BBB-		3.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	45		(4,977	)		(4,701	)		(276	)
CMBX.NA.9.BBB-		3.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	100		(11,061	)		(9,924	)		(1,137	)
CMBX.NA.9.BBB-		3.00	%		Monthly	Morgan Stanley & Co. International plc		09/17/58		NR		USD	2		(221	)		(241	)		20
CMBX.NA.10.A		2.00	%		Monthly	Deutsche Bank AG		11/17/59		A-		USD	60		(1,837	)		(2,677	)		840
CMBX.NA.10.A		2.00	%		Monthly	Deutsche Bank AG		11/17/59		A-		USD	120		(3,673	)		(5,262	)		1,589
CMBX.NA.10.BBB-		3.00	%		Monthly	JPMorgan Securities LLC		11/17/59		NR		USD	10		(1,006	)		(873	)		(133	)
CMBX.NA.6.BBB-		3.00	%		Monthly	Credit Suisse International		05/11/63		NR		USD	30		(4,380	)		(2,408	)		(1,972	)
														$	(52,579	)	$	(68,759	)	$	16,180

^(a) Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

^(b) The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

OTC Interest Rate Swaps

Paid by the Fund		Received by the Fund			Counterparty	Termination Date		Notional Amount (000)			Value			Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Rate	Frequency	Rate		Frequency
8.98%	At Termination		1 day BZDIOVER	At Termination	Citibank NA		01/02/18		BRL	1,077	$	(388	)	$	—	$	(388	)
9.99%	At Termination		1 day BZDIOVER	At Termination	Citibank NA		01/02/18		BRL	3,321		(7,210	)		—		(7,210	)
9.98%	At Termination		1 day BZDIOVER	At Termination	JP Morgan Chase Bank NA		01/02/18		BRL	3,322		(5,242	)		—		(5,242	)
4.55%	Monthly		28 day MXIBTIIE	Monthly	Barclays Bank plc		03/21/18		MXN	826		305			—		305
4.85%	Monthly		28 day MXIBTIIE	Monthly	Bank of America NA		11/01/18		MXN	716		959			—		959
28 day MXIBTIIE	Monthly		7.07%	Monthly	Citibank NA		11/21/18		MXN	8,086		(3,580	)		—		(3,580	)
28 day MXIBTIIE	Monthly		7.06%	Monthly	JP Morgan Chase Bank NA		11/21/18		MXN	9,703		(4,341	)		—		(4,341	)
28 day MXIBTIIE	Monthly		6.98%	Monthly	Citibank NA		11/28/18		MXN	13,800		(6,753	)		—		(6,753	)
28 day MXIBTIIE	Monthly		6.98%	Monthly	JP Morgan Chase Bank NA		11/28/18		MXN	7,828		(3,831	)		—		(3,831	)
7.02%	At Termination		1 day BZDIOVER	At Termination	Bank of America NA		01/02/19		BRL	5,244		(2,404	)		—		(2,404	)
7.75%	At Termination		1 day BZDIOVER	At Termination	Bank of America NA		01/02/19		BRL	3,153		(8,124	)		—		(8,124	)
1 day BZDIOVER	At Termination		9.25%	At Termination	Citibank NA		01/02/19		BRL	2,921		22,621			—		22,621
1 day BZDIOVER	At Termination		9.28%	At Termination	JP Morgan Chase Bank NA		01/02/19		BRL	2,773		21,766			—		21,766
1 day BZDIOVER	At Termination		8.21%	At Termination	Bank of America NA		01/02/20		BRL	3,516		4,103			—		4,103
1 day BZDIOVER	At Termination		9.14%	At Termination	Bank of America NA		01/04/21		BRL	1,400		3,950			—		3,950
3.27%	Semi-Annual		3 month LIBOR	Quarterly	Deutsche Bank AG		05/16/21		USD	470		(17,928	)		—		(17,928	)
1 day BZDIOVER	At Termination		9.84%	At Termination	Citibank NA		01/02/23		BRL	1,378		3,884			—		3,884
5.73%	Monthly		28 day MXIBTIIE	Monthly	Bank of America NA		01/03/25		MXN	672		4,078			—		4,078
28 day MXIBTIIE	Monthly		6.43%	Monthly	Bank of America NA		06/06/25		MXN	541		(2,336	)		—		(2,336	)
28 day MXIBTIIE	Monthly		6.33%	Monthly	Citibank NA		06/09/25		MXN	271		(1,253	)		—		(1,253	)
28 day MXIBTIIE	Monthly		6.33%	Monthly	Citibank NA		07/17/25		MXN	864		(4,044	)		—		(4,044	)
6.31%	Monthly		28 day MXIBTIIE	Monthly	Deutsche Bank AG		08/11/25		MXN	3,395		16,207			—		16,207
28 day MXIBTIIE	Monthly		6.27%	Monthly	Bank of America NA		12/05/25		MXN	122		(613	)		—		(613	)
											$	9,826		$	—	$	9,826

30 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

OTC Total Return Swaps

Paid by the Fund		Received by the Fund			Counterparty	Termination Date		Notional Amount (000)			Value		Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
Rate/ Reference	Frequency	Rate / Reference		Frequency
iBoxx USD Liquid High Yield Index March 2018	At Termination		3 month LIBOR	Quarterly	BNP Paribas SA		03/20/18		USD	2,041	$	21,014	$	(2,715	)	$	23,729
iBoxx USD Liquid High Yield Index March 2018	At Termination		3 month LIBOR	Quarterly	Goldman Sachs International		03/20/18		USD	2,050		15,678		(2,309	)		17,987
											$	36,692	$	(5,024	)	$	41,716

Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps and OTC Derivatives

	Swap Premiums Paid		Swap Premiums Received			Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swaps(a)	$	42,449	$	—		$	190,086	$	(412,258	)
OTC Derivatives		28,589		(133,721	)		143,058		(119,858	)

^(a) Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Futures Contracts	Net unrealized appreciation(a)	$	—	$	—	$	—	$	—	$	142,627	$	127	$	142,754
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		298,736		—		—		298,736
Options purchased	Investments at value — unaffiliated(b)		—		—		—		102,976		164,025		—		267,001
Swaps — centrally cleared	Net unrealized appreciation(a)		—		1,971		—		—		179,212		8,903		190,086
Swaps — OTC	Unrealized appreciation on OTC swaps; Swap premiums paid		—		52,058		41,716		—		77,873		—		171,647
Total		$	—	$	54,029	$	41,716	$	401,712	$	563,737	$	9,030	$	1,070,224
Liabilities — Derivative Financial Instruments
Futures Contracts	Net unrealized depreciation(a)	$	—	$	—	$	—	$	—	$	93,040	$	—	$	93,040
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		321,308		—		—		321,308
Options written	Options written, at value		—		—		—		38,118		216,050		—		254,168
Swaps — centrally cleared	Net unrealized depreciation(a)		—		—		—		—		412,258		—		412,258
Swaps — OTC	Unrealized depreciation on OTC swaps; Swap premiums received		—		180,508		5,024		—		68,047		—		253,579
		$	—	$	180,508	$	5,024	$	359,426	$	789,395	$	—	$	1,334,353

^(a)  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

^(b)  Includes options purchased at value as reported in the Schedule of Investments

SCHEDULE OF INVESTMENTS 31

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund (Percentages shown are based on Net Assets)

For the year ended 31 December, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts			Equity Contracts		Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts		Total
Net realized Gain (Loss) from:
Futures Contracts	$	—	$	—		$	—	$	—		$	1,501,085		$	—	$	1,501,085
Forward foreign currency exchange contracts		—		—			—		48,123			—			—		48,123
Options purchased(a)		—		—			—		(323,441	)		(625,880	)		—		(949,321	)
Options written		—		—			—		148,304			182,461			—		330,765
Swaps		—		56,136			—		(53,722	)		(128,233	)		—		(125,819	)
	$	—	$	56,136		$	—	$	(180,736	)	$	929,433		$	—	$	804,833
Net Change in Unrealized Appreciation (Depreciation) on:
Futures Contracts	$	—	$	—		$	—	$	—		$	110,071		$	127	$	110,198
Forward foreign currency exchange contracts		—		—			—		(135,939	)		—			—		(135,939	)
Options purchased(b)		—		—			—		(275,746	)		(256,485	)		—		(532,231	)
Options written		—		—			—		134,967			144,512			—		279,479
Swaps		—		(138,521	)		41,716		—			(125,685	)		25,974		(196,516	)
	$	—	$	(138,521	)	$	41,716	$	(276,718	)	$	(127,587	)	$	26,101	$	(475,009	)

^(a) Options purchased are included in net realized gain (loss) from investments — unaffiliated.

^(b) Options purchased are included in net change in unrealized appreciation (depreciation) on investments — unaffiliated.

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	48,639,197
Average notional value of contracts — short	$	57,758,045
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	17,366,163
Average amounts sold — in USD	$	13,832,715
Options:
Average value of option contracts purchased	$	238,254
Average value of option contracts written	$	100,537
Credit default swaps:
Average notional value — buy protection	$	6,477,665
Average notional value — sell protection	$	5,837,750
Interest rate swaps:
Average notional value — pays fixed rate	$	66,660,838
Average notional value — receives fixed rate	$	88,698,621
Inflation Swaps:
Average notional value — receives fixed rate	$	371,000
Total return swaps:
Average notional value	$	4,844,029

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	—		$	58,835
Forward foreign currency exchange contracts		298,736			321,308
Options(a)		267,001			254,168
Swaps — Centrally cleared		—			156,856
Swaps — OTC(b)		171,647			253,579
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	737,384		$	1,044,746
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(164,025	)		(431,741	)
Total derivative assets and liabilities subject to an MNA	$	573,359		$	613,005

^(a) Includes options purchased at value which is included in Investments at value – unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

^(b) Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statement of Assets and Liabilities.

32 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

The following table presents the Fund’s derivative assets (and liabilities) by counterparty net of amounts available for offset under a Master Netting Agreement (“MNA”)

Counterparty	Derivative Assets Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets  (b)
Bank of America NA	$	95,467	$	(35,923	)	$	—	$	—	$	59,544
Barclays Bank plc		77,253		(10,603	)		—		—		66,650
BNP Paribas SA		70,453		(70,453	)		—		—		—
Citibank NA		36,148		(36,148	)		—		—		—
Credit Suisse International		14,188		(14,188	)		—		—		—
Deutsche Bank AG		46,201		(46,201	)		—		—		—
Goldman Sachs International		118,757		(102,217	)		—		—		16,540
HSBC Bank plc		37,567		(11,411	)		—		—		26,156
JP Morgan Chase Bank NA		46,865		(46,865	)		—		—		—
JPMorgan Securities LLC		7,516		(7,516	)		—		—		—
Morgan Stanley & Co. International plc		22,192		(22,192	)		—		—		—
Royal Bank of Scotland		752		(752	)		—		—		—
	$	573,359	$	(404,469	)	$	—	$	—	$	168,890

Counterparty	Derivative Liabilities Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities (c)
Bank of America NA	$	35,923	$	(35,923	)	$	—	$	—	$	—
Barclays Bank plc		10,603		(10,603	)		—		—		—
BNP Paribas SA		198,035		(70,453	)		—		—		127,582
Citibank NA		39,398		(36,148	)		—		—		3,250
Credit Suisse International		48,784		(14,188	)		—		—		34,596
Deutsche Bank AG		54,180		(46,201	)		—		—		7,979
Goldman Sachs International		102,217		(102,217	)		—		—		—
HSBC Bank plc		11,411		(11,411	)		—		—		—
JP Morgan Chase Bank NA		57,193		(46,865	)		—		—		10,328
JPMorgan Securities LLC		13,286		(7,516	)		—		—		5,770
Morgan Stanley & Co. International plc		35,626		(22,192	)		—		—		13,434
Royal Bank of Scotland		6,076		(752	)		—		—		5,324
UBS AG		273		—			—		—		273
	$	613,005	$	(404,469	)	$	—	$	—	$	208,536

^(a) The amount of derivatives available for offset is limited to the amount of assets and/or liabilities that are subject to an MNA.

^(b) Net amount represents the net amount receivable from the counterparty in the event of default.

^(c)  Net amount represents the net amount payable from the counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	$	—	$	48,712,604	$	2,576,403	$	51,289,007
Corporate Bonds:
Aerospace & Defense		—		1,535,661		—		1,535,661
Air Freight & Logistics		—		406,790		—		406,790
Airlines		—		1,011,054		—		1,011,054
Auto Components		—		236,379		—		236,379
Automobiles		—		779,585		—		779,585
Banks		—		25,482,871		—		25,482,871
Beverages		—		2,014,663		—		2,014,663
Biotechnology		—		3,587,437		—		3,587,437
Building Products		—		675,511		—		675,511
Capital Markets		—		5,757,071		—		5,757,071

SCHEDULE OF INVESTMENTS 33

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

	Level 1		Level 2			Level 3		Total
Chemicals	$	—	$	554,191		$	—	$	554,191
Commercial Services & Supplies		—		693,587			—		693,587
Communications Equipment		—		91,930			—		91,930
Construction & Engineering		—		197,500			—		197,500
Consumer Finance		—		4,394,064			—		4,394,064
Containers & Packaging		—		697,263			—		697,263
Diversified Consumer Services		—		631,079			—		631,079
Diversified Financial Services		—		1,671,248			1,000,000		2,671,248
Diversified Telecommunication Services		—		5,488,991			—		5,488,991
Electric Utilities		—		5,847,479			—		5,847,479
Electrical Equipment		—		118,345			—		118,345
Electronic Equipment, Instruments & Components		—		210,477			—		210,477
Energy Equipment & Services		—		955,967			—		955,967
Equity Real Estate Investment Trusts (REITs)		—		2,143,233			—		2,143,233
Food & Staples Retailing		—		812,684			—		812,684
Food Products		—		486,416			—		486,416
Gas Utilities		—		106,718			—		106,718
Health Care Equipment & Supplies		—		2,787,166			—		2,787,166
Health Care Providers & Services		—		3,203,226			—		3,203,226
Hotels, Restaurants & Leisure		—		541,263			—		541,263
Household Durables		—		264,800			—		264,800
Industrial Conglomerates		—		318,445			—		318,445
Insurance		—		1,724,672			—		1,724,672
Internet & Direct Marketing Retail		—		610,132			—		610,132
IT Services		—		645,482			—		645,482
Life Sciences Tools & Services		—		789,247			—		789,247
Media		—		4,829,183			—		4,829,183
Metals & Mining		—		1,864,204			—		1,864,204
Multiline Retail		—		225,944			—		225,944
Multi-Utilities		—		458,849			—		458,849
Oil, Gas & Consumable Fuels		—		7,900,878			—		7,900,878
Paper & Forest Products		—		123,457			—		123,457
Pharmaceuticals		—		1,590,446			—		1,590,446
Road & Rail		—		1,170,749			—		1,170,749
Semiconductors & Semiconductor Equipment		—		4,085,433			—		4,085,433
Software		—		3,554,768			—		3,554,768
Specialty Retail		—		328,176			—		328,176
Technology Hardware, Storage & Peripherals		—		3,121,798			—		3,121,798
Thrifts & Mortgage Finance		—		329,817			—		329,817
Tobacco		—		1,087,344			—		1,087,344
Trading Companies & Distributors		—		716,362			—		716,362
Wireless Telecommunication Services		—		554,633			—		554,633
Floating Rate Loan Interests		—		—			1,599,976		1,599,976
Foreign Agency Obligations		—		1,508,907			—		1,508,907
Foreign Government Obligations		—		17,689,765			—		17,689,765
Municipal Bonds		—		23,299,754			—		23,299,754
Non-Agency Mortgage-Backed Securities		—		26,046,761			2,319,947		28,366,708
Preferred Securities		383,923		212,500			—		596,423
U.S. Government Sponsored Agency Securities		—		184,678,926			—		184,678,926
U.S. Treasury Obligations		—		137,921,077			—		137,921,077
Short-Term Securities:
Borrowed Bond Agreements		—		642,402			—		642,402
Money Market Funds		1,977,846		—			—		1,977,846
Options Purchased:
Foreign currency exchange contracts		—		102,976			—		102,976
Interest rate contracts		164,025		—			—		164,025
Liabilities:
Borrowed Bonds		—		(640,326	)		—		(640,326	)
TBA Sale Commitments		—		(73,333,478	)		—		(73,333,478	)
	$	2,525,794	$	476,256,536		$	7,496,326	$	486,278,656

34 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock Total Return V.I. Fund

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments(a)
Assets:
Equity contracts	$	—		$	41,716		$	—	$	41,716
Credit contracts		—			25,440			—		25,440
Foreign currency exchange contracts		—			298,736			—		298,736
Interest rate contracts		142,627			257,085			—		399,712
Other contracts		127			8,903			—		9,030
Liabilities:
Credit contracts		—			(51,811	)		—		(51,811	)
Foreign currency exchange contracts		—			(359,426	)		—		(359,426	)
Interest rate contracts		(309,090	)		(480,305	)		—		(789,395	)
	$	(166,336	)	$	(259,662	)	$	—	$	(425,998	)

^(a)  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts, and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities			Corporate Bonds		Floating Rate Loan Interests			Non-Agency Mortgage- Backed Securities			Options Purchased				Total
Investments:
Assets:
Opening Balance, as of December 31, 2016	$	9,595,248		$	—	$	—		$	2,403,512		$	1			$	11,998,761
Transfers into Level 3		46,394			—		494,357			104,343			—				645,094
Transfers out of Level 3(a)		(6,661,753	)		—		—			(674,375	)		—				(7,336,128	)
Other(b)		324,433			—		—			(324,433	)		—				—
Accrued discounts/premiums		498			—		—			4,398			—				4,896
Net realized gain (loss)		(34,093	)		—		—			9,367			—				(24,726	)
Net change in unrealized appreciation (depreciation)(c) (d)		(20,399	)		—		(23,234	)		1,608			(1	)			(42,026	)
Purchases		2,240,000			1,000,000		1,232,111			1,762,051			—				6,234,162
Sales		(2,913,925	)		—		(103,258	)		(966,524	)		—				(3,983,707	)
Closing Balance, as of December 31, 2017	$	2,576,403		$	1,000,000	$	1,599,976		$	2,319,947		$	—		��	$	7,496,326
Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017(d)	$	(16,618	)	$	—	$	(23,234	)	$	9,008		$	—			$	(30,845	)

^(a) As of December 31, 2016, the Fund used significant unobservable inputs in determining the value of certain investments. As of December 31, 2017, the Fund used observable inputs in determining the value of the same investments. As a result, the investments at beginning of the period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

^(b) Certain Level 3 investments were re-classified between Asset-Backed Securities and Non-Agency Mortgage-Backed Securities.

^(c) Included in the related net change in unrealized appreciation (depreciation) in the Statement of Operations.

^(d) Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017 is generally due to investments no longer held or categorized as Level 3 at period end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 35

Statement of Assets and Liabilities

December 31, 2017

	BlackRock Total Return V.I. Fund
ASSETS
Investments at value — unaffiliated (cost — $557,388,060)	$	558,442,583
Investments at value — affiliated (cost — $1,809,877)		1,809,877
Cash		56,145
Cash pledged:
Futures contracts		750,050
Centrally cleared swaps		1,042,398
Foreign currency at value (cost — $1,391,796)		1,400,454
Receivables:
Investments sold		5,961,271
TBA sale commitments		73,392,818
Capital shares sold		428,398
Dividends — affiliated		3,309
Dividends — unaffiliated		8,095
Interest — unaffiliated		2,564,085
Swap premiums paid		28,589
Unrealized appreciation on:
Forward foreign currency exchange contracts		298,736
OTC swaps		143,058
Prepaid expenses		1,938
Other assets		18,765
Total assets		646,350,569
LIABILITIES
Borrowed bonds at value (proceeds $595,127)		640,326
Options written at value (premium received $564,438)		254,168
TBA sale commitments at value (proceeds $73,392,818)		73,333,478
Reverse repurchase agreements at value		37,438,577
Payables:
Investments purchased		112,715,931
Capital shares redeemed		29,200
Income dividends		691,614
Interest expense		202
Distribution fees		53,449
Variation margin on futures contracts		58,835
Variation margin on centrally cleared swaps		156,856
Investment advisory fees		147,036
Officer’s and Directors’ fees		4,771
Other affiliates		1,354
Other accrued expenses		460,567
Swap premiums received		133,721
Unrealized depreciation on:
Forward foreign currency exchange contracts		321,308
OTC swaps		119,858
Total liabilities		226,561,251
NET ASSETS	$	419,789,318
NET ASSETS CONSIST OF
Paid-in capital	$	421,542,020
Distributions in excess of net investment income		(437,435	)
Accumulated net realized loss		(2,552,029	)
Net unrealized appreciation (depreciation)		1,236,762
NET ASSETS	$	419,789,318
NET ASSET VALUE
Class I — Based on net assets of $152,138,371 and 12,778,791 shares outstanding, 600 million shares authorized, $0.10 par value.	$	11.91
Class III — Based on net assets of $267,650,947 and 22,749,980 shares outstanding, 100 million shares authorized, $0.10 par value.	$	11.76

See notes to financial statements.

36 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock Total Return V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	34,705
Dividends — unaffiliated		66,795
Interest — unaffiliated		11,993,200
Foreign taxes withheld		(4,343	)
Total investment income		12,090,357
EXPENSES
Investment advisory		1,692,511
Transfer agent — class specific		669,826
Distribution — class specific		557,875
Pricing		250,773
Custodian		121,920
Printing		116,205
Accounting services		84,688
Professional		78,958
Directors and Officer		25,866
Transfer agent		4,997
Miscellaneous		10,004
Total expenses excluding interest expense		3,613,623
Interest expense		439,065
Total expenses		4,052,688
Less:
Fees waived and/or reimbursed by the Manager		(3,471	)
Transfer agent fees reimbursed — class specific		(535,927	)
Total expenses after fees waived and/or reimbursed		3,513,290
Net investment income		8,577,067
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — unaffiliated (net of $678 foreign capital gain tax)		(1,553,069	)
Borrowed bonds		138,962
Capital gain distributions from investment companies — affiliated		10
Forward foreign currency exchange contracts		48,123
Foreign currency transactions		(173,247	)
Futures contracts		1,501,085
Options written		330,765
Payment by affiliate		19,241
Swaps		(125,819	)
		186,051
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		3,396,789
Borrowed bonds		(89,354	)
Forward foreign currency exchange contracts		(135,939	)
Foreign currency translations		867
Futures contracts		110,198
Options written		279,479
Swaps		(196,516	)
		3,365,524
Net realized and unrealized gain		3,551,575
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	12,128,642

See notes to financial statements.

FINANCIAL STATEMENTS 37

Statements of Changes in Net Assets

	BlackRock Total Return V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	8,577,067		$	5,122,678
Net realized gain (loss)		186,051			(111,898	)
Net change in unrealized appreciation (depreciation)		3,365,524			53,330
Net increase in net assets resulting from operations		12,128,642			5,064,110
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(3,931,362	)		(3,223,271	)
Class III		(4,976,227	)		(2,293,347	)
Decrease in net assets resulting from distributions to shareholders		(8,907,589	)		(5,516,618	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		83,969,566			110,161,750
NET ASSETS
Total increase in net assets		87,190,619			109,709,242
Beginning of year		332,598,699			222,889,457
End of year	$	419,789,318		$	332,598,699
Undistributed (distributions in excess of) net investment income, end of year	$	(437,435	)	$	34,849

^(a) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

38 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Total Return V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	11.79		$	11.71		$	11.93		$	11.51		$	12.01
Net investment income(a)		0.29			0.23			0.22			0.32			0.32
Net realized and unrealized gain (loss)		0.13			0.09			(0.19	)		0.44			(0.45	)
Net increase (decrease) from investment operations		0.42			0.32			0.03			0.76			(0.13	)
Distributions:(b)
From net investment income		(0.30	)		(0.24	)		(0.25	)		(0.34	)		(0.37	)
Net asset value, end of year	$	11.91		$	11.79		$	11.71		$	11.93		$	11.51
Total Return:(c)
Based on net asset value		3.60	%(d)		2.76	%		0.26	%		6.66	%		(1.14	)%
Ratios to Average Net Assets:(e)
Total expenses		0.94	%		0.82	%		0.92	%		0.88	%		0.87	%
Total expenses after fees waived and/or reimbursed and paid indirectly		0.74	%		0.62	%		0.74	%		0.69	%		0.67	%
Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense		0.62	%		0.59	%		0.69	%		0.66	%		0.65	%
Net investment income		2.43	%		1.92	%		1.89	%		2.68	%		2.75	%
Supplemental Data:
Net assets, end of year (000)	$	152,138		$	157,445		$	154,046		$	130,765		$	135,943
Portfolio turnover rate(f)		627	%		590	%		900	%		772	%		724	%

^(a) Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Includes payment received from an affiliate, which impacted the Fund’s total return. Excluding the payment from an affiliate, the Fund’s total return is 3.51%.

^(e)  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,
	2017		2016			2015			2014		2013
Investments in underlying funds		—		0.01	%		0.01	%		—		—

^(f)  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2017			2016			2015			2014			2013
Portfolio turnover rate (excluding MDRs)		389	%		396	%		625	%		560	%		498	%

See notes to financial statements.

FINANCIAL HIGHLIGHTS 39

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Total Return V.I. Fund
	Class III
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	11.65		$	11.57		$	11.79		$	11.38		$	11.86
Net investment income(a)		0.25			0.19			0.18			0.27			0.28
Net realized and unrealized gain (loss)		0.12			0.10			(0.19	)		0.44			(0.42	)
Net increase (decrease) from investment operations		0.37			0.29			(0.01	)		0.71			(0.14	)
Distributions:(b)
From net investment income		(0.26	)		(0.21	)		(0.21	)		(0.30	)		(0.34	)
Net asset value, end of year	$	11.76		$	11.65		$	11.57		$	11.79		$	11.38
Total Return:(c)
Based on net asset value		3.21	%(d)		2.46	%		(0.08	)%		6.28	%		(1.30	)%
Ratios to Average Net Assets:(e)
Total expenses		1.16	%		1.01	%		1.06	%		1.11	%		1.06	%
Total expenses after fees waived and/or reimbursed and paid indirectly		1.06	%		0.93	%		1.04	%		1.01	%		0.96	%
Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense		0.94	%		0.89	%		0.98	%		0.98	%		0.94	%
Net investment income		2.15	%		1.61	%		1.54	%		2.31	%		2.45	%
Supplemental Data:
Net assets, end of year (000)	$	267,651		$	175,153		$	68,844		$	7,300		$	2,750
Portfolio turnover rate(f)		627	%		590	%		900	%		772	%		724	%

^(a)  Based on average shares outstanding.

^(b) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c) Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Includes payment received from an affiliate, which had no impact on the Fund’s total return.

^(e) Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended December 31,
	2017		2016			2015			2014		2013
Investments in underlying funds		—		0.01	%		0.01	%		—		—

^(f)  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2017			2016			2015			2014			2013
Portfolio turnover rate (excluding MDRs)		389	%		396	%		625	%		560	%		498	%

See notes to financial statements.

40 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds. The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock Total Return V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., dollar rolls, TBA sale commitments, futures contracts, forward foreign currency exchange contracts, options written and swaps), or certain borrowings (e.g., reverse repurchase agreements) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Fund.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

NOTESTO FINANCIAL STATEMENTS 41

Notes to Financial Statements  (continued)

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

• Swap agreements are valued utilizing quotes received daily by the Fund’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

• To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

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Notes to Financial Statements  (continued)

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach	(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii)   recapitalizations and other transactions across the capital structure; and (iii)  market multiples of comparable issuers.
Income approach	(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii)   quoted prices for similar investments or assets in active markets; and (iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach	(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii)  relevant news and other public sources; and (iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such

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Notes to Financial Statements  (continued)

assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a fund’s initial investment in the IOs may not fully recoup.

Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are typically issued by the U.S. Government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. Stripped mortgage-backed securities may be privately issued.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

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Notes to Financial Statements  (continued)

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result in proceeds from the sale not being readily available for a fund to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a fund to the extent that it invests in floating rate loan interest. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a fund’s investment policies.

When a fund purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A fund may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a fund having a contractual relationship only with the lender, not with the borrower. A fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, a fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a fund assumes the credit risk of both the borrower and the lender that is selling the Participation. A fund’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a fund having a direct contractual relationship with the borrower, and a fund may enforce compliance by the borrower with the terms of the loan agreement.

Forward Commitments and When-Issued Delayed Delivery Securities: The fund may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the fund may be required to pay more at settlement than the security is worth. In addition, the fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a fund mitigate its counterparty risk, TBA commitments may be entered into by a fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a fund, if any, is noted in the Schedule of Investments. Typically, a fund is permitted to sell, re-pledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a fund is not fully collateralized, contractually or otherwise, a fund bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: A fund may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realizes gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a fund is required to purchase may decline below the agreed upon repurchase price of those securities.

Borrowed Bond Agreements: Repurchase agreements may be referred to as borrowed bond agreements when entered into in connection with short sales of bonds. In a borrowed bond agreement, a fund borrows a bond from a counterparty in exchange for cash collateral. The agreement contains a commitment that the security and the

NOTESTO FINANCIAL STATEMENTS 45

Notes to Financial Statements  (continued)

cash will be returned to the counterparty and a fund at a mutually agreed upon date. Certain agreements have no stated maturity and can be terminated by either party at any time. Earnings on cash collateral and compensation to the lender of the bond are based on agreed upon rates between a fund and the counterparty. The value of the underlying cash collateral approximates the market value and accrued interest of the borrowed bond. To the extent that a borrowed bond transaction exceeds one business day, the value of the cash collateral in the possession of the counterparty is monitored on a daily basis to ensure the adequacy of the collateral. As the market value of the borrowed bond changes, the cash collateral is periodically increased or decreased with a frequency and in amounts prescribed in the borrowed bond agreement. A fund may also experience delays in gaining access to the collateral.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a fund continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a fund would still be required to pay the full repurchase price. Further, a fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statement of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a fund to the counterparties are recorded as a component of interest expense in the Statement of Operations. In periods of increased demand for the security, a fund may receive a fee for the use of the security by the counterparty, which may result in interest income to a fund.

For the year ended December 31, 2017, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the Fund were $35,306,881 and 0.829%, respectively.

Borrowed bond agreements and reverse repurchase transactions are entered into by a fund under Master Repurchase Agreements (each, an “MRA”), which permit a fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a fund. With borrowed bond agreements and reverse repurchase transactions, typically a fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a fund receives or posts securities as collateral with a market value in excess of the repurchase price to be paid or received by a fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

As of period end, the following table is a summary of the Fund’s open borrowed bond and reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

Borrowed Bond Agreements and Reverse Repurchase Agreements

Counterparty	Borrowed Bond Agreements(a)		Reverse Repurchase Agreements			Borrowed Bond at Value including Accrued Interest(b)			Exposure Due (to) / from Counterparty before Collateral			Non-cash Collateral Received		Cash Collateral Received		Fair Value of Non-cash Collateral Pledged Including Accrued Interest(c)		Cash Collateral Pledged		Net Collateral (Received) / Pledged(c)		Net Exposure Due (to) /  from Counterparty(d)
Barclays Bank plc	$	642,402	$	—		$	(642,737	)	$	(335	)	$	—	$	—	$	—	$	—	$	—	$	(335	)
Barclays Capital, Inc.		—		(2,397,800	)		—			(2,397,800	)		—		—		2,397,800		—		2,397,800		—
BNP Paribas SA		—		(16,778,610	)		—			(16,778,610	)		—		—		16,778,610		—		16,778,610		—
Deutsche Bank Securities, Inc.		—		(9,555,631	)		—			(9,555,631	)		—		—		9,555,631		—		9,555,631		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		—		(8,706,536	)		—			(8,706,536	)		—		—		8,706,536		—		8,706,536		—
	$	642,402	$	(37,438,577	)	$	(642,737	)	$	(37,438,912	)	$	—	$	—	$	37,438,577	$	—	$	37,438,577	$	(335	)

^(a) Included in Investments at value-unaffiliated in the Statement of Assets and Liabilities.

^(b) Includes accrued interest on borrowed bonds in the amount of $202 which is included in interest expense payable in the Statement of Assets and Liabilities.

^(c) Net collateral with a value of $37,448,005 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

^(d) Net exposure represents the net receivable (payable) that would be due from/to the counterparty in the event of default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a fund’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a fund’s obligation to repurchase the securities.

46 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Short Sale Transactions: In short sale transactions, a fund sells a security it does not hold in anticipation of a decline in the market price of that security. When a fund makes a short sale, it will borrow the security sold short (borrowed bond) and deliver the fixed-income security to the counterparty to which it sold the security short. An amount equal to the proceeds received by a fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. A fund is required to repay the counterparty interest on the security sold short, which, if applicable, is shown as interest expense in the Statement of Operations. A fund is exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of an unlimited loss since there is an unlimited potential for the market price of the security sold short to increase. A gain is limited to the price at which a fund sold the security short. A realized gain or loss is recognized upon the termination of a short sale if the market price is either less than or greater than the proceeds originally received. There is no assurance that a fund will be able to close out a short position at a particular time or at an acceptable price.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure, to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Fund purchases and writes call and put options to increase or decrease its exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statement of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statement of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statement of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Fund writes a call option, such option is typically “covered,” meaning that it holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation:

• Swaptions — The Fund purchases and writes options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Fund’s holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

NOTESTO FINANCIAL STATEMENTS 47

Notes to Financial Statements  (continued)

• Foreign currency options — The Fund purchases and writes foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

• Barrier options — The Fund may purchase and write a variety of options with non-standard payout structures or other features (“barrier options”) that are generally traded OTC.

• The Fund may invest in various types of barrier options, including down-and-out options, down-and-in options, double no-touch options, one-touch options, up-and-out options and up-and-in options. Down-and-out options expire worthless to the purchaser if the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Down-and-in options expire worthless to the purchaser unless the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Double no-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument reaches or surpasses predetermined barrier price levels prior to the expiration date. Up-and-out options expire worthless to the purchaser if the price of the underlying instrument increases beyond a predetermined barrier price level prior to the expiration date. Up-and-in options can only be exercised when the price of the underlying instrument increases beyond a predetermined barrier price level.

In purchasing and writing options, the Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that it may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statement of Operations.

• Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk).

The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Fund will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• Total return swaps — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed-income) with another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Fund receives payment from or makes a payment to the counterparty.

• Interest rate swaps — Interest rate swaps are entered into to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

48 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

• Forward swaps — The Fund enters into forward interest rate swaps and forward total return swaps. In a forward swap, the Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee based on a percentage of the Fund’s and BlackRock High Yield V.I. Fund’s, a series of the Company, aggregate average daily net assets at the following annual rates:

Average Daily Net Assets	Investment Advisory Fees
First $250 Million		0.50	%
$250 Million — $500 Million		0.45
$500 Million — $750 Million		0.40
Greater than $750 Million		0.35

For the year ended December 31, 2017, the aggregate average daily net assets of the Fund and the Company’s BlackRock High Yield V.I. Fund were approximately $766,491,695.

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III was $557,875.

Transfer Agent: On behalf of the Fund, the Manager entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

NOTESTO FINANCIAL STATEMENTS 49

Notes to Financial Statements  (continued)

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III		Total
$	309,667	$	360,159	$	669,826

Expense Limitations, Waivers and Reimbursements: With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is shown as fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $3,471.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of the independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $3,548 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses to a percentage of average daily net assets as follows:

Class I	0.00	%
Class III	0.06

The Manager has agreed not to reduce or discontinue this contractual reimbursement through April 30, 2018 unless approved by the Board, including a majority of Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	309,667	$	226,260	$	535,927

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I	Class III
1.25%		1.50%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018 unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: During the year ended December 31, 2017, the Fund received a reimbursement of $19,241 from an affiliate, which is included in payment by affiliate in the Statement of Operations, related to an operating error.

The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	27,944,882
Sales		25,851,242
Net Realized Gain		17,584

50 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, including paydowns, mortgage dollar rolls and excluding short-term securities, were as follows:

	Purchases		Sales
Non-U.S Government Securities	$	2,275,656,320	$	2,074,344,197
U.S Government Securities		483,515,262		430,080,546

For the year ended December 31, 2017, purchases and sales related to mortgage dollar rolls were $952,490,704 and $952,394,168, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the accounting for swap agreements, the classification of investments, foreign currency transactions, the characterization of expenses, the expiration of capital loss carryforwards, net paydown losses and fees paid on trade settlements were reclassified to the following accounts:

Paid-in capital	$	(23,090,333	)
Distributions in excess of net investment income		(141,762	)
Accumulated net realized loss		23,232,095

The tax character of distributions paid was as follows:

	12/31/17		12/31/16
Ordinary income	$	8,907,589	$	5,516,618

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Capital loss carryforward		(2,473,996	)
Net unrealized gains(a)		721,294
Total	$	(1,752,702	)

^(a)  The difference between book-basis and tax-basis net unrealized losses was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain options, futures and foreign currency contracts, the accounting for swap agreements and the classification of investments.

As of December 31, 2017, the Fund had a capital loss carryforward, with no expiration date, available to offset future realized capital gains of $2,473,996.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	559,287,459
Gross unrealized appreciation	$	5,785,858
Gross unrealized depreciation		(4,666,038	)
Net unrealized appreciation (depreciation)		1,119,820

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

NOTESTO FINANCIAL STATEMENTS 51

Notes to Financial Statements  (continued)

10. PRINCIPAL RISKS

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease the Fund’s ability to buy or sell bonds. As a result, the Fund may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If the Fund needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

For OTC options purchased, the Fund bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty, to perform. The Fund may be exposed to counterparty credit risk with respect to options written to the extent the Fund deposits collateral with its counterparty to a written option.

With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

52 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Concentration Risk: The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

The Fund invests a significant portion of its assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedule of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
	Shares			Amount			Shares			Amount
Class I
Shares sold		738,932		$	8,778,869			2,078,444		$	25,204,731
Shares issued in reinvestment of distributions		330,876			3,939,184			267,271			3,203,436
Shares redeemed		(1,644,712	)		(19,574,644	)		(2,147,090	)		(25,786,780	)
Net increase (decrease)		(574,904	)	$	(6,856,591	)		198,625		$	2,621,387
Class III
Shares sold		7,912,809		$	93,125,910			9,823,253		$	116,352,187
Shares issued in reinvestment of distributions		409,818			4,824,507			178,754			2,121,457
Shares redeemed		(606,082	)		(7,124,260	)		(918,301	)		(10,933,281	)
Net increase		7,716,545		$	90,826,157			9,083,706		$	107,540,363
Total Net Increase		7,141,641		$	83,969,566			9,282,331		$	110,161,750

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 53

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Total Return V.I. Fund and the Board of Directors of BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Total Return V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

54 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Glossary of Terms Used in this Report

Currency
AUD	Australian Dollar
BRL	Brazilian Real
CAD	Canadian Dollar
CHF	Swiss Franc
CLP	Chilean Peso
COP	Colombian Peso
EGP	Egyptian Pound
EUR	Euro
GBP	British Pound
IDR	Indonesian Rupiah
JPY	Japanese Yen
KRW	South Korean Won
MXN	Mexican Peso
NZD	New Zealand Dollar
RUB	New Russian Ruble
SEK	Swedish Krona
TRY	Turkish Lira
USD	United States Dollar
ZAR	South African Rand
Portfolio Abbreviations
CLO	Collateralized Loan Obligation
ERS	Extendible Reset Securities
GO	General Obligation Bonds
LIBOR	London Interbank Offered Rate
MXIBTIIE	Mexican Equilibrium Interbank Interest Rate
OTC	Over-the-counter
RB	Revenue Bonds
TBA	To-be-announced

GLOSSARYOF TERMS USEDINTHIS REPORT 55

DECEMBER 31, 2017

ANNUAL REPORT

BlackRock Variable Series Funds, Inc.

^Ø  BlackRock U.S. Government Bond V.I. Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

Fund Summary  as of December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Investment Objective

BlackRock U.S. Government Bond V.I. Fund’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended December 31, 2017, the Fund underperformed its benchmark, the Bloomberg Barclays U.S. Government/Mortgage Index.

What factors influenced performance?

Detractors from relative performance included interest rate swap-related strategies. The Fund’s underweight allocation to agency securities weighed on return, as did security selection within 30-year agency residential mortgage-backed securities (“MBS”). An underweight to U.S. agency securities constrained performance, as did positioning with respect to global interest rates and currency exposures.

The principal positive contributors to performance were allocation-based strategies within securitized assets such as commercial mortgage-backed securities (“CMBS”) and collateralized loan obligations (“CLOs”). These segments benefited as the global search for yield and limited supply created a favorable technical backdrop and the fundamentals around the U.S. consumer, housing and commercial real estate continued to strengthen. The Fund’s stance with respect to U.S. interest rates also added to performance. This included the Fund’s stance with respect to duration and corresponding interest rate sensitivity, as well as the Fund’s positioning along the Treasury yield curve. Overweight positioning with respect to both 15-year and 30-year agency MBS added value, as did security selection within 15-year MBS. Finally, the Fund’s positioning with respect to Treasury inflation-protected securities (“TIPS”) helped return.

Describe recent portfolio activity.

During the 12-month period, the Fund increased its exposure to U.S. Treasuries, while closing its position in TIPS. Exposure to agency MBS increased modestly over the period, with new purchases favoring collateralized mortgage obligations. The Fund also slightly reduced exposure to CMBS and CLOs.

Describe portfolio positioning at period end.

The Fund closed the period with modestly underweight exposure to U.S. duration, on the view that yields will continue to rise in the context of strong domestic economic growth and the Fed hiking cycle. The Fund had overweight exposure to the U.S. dollar with an eye toward helping to buffer any volatility in risk assets. Outside of the United States, the Fund held short positions in German and U.K interest rates and U.K. inflation forward contracts. The Fund maintained a modest overweight to agency mortgages versus the benchmark on favorable seasonal factors and the view that the segment has become attractively valued relative to credit assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

PORTFOLIO COMPOSITION

Asset Type	Percent of Net Assets
U.S. Government Sponsored Agency Securities		71	%
U.S. Treasury Obligations		55
Asset-Backed Securities		5
Non-Agency Mortgage-Backed Securities		4
Money Market Funds		3
Foreign Government Obligations		1
Options Purchased		–	(a)
Liabilities in Excess of Other Assets		(16	)
TBA Sale Commitments		(23	)

^(a)  Representing less than 0.5% of the Fund’s Net Assets.

2 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Fund Summary  as of December 31, 2017(continued) BlackRock U.S. Government Bond V.I. Fund

TOTAL RETURN BASED ON A $10,000 INVESTMENT

^(a)  Assuming transaction costs, if any, and other operating expenses, including investment advisory fees. Does not include insurance related fees and expenses. The returns for Class III Shares prior to July 15, 2013, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares. The returns for Class III Shares, however, are adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class III Shares.

^(b)  The Fund invests, under normal circumstances, at least 80% of its assets in fixed-income securities that are issued or guaranteed by the U.S. Government and its agencies. The Fund’s total returns prior to October 1, 2011 are the returns of the Fund when it followed a different investment objective and different investment strategies under the name “BlackRock Government Income V.I. Fund”.

^(c)  An index that measures debt issued by the U.S. Government, and its agencies, as well as mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae and Freddie Mac.

^(d)  An unmanaged index that includes the mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae and Freddie Mac that meet certain maturity and liquidity criteria.

Performance Summary for the Period Ended December 31, 2017

	Standardized 30-Day Yield  (b)		Unsubsidized 30-Day Yield  (b)		6-Month Total Returns (c)			Average Annual Total Returns
								1 Year (c)		5 Years (c)			10 Years (c)
Class I(a)		1.90%		1.90%		0.06%			1.52%		1.14%			2.86%
Class III(a)		1.78		1.74		(0.10	)		1.10		0.85	(d)		2.59	(d)
Bloomberg Barclays U.S. Government/Mortgage Index		—		—		0.72			2.37		1.59			3.51
Bloomberg Barclays U.S. Mortgage-Backed Securities Index		—		—		1.11			2.47		2.04			3.84

^(a)  Average annual and cumulative total returns are based on changes in net asset value for the periods shown, and assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend/payable date. Insurance-related fees and expenses are not reflected in these returns. The Fund’s total returns prior to October 1, 2011 are the returns of the Fund when it followed a different investment objective and different investment strategies under the name “BlackRock Government Income V.I. Fund”.

^(b)  The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

^(c)  For a portion of the period, the Fund’s investment adviser waived a portion of its fee. Without such waiver, the Fund’s performance would have been lower.

^(d)  The returns for Class III Shares prior to July 15, 2013, the recommencement of operations of Class III Shares, are based upon the performance of the Fund’s Class I Shares.

The returns for Class III Shares, however, are adjusted to reflect the distribution and/or service (12b-1) fees applicable to Class III Shares.

Past performance is not indicative of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example

	Actual								Hypothetical (a)
	Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Including Interest Expense and Fees		Excluding Interest Expense and Fees				Including Interest Expense and Fees				Excluding Interest Expense and Fees
					Expenses Paid During the Period (b)		Expenses Paid During the Period (c)		Beginning Account Value (07/01/17)		Ending Account Value (12/31/17)		Expenses Paid During the Period (b)		Ending Account Value 12/31/17		Expenses Paid During the Period (c)
Class I	$	1,000.00	$	1,000.60	$	6.05	$	5.09	$	1,000.00	$	1,019.16	$	6.11	$	1,020.11	$	5.14
Class III		1,000.00		999.00		7.96		6.85		1,000.00		1,017.24		8.03		1,018.35		6.92

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(b)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (1.20% for Class I and 1.58% for Class III), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

^(c)  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (1.01% for Class I and 1.36% for Class III), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown).

See “Disclosure of Expenses” on the following page for further information on how expenses were calculated.

FUND SUMMARY 3

Disclosure of Expenses BlackRock U.S. Government Bond V.I. Fund

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown on the previous page (which is based on a hypothetical investment of $1,000 invested on July 1, 2017 and held through December 31, 2017) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical examples are useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

The Benefits and Risks of Leveraging

The Fund may utilize leverage to seek to enhance returns and net asset value (“NAV”). However, these objectives cannot be achieved in all interest rate environments.

The Fund may utilize leverage by entering into reverse repurchase agreements.

In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by the Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Fund’s shareholders benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is distributed to Fund’s shareholders, and the value of these portfolio holdings is reflected in the Fund’s per share NAV. However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other ongoing costs of leverage exceed the Fund’s return on assets purchased with leverage proceeds, income to shareholders is lower than if the Fund had not used leverage.

Furthermore, the value of the Fund’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can also influence the value of portfolio investments. As a result, changes in interest rates can influence the Fund’s NAV positively or negatively in addition to the impact on Fund’s performance from leverage. Changes in the direction of interest rates are difficult to predict accurately, and there is no assurance that the Fund’s leveraging strategy will be successful.

The use of leverage also generally causes greater changes in the Fund’s NAV and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV of the Fund’s shares than if the Fund were not leveraged. In addition, the Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of the leverage instruments, which may cause the Fund to incur losses. The use of leverage may limit the Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. The Fund incurs expenses in connection with the use of leverage, all of which are borne by the Fund’s shareholders and may reduce income.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

4 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments   December 31, 2017 BlackRock U.S. Government Bond V.I. Fund (Percentages shown are based on Net Assets)

Security		Par (000)		Value
Asset-Backed Securities — 5.0%
Arbor Realty Commercial Real Estate Notes Ltd., Series 2016-FL1A, Class A, 3.18%, 09/15/26(a)(b)	USD		210	$	213,337
Bsprt Issuer Ltd., Series 2017-FL1, Class A, 2.83%, 06/15/27(a)(b)			200		200,686
CIFC Funding Ltd.(a):
Series 2014-V, 2.75%, 01/17/27			400		401,414
Series 2015-3A, Class A, 2.78%, 10/19/27(b)			250		251,521
Dryden XXVIII Senior Loan Fund, Series 2013-28A, Class A1LR, 2.62%, 08/15/30(a)(b)			700		705,344
OCP CLO Ltd., Series 2012-2A, Class A1R, 2.85%, 11/22/25(a)(b)			556		559,802
OHA Credit Partners VIII Ltd., Series 2013-8A, Class A, 2.48%, 04/20/25(a)(b)			440		440,597
Progress Residential Trust, Series 2017-SFR1, Class A, 2.77%, 08/17/34(b)			100		99,058
Washington Mill CLO Ltd., Series 2014-1A, Class A1R, 2.58%, 04/20/26(a)(b)			500		501,042
Total Asset-Backed Securities — 5.0% (Cost: $3,349,229)					3,372,801
Foreign Government Obligations — 0.9%
Mexico — 0.9%
United Mexican States, 5.00%, 12/11/19	MXN		11,800		571,237
Non-Agency Mortgage-Backed Securities — 4.0%
Commercial Mortgage-Backed Securities — 3.1%(b)
BHMS Mortgage Trust, Series 2014-ATLS, Class AFL, 2.86%, 07/05/33(a)	USD		700		703,252
Commercial Mortgage Trust, Series 2017-PANW, Class A, 3.24%, 10/10/29			440		443,974
CSMC Trust:
Series 2016-MFF, Class A, 3.08%, 11/15/33(a)			100		100,616
Series 2017-CALI, Class A, 3.43%, 11/10/32			120		122,834
DBUBS Mortgage Trust, Series 2017-BRBK, Class A, 3.45%, 10/10/34			180		183,904
GAHR Commercial Mortgage Trust, Series 2015-NRF, Class AFL1, 2.78%, 12/15/34(a)			143		143,400
LMREC, Inc., Series 2016-CRE2, Class A, 3.24%, 11/24/31(a)			100		101,000
RAIT Trust, Series 2017-FL7, Class A, 2.43%, 06/15/37(a)			250		250,129
					2,049,109
Interest Only Commercial Mortgage-Backed Securities — 0.9%(a)
CFCRE Commercial Mortgage Trust, Series 2016-C4, Class XA, 1.75%, 05/10/58			849		90,260
Commercial Mortgage Trust, Series 2015-CR24, Class XA, 0.81%, 08/10/48			1,142		55,316
Core Industrial Trust(b):
Series 2015-CALW, Class XA, 0.81%, 02/10/34			3,895		113,723
Series 2015-TEXW, Class XA, 0.77%, 02/10/34			3,300		92,047
Series 2015-WEST, Class XA, 0.93%, 02/10/37			1,600		93,859
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2016-C29, Class XA, 1.64%, 05/15/49			986		97,195
Wells Fargo Commercial Mortgage Trust, Series 2015-NXS4, Class XA, 0.95%, 12/15/48			1,480		81,667
					624,067
Total Non-Agency Mortgage-Backed Securities — 4.0% (Cost: $2,688,944)					2,673,176

Security		Par (000)		Value
U.S. Government Sponsored Agency Securities — 71.4%
Agency Obligations — 0.8%
Federal Home Loan Bank, 4.00%, 04/10/28	USD		500	$	553,091
Collateralized Mortgage Obligations — 1.8%
Federal National Mortgage Association:
Series 2017-69, Class HA, 3.00%, 06/25/46			681		687,781
Series 2011-8, Class ZA, 4.00%, 02/25/41			264		276,456
Government National Mortgage Association Variable Rate Notes, Series 2014-107, Class WX, 6.78%, 07/20/39(a)			202		230,360
					1,194,597
Interest Only Commercial Mortgage-Backed Securities — 1.5%(a)
Federal Home Loan Mortgage Corp. Variable Rate Notes:
Series 2015-K718, Class X2A, 0.10%, 02/25/22(b)			22,693		74,505
Series K064, Class X1, 0.61%, 03/25/27			1,397		66,480
Series K718, Class X1, 0.64%, 01/25/22			328		7,284
Federal National Mortgage Association ACES Variable Rate Notes:
Series 2015-M1, Class X2, 0.55%, 09/25/24			5,106		159,830
Series 2016-M4, Class X2, 2.70%, 01/25/39			632		71,734
Government National Mortgage Association, Series 2016-22, 0.81%, 11/16/55			2,698		156,264
Government National Mortgage Association Variable Rate Notes:
Series 2003-17, Class IO, 0.00%, 03/16/43			2,265		—
Series 2003-109, Class IO, 0.00%, 11/16/43			2,034		386
Series 2002-83, Class IO, 0.00%, 10/16/42			957		2
Series 2017-168, Class IO, 0.66%, 12/16/59			739		49,926
Series 2017-72, Class IO, 0.68%, 04/16/57			1,357		91,318
Series 2017-54, Class IO, 0.68%, 12/16/58			193		12,963
Series 2017-53, Class IO, 0.69%, 11/16/56			2,076		131,168
Series 2017-44, Class IO, 0.70%, 04/17/51			770		47,981
Series 2017-64, Class IO, 0.72%, 11/16/57			361		25,047
Series 2017-30, Class IO, 0.76%, 08/16/58			770		50,827
Series 2017-61, Class IO, 0.77%, 05/16/59			516		42,108
					987,823
Mortgage-Backed Securities — 67.3%
Federal Home Loan Mortgage Corp.:
2.50%, 09/01/27 - 02/01/32			550		551,093
2.50%, 01/15/33(c)			57		56,902
3.00%, 01/01/30 - 12/01/46			736		743,111
3.00%, 01/15/33 - 01/15/48(c)			1,463		1,468,365
3.50%, 04/01/31 - 03/01/47			1,496		1,552,034
3.50%, 01/15/48(c)			1,546		1,587,412
4.00%, 08/01/40 - 08/01/47			616		651,820
4.00%, 01/15/48(c)			602		629,513
4.50%, 02/01/39 - 11/01/47			440		468,467
5.00%, 10/01/41 - 11/01/41			233		254,366
5.50%, 06/01/41			158		174,061
8.00%, 12/01/29 - 07/01/30			37		42,965
Federal National Mortgage Association:
2.50%, 09/01/27 - 09/01/32			1,258		1,258,347
2.50%, 01/25/33 - 02/25/33(c)			1,649		1,646,316
3.00%, 04/01/29 - 03/01/47			5,066		5,111,262
3.00%, 01/25/33 - 01/25/48(c)			4,537		4,537,965
3.50%, 04/01/29 - 11/01/47			3,816		3,950,957
4.00%, 01/01/26 - 08/01/47			4,856		5,115,187
4.00%, 01/25/48(c)			1,733		1,812,265
4.50%, 05/01/24 - 10/01/47			2,235		2,390,661
4.50%, 01/25/48(c)			294		312,789
5.00%, 09/01/35 - 08/01/41			319		345,696

SCHEDULE OF INVESTMENTS 5

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund (Percentages shown are based on Net Assets)

Security		Par (000)		Value
Mortgage-Backed Securities (continued)
Federal National Mortgage Association (continued):
5.50%, 05/01/34 - 12/01/39	USD		298	$	329,754
6.00%, 04/01/35 - 06/01/41			352		399,014
6.50%, 05/01/40			65		73,214
Government National Mortgage Association:
3.00%, 01/15/48(c)			360		363,262
3.50%, 12/20/41 - 10/20/46			449		466,721
3.50%, 01/15/48(c)			2,641		2,730,377
4.00%, 09/20/40 - 02/20/47			337		354,696
4.00%, 01/15/48 - 02/15/48(c)			2,422		2,524,579
4.50%, 12/20/39 - 11/20/44			2,071		2,197,378
5.00%, 12/15/38 - 07/20/42			153		165,890
5.50%, 01/15/34			671		750,940
					45,017,379
Total U.S. Government Sponsored Agency Securities — 71.4% (Cost: $47,789,908)					47,752,890
U.S. Treasury Obligations — 55.3%
U.S. Treasury Bonds:
4.25%, 05/15/39			181		228,774
4.50%, 08/15/39			176		229,907
4.38%, 11/15/39			176		226,455
3.13%, 02/15/43			773		830,462
2.88%, 05/15/43 - 11/15/46			997		1,024,644
3.63%, 08/15/43			738		861,327
3.75%, 11/15/43			868		1,034,242
3.00%, 02/15/47			141		148,287
2.75%, 11/15/47(d)			1,022		1,023,677
U.S. Treasury Notes:
1.25%, 04/30/19 - 05/31/19			4,666		4,628,205
1.75%, 11/30/19 - 09/30/22(d)			7,112		7,055,345
1.50%, 04/15/20 - 03/31/23			3,461		3,419,442
2.63%, 08/15/20 - 11/15/20			3,548		3,611,575
1.88%, 12/15/20 - 04/30/22			1,940		1,921,985
1.63%, 11/15/22 - 04/30/23			1,015		987,642
2.00%, 11/30/22 - 11/15/26(d)			6,605		6,493,636
2.13%, 11/30/24 - 05/15/25			1,762		1,738,081
2.25%, 11/15/25 - 11/15/27(d)			1,547		1,528,075
Total U.S. Treasury Obligations — 55.3% (Cost: $37,099,954)					36,991,761
Total Long-Term Investments — 136.6% (Cost: $91,559,729)					91,361,865
		Shares
Money Market Funds — 2.7%(e)
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.17%(f)			1,793,803		1,793,803
JPMorgan US Treasury Plus Money Market Fund, Agency Class, 1.14%			1,799		1,799
Total Money Market Funds — 2.7% (Cost: $1,795,602)					1,795,602
Total Options Purchased — 0.1% (Cost: $143,336)					91,986
Total Investments Before TBA Sale Commitments — 139.4% (Cost: $93,498,667)					93,249,453

Security		Par (000)		Value
TBA Sale Commitments — (23.4)%(c)
Mortgage-Backed Securities — (23.4)%
Federal Home Loan Mortgage Corp.:
3.00%, 01/15/48	USD		12	$	(11,998	)
3.50%, 01/15/33 - 01/15/48			753		(777,311	)
4.50%, 01/15/48			8		(8,504	)
Federal National Mortgage Association:
2.50%, 01/25/33			42		(41,934	)
3.00%, 01/25/33 - 02/25/48			6,121		(6,153,951	)
3.50%, 01/25/33 - 01/25/48			1,595		(1,638,411	)
4.00%, 01/25/33 - 02/25/48			4,465		(4,663,818	)
5.00%, 01/25/48			156		(167,667	)
5.50%, 01/25/48			787		(862,345	)
6.00%, 01/25/48			160		(178,944	)
Government National Mortgage Association:
3.00%, 01/15/48			203		(204,840	)
4.00%, 01/15/48			100		(104,242	)
4.50%, 01/15/48			796		(834,929	)
Total TBA Sale Commitments — (23.4)% (Proceeds: $15,653,897)					(15,648,894	)
Total Investments Net of TBA Sale Commitments — 116.0% (Cost: $77,844,770)					77,600,559
Liabilities in Excess of Other Assets — (16.0)%					(10,715,755	)
Net Assets — 100.0%				$	66,884,804

^(a)  Variable or floating rate security, which interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.

^(b)  Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

6 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

^(c)  Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Securities LLC	$	(43,505	)	$	(508	)
Barclays Capital, Inc.		181,599			(839	)
BNP Paribas SA		943,739			(1,211	)
Citigroup Global Markets Inc.		240,439			(2,298	)
Credit Suisse Securities USA LLC		397,488			1,923
Daiwa Capital Markets America, Inc.		344,000			215
Deutsche Bank Securities, Inc.		(313,503	)		(383	)
Goldman Sachs International		(677,673	)		885
JP Morgan Chase Bank		(1,348,999	)		1,138
Mizuho Securities USA, Inc.		(103,113	)		2,340
Morgan Stanley & Co., Inc.		180,351			(1,057	)
Nomura Securities International, Inc.		(98,583	)		(614	)
RBC Dain Rauscher, Inc.		1,553,808			(204	)
Wells Fargo Securities LLC		764,806			(167	)

^(d)  All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

^(e)  Annualized 7-day yield as of period end.

^(f)  During the year ended December 31, 2017, investments in issuers considered to be affiliates of the Fund for the purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 12/31/16		Net Activity		Shares Held at 12/31/17		Value at 12/31/17		Income		Net Realized Gain (Loss) (a)		Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class		701,543		1,092,260		1,793,803	$	1,793,803	$	11,627	$	4	$	—

^(a)  Includes net capital gain distributions, if applicable.

For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements

Counterparty	Interest Rate			Trade Date		Maturity Date		Face Value		Face Value Including Accrued Interest		Type of Underlying Collateral	Remaining Contractual Maturity of the Agreements
Barclays Capital, Inc.		0.75	%		12/29/2017		01/02/18	$	342,663	$	342,684	U.S. Treasury Obligations	Overnight
BNP Paribas SA		1.15	%		12/29/2017		01/02/18		3,215,975		3,216,283	U.S. Treasury Obligations	Overnight
Deutsche Bank Securities, Inc.		0.75	%		12/29/2017		01/02/18		1,801,220		1,801,332	U.S. Treasury Obligations	Overnight
Deutsche Bank Securities, Inc.		1.50	%		12/29/2017		01/02/18		1,022,000		1,022,128	U.S. Treasury Obligations	Overnight
Merrill Lynch, Pierce, Fenner & Smith, Inc.		0.45	%		12/29/2017		01/02/18		2,741,285		2,741,388	U.S. Treasury Obligations	Overnight
								$	9,123,143	$	9,123,815

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Long Contracts
U.S. Treasury Long Bond		7		03/20/18	$	1,071	$	(2,138	)
U.S. Treasury 5 Year Note		4		03/29/18		465		375
90-Day Eurodollar		14		12/17/18		3,425		(565	)
Bank Acceptance		17		12/17/18		3,307		39
90-Day Eurodollar		12		03/16/20		2,930		(5,490	)
								(7,779	)

SCHEDULE OF INVESTMENTS 7

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)
Short Contracts
Euro-Bund		5		03/08/18	$	970	$	10,001
U.S. Treasury 10 Year Note		63		03/20/18		7,815		(3,050	)
Long Gilt		5		03/27/18		845		(11,342	)
U.S. Treasury 2 Year Note		3		03/29/18		642		293
90-Day Eurodollar		1		03/18/19		244		424
90-Day Eurodollar		28		12/16/19		6,837		1,060
								(2,614	)
							$	(10,393	)

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	11,000	BRL	35,981	Barclays Bank plc		01/04/18	$	154
USD	53,100	BRL	175,132	BNP Paribas SA		01/04/18		308
USD	160	MXN	3,000	BNP Paribas SA		01/04/18		8
COP	42,002,100	USD	14,000	Barclays Bank plc		01/05/18		71
USD	14,000	MXN	269,827	Barclays Bank plc		01/05/18		282
RUB	1,775,430	USD	30,000	Bank of America NA		01/12/18		767
USD	17,000	JPY	1,910,185	BNP Paribas SA		01/12/18		39
USD	19,924	MXN	379,776	Bank of America NA		01/12/18		643
JPY	379,795,920	USD	3,360,000	Goldman Sachs International		01/16/18		12,938
USD	3,360,000	JPY	377,512,800	Bank of America NA		01/16/18		7,339
USD	14,391	MXN	275,715	Barclays Bank plc		01/22/18		422
IDR	746,515,000	USD	55,000	Deutsche Bank AG		01/29/18		99
IDR	163,392,000	USD	12,000	JP Morgan Chase Bank NA		01/29/18		60
INR	841,945	USD	13,000	Barclays Bank plc		01/29/18		164
RUB	1,021,615	USD	17,000	Bank of America NA		01/30/18		627
CAD	8,991	USD	7,000	Barclays Bank plc		02/22/18		158
NOK	116,966	USD	14,000	Bank of America NA		02/22/18		266
USD	374,000	MXN	7,282,218	Barclays Bank plc		03/21/18		8,746
USD	161,333	TRY	602,000	BNP Paribas SA		06/25/18		10,572
USD	94,629	TRY	358,000	BNP Paribas SA		08/20/18		6,504
								50,167
BRL	30,262	USD	9,300	Bank of America NA		01/04/18		(178	)
BRL	160,191	USD	49,000	BNP Paribas SA		01/04/18		(712	)
BRL	42,406	USD	13,000	Goldman Sachs International		01/04/18		(217	)
USD	7,200	BRL	24,028	BNP Paribas SA		01/04/18		(43	)
MXN	268,197	USD	14,000	HSBC Bank plc		01/05/18		(365	)
USD	14,000	COP	42,311,500	Royal Bank of Scotland		01/05/18		(175	)
USD	16,854	AUD	22,000	BNP Paribas SA		01/12/18		(312	)
USD	20,083	EUR	17,000	Royal Bank of Scotland		01/12/18		(326	)
MXN	275,715	USD	14,672	Citibank NA		01/22/18		(703	)
USD	13,000	INR	852,449	JP Morgan Chase Bank NA		01/29/18		(328	)
BRL	149,119	USD	45,100	BNP Paribas SA		02/02/18		(311	)
USD	7,000	CAD	8,984	Bank of America NA		02/22/18		(152	)
MXN	969,700	USD	50,000	JP Morgan Chase Bank NA		03/21/18		(1,363	)
TRY	602,000	USD	151,197	Citibank NA		06/25/18		(435	)
TRY	358,000	USD	88,552	HSBC Bank plc		08/20/18		(427	)
								(6,047	)
	Net Unrealized Appreciation						$	44,120

8 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Exchange-Traded Options Purchased

Description	Number of Contracts		Expiration Date		Exercise Price			Notional Amount (000)		Value
Call
90-day Eurodollar June 19 Futures		293		06/15/18		USD	98.13	USD	71,877	$21,975
Put
U.S. Treasury 10 Year Note		57		01/26/18		USD	123.00	USD	7,011	7,125
90-day Eurodollar Mar 20 Futures		51		03/16/18		USD	97.75	USD	12,463	19,763
										26,888
										$48,863

OTC Options Purchased

Description	Counterparty	Expiration Date		Exercise Price			Notional Amount (000)			Value
Call
USD Currency	Royal Bank of Scotland		02/16/18		JPY	114.00		USD	14	$	60
USD Currency	Deutsche Bank AG		03/05/18		KRW	1,156.00		USD	672		919
USD Currency	Bank of America NA		06/13/18		CHF	1.00		USD	34		219
USD Currency	BNP Paribas SA		06/13/18		CAD	1.29		USD	68		603
USD Currency	Citibank NA		06/13/18		SEK	8.53		USD	34		256
USD Currency	Deutsche Bank AG		06/13/18		JPY	113.40		USD	102		1,421
											3,478
Put
AUD Currency	HSBC Bank plc		06/13/18		USD	0.76		AUD	102		884
EUR Currency	HSBC Bank plc		06/13/18		USD	1.17		EUR	425		3,289
											4,173
										$	7,651

OTC Barrier Options Purchased

Description

Type of Option

Counterparty

Expiration Date

Exercise Price

Barrier Price/Range

Notional Amount (000)

Value

Put

EUR Currency

One-Touch

Morgan Stanley & Co. International plc

06/07/18

EUR

4.35

EUR

4.35

EUR

1

$

117

OTC Interest Rate Swaptions Purchased

Description

Paid by the Fund

Received by the Fund

Counterparty

Expiration Date

Exercise Rate

Notional Amount (000)

Value

Rate

Frequency

Rate

Frequency

Put

5-Year Interest Rate Swap, 10/16/18

2.50

%

Semi Annual

3-month LIBOR

Quarterly

Citibank NA

10/18/23

2.50

%

USD

5,700

$

35,355

Exchange-Traded Options Written

Description	Number of Contracts	Expiration Date	Exercise Price			Notional Amount (000)			Value
Call
90-day Eurodollar June 21 Futures	195	06/15/18		USD	97.88		USD	47,714	$	(35,344	)
Put
90-day Eurodollar Mar 20 Futures	51	03/16/18		USD	97.50		USD	12,431		(5,100	)
									$	(40,444	)

SCHEDULE OF INVESTMENTS 9

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Centrally Cleared Credit Default Swaps — Buy Protection

Reference Obligation/Index	Financing Rate Paid by the Fund			Payment Frequency		Termination Date		Notional Amount (000)			Value			Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
CDX.NA.IG Series 29 Version 1		1.00	%		Quarterly		12/20/22		USD	399	$	(9,622	)	$	(7,905	)	$	(1,717	)

OTC Credit Default Swaps — Buy Protection

Reference Obligation/Index	Financing Rate Paid by the Fund			Payment Frequency		Counterparty		Termination Date		Notional Amount (000)		Value			Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
Republic of the Philippines		1.00	%		Quarterly		JP Morgan Chase Bank NA		12/20/22	USD	295	$	(5,687	)	$	(4,484	)	$	(1,203	)
United Mexican States		1.00	%		Quarterly		Barclays Bank plc		12/20/22	USD	27		73			118			(45	)
												$	(5,614	)	$	(4,366	)	$	(1,248	)

Centrally Cleared Interest Rate Swaps

Paid by the Fund		Received by the Fund		Effective Date			Termination Date		Notional Amount (000)						Upfront Premium Paid (Received)			Unrealized Appreciation (Depreciation)
Rate	Frequency	Rate	Frequency									Value
7.36%	Monthly	28 day MXIBTIIE	Monthly		N/A			01/28/19		MXN	2,947	$	1,110		$	—		$	1,110
1.47%	At Termination	1 day Fed Funds	At Termination		12/19/18	(a)		03/20/19		USD	28,245		31,840			—			31,840
1 day Fed Funds	At Termination	1.47%	At Termination		12/19/18	(a)		03/20/19		USD	28,245		(31,840	)		(9,140	)		(22,700	)
3 month LIBOR	Quarterly	2.05%	Semi-Annual		11/19/18	(a)		11/19/19		USD	17,100		(29,677	)		—			(29,677	)
3 month LIBOR	Quarterly	2.05%	Semi-Annual		11/19/18	(a)		11/19/19		USD	8,880		(15,842	)		—			(15,842	)
3 month LIBOR	Quarterly	2.16%	Semi-Annual		12/06/18	(a)		12/06/19		USD	8,640		(6,505	)		—			(6,505	)
28 day MXIBTIIE	Monthly	7.32%	Monthly		N/A			02/20/20		MXN	2,559		(1,759	)		—			(1,759	)
28 day MXIBTIIE	Monthly	7.16%	Monthly		N/A			04/29/20		MXN	2,380		(2,120	)		—			(2,120	)
1.37%	Semi-Annual	3 month LIBOR	Quarterly		N/A			11/30/20		USD	2,470		54,105			—			54,105
3 month LIBOR	Quarterly	1.37%	Semi-Annual		N/A			11/30/20		USD	1,350		(29,570	)		4,867			(34,437	)
3 month LIBOR	Quarterly	2.24%	Semi-Annual		11/01/19	(a)		11/01/21		USD	1,805		(3,451	)		—			(3,451	)
2.28%	Semi-Annual	3 month LIBOR	Quarterly		11/19/20	(a)		11/19/21		USD	9,230		6,699			—			6,699
2.27%	Semi-Annual	3 month LIBOR	Quarterly		11/19/20	(a)		11/19/21		USD	17,840		14,402			—			14,402
2.34%	Semi-Annual	3 month LIBOR	Quarterly		12/07/20	(a)		12/07/21		USD	9,040		2,021			—			2,021
3 month LIBOR	Quarterly	2.31%	Semi-Annual		12/09/19	(a)		12/08/21		USD	3,580		(2,555	)		—			(2,555	)
3 month LIBOR	Quarterly	2.39%	Semi-Annual		12/19/19	(a)		12/19/21		USD	1,780		1,259			—			1,259
28 day MXIBTIIE	Monthly	7.48%	Monthly		N/A			03/07/22		MXN	431		(303	)		—			(303	)
28 day MXIBTIIE	Monthly	7.47%	Monthly		N/A			03/07/22		MXN	431		(311	)		—			(311	)
28 day MXIBTIIE	Monthly	7.45%	Monthly		N/A			03/07/22		MXN	863		(662	)		—			(662	)
3 month LIBOR	Quarterly	1.84%	Semi-Annual		N/A			08/23/22		USD	500		(6,033	)		—			(6,033	)
3 month LIBOR	Quarterly	1.88%	Semi-Annual		N/A			09/18/22		USD	300		(3,261	)		—			(3,261	)
3 month LIBOR	Quarterly	1.98%	Semi-Annual		N/A			09/22/22		USD	750		(4,915	)		—			(4,915	)
7.13%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/07/22		MXN	321		470			—			470
7.14%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/10/22		MXN	130		188			—			188
7.11%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/14/22		MXN	321		485			—			485
7.11%	Monthly	28 day MXIBTIIE	Monthly		N/A			10/14/22		MXN	424		644			—			644
3 month LIBOR	Quarterly	2.23%	Semi-Annual		N/A			12/20/22		USD	600		(109	)		—			(109	)
3 month LIBOR	Quarterly	2.13%	Semi-Annual		N/A			08/25/25		USD	15		(114	)		—			(114	)
												$	(25,804	)	$	(4,273	)	$	(21,531	)

^(a)  Forward swap.

10 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

OTC Interest Rate Swaps

Paid by the Fund		Received by the Fund			Counterparty	Effective Date			Termination Date		Notional Amount (000)		Value			Upfront Premium Paid (Received)		Unrealized Appreciation (Depreciation)
Rate	Frequency	Rate		Frequency
8.98%	At Termination		1 day BZDIOVER	At Termination	Citibank NA		01/02/18	(a)		01/02/18		BRL 105	$	(38	)	$	—	$	(38	)
9.99%	At Termination		1 day BZDIOVER	At Termination	Citibank NA		N/A			01/02/18		BRL 340		(738	)		—		(738	)
9.98%	At Termination		1 day BZDIOVER	At Termination	JP Morgan Chase Bank NA		N/A			01/02/18		BRL 340		(536	)		—		(536	)
28 day MXIBTIIE	Monthly		7.07%	Monthly	Citibank NA		N/A			11/21/18		MXN 938		(415	)		—		(415	)
28 day MXIBTIIE	Monthly		7.06%	Monthly	JP Morgan Chase Bank NA		N/A			11/21/18		MXN 1,125		(503	)		—		(503	)
28 day MXIBTIIE	Monthly		6.98%	Monthly	Citibank NA		N/A			11/28/18		MXN 1,600		(783	)		—		(783	)
28 day MXIBTIIE	Monthly		6.98%	Monthly	JP Morgan Chase Bank NA		N/A			11/28/18		MXN 908		(443	)		—		(443	)
7.02%	At Termination		1 day BZDIOVER	At Termination	Bank of America NA		N/A			01/02/19		BRL 426		(195	)		—		(195	)
7.75%	At Termination		1 day BZDIOVER	At Termination	Bank of America NA		N/A			01/02/19		BRL 275		(708	)		—		(708	)
1 day BZDIOVER	At Termination		9.25%	At Termination	Citibank NA		N/A			01/02/19		BRL 288		2,230			—		2,230
8.00%	At Termination		1 day BZDIOVER	At Termination	Citibank NA		N/A			01/02/19		BRL 274		(949	)		—		(949	)
1 day BZDIOVER	At Termination		9.28%	At Termination	JP Morgan Chase Bank NA		N/A			01/02/19		BRL 273		2,145			—		2,145
1 day BZDIOVER	At Termination		8.21%	At Termination	Bank of America NA		N/A			01/02/20		BRL 285		333			—		333
1 day BZDIOVER	At Termination		9.14%	At Termination	Bank of America NA		N/A			01/04/21		BRL 122		344			—		344
1 day BZDIOVER	At Termination		9.61%	At Termination	Bank of America NA		N/A			01/02/23		BRL 64		(46	)		—		(46	)
1 day BZDIOVER	At Termination		9.85%	At Termination	Citibank NA		N/A			01/02/23		BRL 64		188			—		188
1 day BZDIOVER	At Termination		9.84%	At Termination	Citibank NA		N/A			01/02/23		BRL 122		343			—		343
28 day MXIBTIIE	Monthly		6.32%	Monthly	Goldman Sachs International		N/A			08/06/25		MXN 640		(3,030	)		—		(3,030	)
6.31%	Monthly		28 day MXIBTIIE	Monthly	Deutsche Bank AG		N/A			08/11/25		MXN 810		3,867			—		3,867
													$	1,066		$	—	$	1,066

^(a)  Forward swap.

Centrally Cleared Inflation Swaps

Paid by the Fund

Received by the Fund

Termination Date

Notional Amount (000)

Value

Upfront Premium Paid (Received)

Unrealized Appreciation (Depreciation)

Reference

Frequency

Rate

Frequency

UK Retail Price Index All Items Monthly

At Termination

3.46%

At Termination

10/15/26

GBP 180

$

2,154

$

—

$

2,154

Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps and OTC Derivatives

	Swap Premiums Paid		Swap Premiums Received			Unrealized Appreciation		Unrealized Depreciation
Centrally Cleared Swaps(a)	$	4,867	$	(17,045	)	$	115,377	$	(136,471	)
OTC Derivatives		118		(4,484	)		9,450		(9,632	)

^(a)  Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

SCHEDULE OF INVESTMENTS 11

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Assets — Derivative Financial Instruments
Futures Contracts Net unrealized appreciation(a)	$	—	$	—	$	—	$	—	$	12,153	$	39	$	12,192
Forward foreign currency exchange contracts Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		50,167		—		—		50,167
Options purchased Investments at value — unaffiliated(b)		—		—		—		7,768		84,218		—		91,986
Swaps — centrally cleared Net unrealized appreciation(a)		—		—		—		—		113,223		2,154		115,377
Swaps — OTC Net unrealized appreciation on OTC swaps; Swap premiums paid		—		118		—		—		9,450		—		9,568
	$	—	$	118	$	—	$	57,935	$	219,044	$	2,193	$	279,290

	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Liabilities — Derivative Financial Instruments
Futures Contracts Net unrealized depreciation(a)	$	—	$	—	$	—	$	—	$	22,585	$	—	$	22,585
Forward foreign currency exchange contracts Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		6,047				—		6,047
Options written Options written, at value		—		—		—		—		40,444		—		40,444
Swaps — centrally cleared Net unrealized depreciation(a)		—		1,717		—		—		134,754		—		136,471
Swaps — OTC Net unrealized depreciation on OTC swaps; Swap premiums received		—		5,732		—		—		8,384		—		14,116
	$	—	$	7,449	$	—	$	6,047	$	206,167	$	—	$	219,663

^(a)  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

^(b)  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended 31 December, 2017, the effect of derivative financial instruments in the Statement of Operations was as follows:

	Commodity Contracts		Credit Contracts			Equity Contracts		Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts		Total
Net realized Gain (Loss) from:
Futures Contracts		—	$	—		$	—	$	—		$	(24,103	)	$	—	$	(24,103	)
Forward foreign currency exchange contracts		—		—			—		37,619			—			—		37,619
Options purchased(a)		—		—			—		(41,404	)		(116,739	)		—		(158,143	)
Options written		—		—			—		(2,423	)		74,721			—		72,298
Swaps		—		(28,248	)		—		(11,654	)		(128,749	)		—		(168,651	)
	$	—	$	(28,248	)	$	—	$	(17,862	)	$	(194,870	)	$	—	$	(240,980	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures Contracts	$	—	$	—		$	—	$	—		$	87,402		$	39	$	87,441
Forward foreign currency exchange contracts		—		—			—		38,591			—			—		38,591
Options purchased(b)		—		—			—		(18,886	)		(41,900	)		—		(60,786	)
Options written		—		—			—		—			14,180			—		14,180
Swaps		—		(2,920	)		—		—			34,693			6,295		38,068
	$	—	$	(2,920	)	$	—	$	19,705		$	94,375		$	6,334	$	117,494

^(a)  Options purchased are included in net realized gain (loss) from investments — unaffiliated.

^(b)  Options purchased are included in net change in unrealized appreciation (depreciation) on investments — unaffiliated.

12 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	4,898,897
Average notional value of contracts — short	$	15,232,023
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	2,477,560
Average amounts sold — in USD	$	2,114,276
Options:
Average value of option contracts purchased	$	44,209
Average value of option contracts written	$	13,378
Average notional value of swaption contracts purchased	$	2,350,000
Average notional value of swaption contracts written	$	7,720,000
Credit default swaps:
Average notional value — buy protection	$	875,750
Interest rate swaps:
Average notional value — pays fixed rate	$	28,585,400
Average notional value — receives fixed rate	$	32,451,857
Inflation swaps:
Average notional value — receives fixed rate	$	121,248
Total return swaps:
Average notional value — pays fixed rate	$	588,075

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	—		$	2,731
Forward foreign currency exchange contracts		50,167			6,047
Options		91,986	(a)		40,444
Swaps — Centrally cleared		3,621			—
Swaps — OTC(b)		9,568			14,116
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	155,342		$	63,338
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(52,484	)		(43,175	)
Total derivative assets and liabilities subject to an MNA	$	102,858		$	20,163

^(a)  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

^(b)  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statement of Assets and Liabilities.

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets (b)
Bank of America NA	$	10,538	$	(1,279	)	$	—	$	—	$	9,259
Barclays Bank plc		10,115		(45	)		—		—		10,070
BNP Paribas SA		18,034		(1,378	)		—		—		16,656
Citibank NA		38,372		(4,061	)		—		—		34,311
Deutsche Bank AG		6,306		—			—		—		6,306
Goldman Sachs International		12,938		(3,247	)		—		—		9,691
HSBC Bank plc		4,173		(792	)		—		—		3,381
JP Morgan Chase Bank NA		2,205		(2,205	)		—		—		—
Morgan Stanley & Co. International plc		117		—			—		—		117
Royal Bank of Scotland		60		(60	)		—		—		—
	$	102,858	$	(13,067	)	$	—	$	—	$	89,791

SCHEDULE OF INVESTMENTS 13

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

Counterparty	Derivative Liabilities Subject to MNA by Counterparty		Derivatives Available for Offset (a)			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities (c)
Bank of America NA	$	1,279	$	(1,279	)	$	—	$	—	$	—
Barclays Bank plc		45		(45	)		—		—		—
BNP Paribas SA		1,378		(1,378	)		—		—		—
Citibank NA		4,061		(4,061	)		—		—		—
Goldman Sachs International		3,247		(3,247	)		—		—		—
HSBC Bank plc		792		(792	)		—		—		—
JP Morgan Chase Bank NA		8,860		(2,205	)		—		—		6,655
Royal Bank of Scotland		501		(60	)		—		—		441
	$	20,163	$	(13,067	)	$	—	$	—	$	7,096

^(a)  The amount of derivatives available for offset is limited to the amount of assets and/or liabilities that are subject to an MNA.

^(b)  Net amount represents the net amount receivable from the counterparty in the event of default.

^(c)  Net amount represents the net amount payable from the counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments(a)	$	—		$	91,361,865		$	—	$	91,361,865
Money Market Funds		1,795,602			—			—		1,795,602
Options Purchased:
Interest rate contracts		48,863			35,355			—		84,218
Foreign currency exchange contracts		—			7,768			—		7,768
Liabilities:
TBA Sale Commitments		—			(15,648,894	)		—		(15,648,894	)
	$	1,844,465		$	75,756,094		$	—	$	77,600,559
Derivative Financial Instruments(b)
Assets:
Foreign currency exchange contracts	$	—		$	50,167		$	—	$	50,167
Interest rate contracts		12,153			122,673			—		134,826
Other contracts		39			2,154			—		2,193
Liabilities:
Credit contracts		—			(2,965	)		—		(2,965	)
Foreign currency exchange contracts		—			(6,047	)		—		(6,047	)
Interest rate contracts		(63,029	)		(143,138	)		—		(206,167	)
	$	(50,837	)	$	22,844		$	—	$	(27,993	)

^(a)  See above Schedule of Investments for values in each security type.

^(b)  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts, and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, reverse repurchase agreements of $9,123,815 are categorized as level 2 within the disclosure hierarchy.

During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2.

14 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Schedule of Investments  (continued) December 31, 2017 BlackRock U.S. Government Bond V.I. Fund

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset-Backed Securities
Investments:
Assets:
Opening Balance, as of December 31, 2016	$	1,360,300
Transfers into Level 3		—
Transfers out of Level 3(a)		(860,000	)
Accrued discounts/premiums		8
Net realized gain (loss)		381
Net change in unrealized appreciation (depreciation)(b)		(689	)
Purchases		—
Sales		(500,000	)
Closing Balance, as of December 31, 2017	$	—
Net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017(b)	$	—

^(a)  As of December 31, 2017, the Fund used significant unobservable inputs in determining the value of certain investments. As of December 31, 2017, the Fund used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

^(b)  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at December 31, 2017 is generally due to investments no longer held or categorized as Level 3 at period end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See notes to financial statements.

SCHEDULE OF INVESTMENTS 15

Statement of Assets and Liabilities

December 31, 2017

	BlackRock U.S. Government Bond V.I. Fund
ASSETS
Investments at value — unaffiliated (cost — $91,704,864)	$	91,455,650
Investments at value — affiliated (cost — $1,793,803)		1,793,803
Cash		1,256
Cash pledged:
Futures contracts		118,710
Centrally cleared swaps		167,000
Foreign currency at value (cost — $135,802)		135,760
Receivables:
Investments sold		5,459,350
TBA sale commitments		15,653,897
Capital shares sold		151,001
Dividends — affiliated		2,410
Dividends — unaffiliated		6,022
Interest — unaffiliated		285,343
Variation margin on centrally cleared swaps		3,621
Swap premiums paid		118
Unrealized appreciation on:
Forward foreign currency exchange contracts		50,167
OTC swaps		9,450
Prepaid expenses		293
Other assets		15,653
Total assets		115,309,504
LIABILITIES
Options written at value (premium received $63,472)		40,444
TBA sale commitments at value (proceeds $15,653,897)		15,648,894
Reverse repurchase agreements at value		9,123,815
Payables:
Investments purchased		23,282,962
Capital shares redeemed		180
Income dividends		86,234
Distribution fees		346
Variation margin on futures contracts		2,731
Investment advisory fees		45,348
Officer’s and Directors’ fees		3,966
Other affiliates		559
Other accrued expenses		169,058
Swap premiums received		4,484
Unrealized depreciation on:
Forward foreign currency exchange contracts		6,047
OTC swaps		9,632
Total liabilities		48,424,700
NET ASSETS	$	66,884,804
NET ASSETS CONSIST OF
Paid-in capital	$	71,404,783
Undistributed net investment income		108,200
Accumulated net realized loss		(4,435,412	)
Net unrealized appreciation (depreciation)		(192,767	)
NET ASSETS	$	66,884,804
NET ASSET VALUE
Class I — Based on net assets of $65,100,220 and 6,434,695 shares outstanding, 300 million shares authorized, $0.10 par value.	$	10.12
Class III — Based on net assets of $1,784,584 and 176,523 shares outstanding, 100 million shares authorized, $0.10 par value.	$	10.11

See notes to financial statements.

16 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Statement of Operations

Year Ended December 31, 2017

	BlackRock U.S. Government Bond V.I. Fund
INVESTMENT INCOME
Dividends — affiliated	$	11,627
Dividends — unaffiliated		176
Interest — unaffiliated		1,807,780
Total investment income		1,819,583
EXPENSES
Investment advisory		351,496
Transfer agent — class specific		135,971
Pricing		81,656
Custodian		78,152
Professional		70,076
Printing		42,405
Accounting services		31,908
Directors and Officer		21,263
Transfer agent		5,000
Distribution — class specific		4,767
Registration		1
Miscellaneous		1,127
Total expenses excluding interest expense		823,822
Interest expense		99,529
Total expenses		923,351
Less:
Fees waived and/or reimbursed by the Manager		(72,054	)
Transfer agent fees reimbursed — class specific		(134,825	)
Total expenses after fees waived and/or reimbursed		716,472
Net investment income		1,103,111
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — unaffiliated		(1,138,288	)
Borrowed bonds		(1,142	)
Capital gain distributions from investment companies — affiliated		4
Forward foreign currency exchange contracts		37,619
Foreign currency transactions		(16,001	)
Futures contracts		(24,103	)
Options written		72,298
Swaps . . . . .		(168,651	)
		(1,238,264	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		1,016,674
Borrowed bonds		1,005
Forward foreign currency exchange contracts		38,591
Foreign currency translations		633
Futures contracts		87,441
Options written		14,180
Swaps . . . . .		38,068
		1,196,592
Net realized and unrealized loss		(41,672	)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	1,061,439

See notes to financial statements.

FINANCIAL STATEMENTS 17

Statements of Changes in Net Assets

	BlackRock U.S. Government Bond V.I. Fund
	Year Ended December 31,
	2017			2016
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	1,103,111		$	1,191,810
Net realized gain (loss)		(1,238,264	)		1,294,260
Net change in unrealized appreciation (depreciation)		1,196,592			(1,045,699	)
Net increase in net assets resulting from operations		1,061,439			1,440,371
DISTRIBUTIONS TO SHAREHOLDERS(a)
From net investment income:
Class I		(1,434,556	)		(1,449,685	)
Class III		(34,383	)		(67,977	)
Decrease in net assets resulting from distributions to shareholders		(1,468,939	)		(1,517,662	)
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from capital share transactions		(7,899,331	)		(9,641,543	)
NET ASSETS
Total decrease in net assets		(8,306,831	)		(9,718,834	)
Beginning of year		75,191,635			84,910,469
End of year	$	66,884,804		$	75,191,635
Undistributed net investment income, end of year	$	108,200		$	257,205

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

18 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Financial Highlights

(For a share outstanding throughout each period)

	BlackRock U.S. Government Bond V.I. Fund
	Class I
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of year	$	10.18		$	10.23		$	10.39		$	10.04		$	10.71
Net investment income(a)		0.16			0.15			0.15			0.19			0.13
Net realized and unrealized gain (loss)		(0.01	)		(0.01	)		(0.10	)		0.39			(0.48	)
Net increase (decrease) from investment operations		0.15			0.14			0.05			0.58			(0.35	)
Distributions:(b)
From net investment income		(0.21	)		(0.19	)		(0.21	)		(0.23	)		(0.25	)
From net realized gain		—			—			—			—			(0.07	)
Total distributions		(0.21	)		(0.19	)		(0.21	)		(0.23	)		(0.32	)
Net asset value, end of year	$	10.12		$	10.18		$	10.23		$	10.39		$	10.04
Total Return:(c)
Based on net asset value		1.52	%		1.33	%		0.45	%		5.87	%		(3.25	)%
Ratios to Average Net Assets:
Total expenses		1.31	%		1.02	%		0.96	%		0.89	%		0.90	%
Total expenses after fees waived and/or reimbursed		1.01	%		0.76	%		0.73	%		0.69	%		0.69	%
Total expenses after fees waived and/or reimbursed excluding interest expense		0.87	%		0.70	%		0.70	%		0.66	%		0.68	%
Net investment income		1.58	%		1.43	%		1.41	%		1.88	%		1.24	%
Supplemental Data:
Net assets, end of year (000)	$	65,100		$	72,433		$	83,016		$	92,975		$	103,218
Portfolio turnover rate(d)		1,052	%		1,140	%		1,581	%		1,388	%		1,956	%

^(a)  Based on average shares outstanding.

^(b) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(d)  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,
	2017			2016			2015			2014			2013
Portfolio turnover rate (excluding MDRs)		681	%		705	%		991	%		956	%		1,415	%

See notes to financial statements.

FINANCIAL HIGHLIGHTS 19

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock U.S. Government Bond V.I. Fund (continued)
	Class III
	Year Ended December 31,																		Period 05/09/2012 (a) to 12/31/2012
	2017			2016			2015			2014			Period 07/15/2013 (a) to 12/31/2013			Period 01/01/2013 to 07/09/2013 (b)
Net asset value, beginning of period	$	10.18		$	10.22		$	10.39		$	10.04		$	10.19		$	10.71		$	10.77
Net investment income(c)		0.13			0.11			0.13			0.17			0.11			0.01			0.08
Net realized and unrealized gain (loss)		(0.02	)		—			(0.12	)		0.38			(0.09	)		(0.38	)		0.05
Net increase (decrease) from investment operations		0.11			0.11			0.01			0.55			0.02			(0.37	)		0.13
Distributions:(d)
From net investment income		(0.18	)		(0.15	)		(0.18	)		(0.20	)		(0.10	)		(0.15	)		(0.15	)
From net realized gain		—			—			—			—			(0.07	)		—			(0.04	)
Total distributions		(0.18	)		(0.15	)		(0.18	)		(0.20	)		(0.17	)		(0.15	)		(0.19	)
Net asset value, end of period	$	10.11		$	10.18		$	10.22		$	10.39		$	10.04		$	10.19			10.71
Total Return:(e)
Based on net asset value		1.10	%		1.08	%		0.08	%		5.56	%		0.26	%(f)		(3.60	)%(f)		1.24	(f)
Ratios to Average Net Assets:
Total expenses		1.45	%		1.27	%		1.11	%		1.09	%		0.86	%(g)		1.66	%(g)		1.14	%(g)
Total expenses after fees waived and/or reimbursed		1.30	%		1.08	%		1.00	%		1.00	%		0.85	%(g)		0.85	%(g)		1.01	%(g)
Total expenses after fees waived and/or reimbursed excluding interest expense		1.17	%		1.01	%		0.97	%		0.98	%		0.84	%(g)		0.85	%(g)		0.99	%(g)
Net investment income		1.30	%		1.09	%		1.27	%		1.63	%		2.30	%(g)		0.25	%(g)		1.20	%(g)
Supplemental Data:
Net assets, end of period (000)	$	1,785		$	2,758		$	1,894		$	750		$	225		$	—	(b)	$	29
Portfolio turnover rate(h)		1,052	%		1,140	%		1,581	%		1,388	%		1,956	%		1,956	%		1,529	%

^(a)  Recommencement of operations.

^(b)  There were no Class III Shares outstanding from July 9,2013 to July 14, 2013. On July 15, 2013, operations recommenced.

^(c)  Based on average shares outstanding.

^(d)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(e)  Where applicable, excludes insurance-related fees and expenses and assumes the reinvestment of distributions.

^(f)  Aggregate total return.

^(g)  Annualized.

^(h)  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended December 31,												Period 07/15/2013 to 12/31/2013			Period 01/01/2013 to 07/09/2013			Period 05/09/2012 to 12/31/2012
	2017			2016			2015			2014
Portfolio turnover rate (excluding MDRs)		681	%		705	%		991	%		956	%		1,415	%		1,415	%		1,119	%

See notes to financial statements.

20 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements

1. ORGANIZATION

BlackRock Variable Series Funds, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company is organized as a Maryland corporation that is comprised of 20 separate funds.

The funds offer shares to insurance companies for their separate accounts to fund benefits under certain variable annuity and variable life insurance contracts. The financial statements presented are for BlackRock U.S. Government Bond V.I. Fund (the “Fund”). The Fund is classified as diversified. Class I and Class III Shares have equal voting, dividend, liquidation and other rights, except that only shares of the respective classes are entitled to vote on matters concerning only that class. In addition, Class III Shares bear certain expenses related to the distribution of such shares. Class III Shares recommenced on May 9, 2012, were redeemed on July 9, 2013 and recommenced on July 15, 2013.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., TBA commitments, futures contracts, forward foreign currency exchange contracts, options written and swaps), or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Recent Accounting Standards: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statement of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Fund’s presentation in the Statement of Cash Flows.

In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Fund.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

NOTESTO FINANCIAL STATEMENTS 21

Notes to Financial Statements  (continued)

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time) (or, if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the period end). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but the Fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option.

• OTC options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

• Swap agreements are valued utilizing quotes received daily by the Fund’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

• To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

22 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach	(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii)   recapitalizations and other transactions across the capital structure; and (iii)  market multiples of comparable issuers.
Income approach	(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit and/or market risks; (ii)   quoted prices for similar investments or assets in active markets; and (iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach.	(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii)  relevant news and other public sources; and (iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

• Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

NOTESTO FINANCIAL STATEMENTS 23

Notes to Financial Statements  (continued)

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a fund’s initial investment in the IOs may not fully recoup.

Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are typically issued by the U.S. Government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. Stripped mortgage-backed securities may be privately issued.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a fund mitigate its counterparty risk, TBA commitments may be entered into by a fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a fund, if any, is noted in the Schedule of Investments.

Typically, a fund is permitted to sell, re-pledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a fund are not fully collateralized, contractually or otherwise, a fund bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: A fund may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realizes gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a fund is required to purchase may decline below the agreed upon repurchase price of those securities.

24 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

Borrowed Bond Agreements: Repurchase agreements may be referred to as borrowed bond agreements when entered into in connection with short sales of bonds. In a borrowed bond agreement, a fund borrows a bond from a counterparty in exchange for cash collateral. The agreement contains a commitment that the security and the cash will be returned to the counterparty and a fund at a mutually agreed upon date. Certain agreements have no stated maturity and can be terminated by either party at any time. Earnings on cash collateral and compensation to the lender of the bond are based on agreed upon rates between a fund and the counterparty. The value of the underlying cash collateral approximates the market value and accrued interest of the borrowed bond. To the extent that a borrowed bond transaction exceeds one business day, the value of the cash collateral in the possession of the counterparty is monitored on a daily basis to ensure the adequacy of the collateral. As the market value of the borrowed bond changes, the cash collateral is periodically increased or decreased with a frequency and in amounts prescribed in the borrowed bond agreement. A fund may also experience delays in gaining access to the collateral.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker-dealers in which a fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a fund continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a fund would still be required to pay the full repurchase price. Further, a fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statement of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a fund to the counterparties are recorded as a component of interest expense in the Statement of Operations. In periods of increased demand for the security, a fund may receive a fee for the use of the security by the counterparty, which may result in interest income to a fund.

For the year ended December 31, 2017, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the Fund were $12,241,322 and 0.81%, respectively.

Borrowed bond agreements and reverse repurchase transactions are entered into by a fund under Master Repurchase Agreements (each, an “MRA”), which permit a fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a fund. With borrowed bond agreements and reverse repurchase transactions, typically a fund and the counterparty under the MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a fund receives or posts securities as collateral with a market value in excess of the repurchase price to be paid or received by a fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

As of period end, the following table is a summary of the Fund’s reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

Counterparty	Reverse Repurchase Agreements		Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a)			Net Exposure Due (to)/from Counterparty (b)
Barclays Capital, Inc.	$	342,684	$	(342,684	)	$	—
BNP Paribas S.A.		3,216,283		(3,216,283	)		—
Deutsche Bank Securities, Inc.		2,823,460		(2,823,460	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		2,741,388		(2,741,388	)		—
	$	9,123,815	$	(9,123,815	)	$	—

^(a)  Net collateral with a value of $9,130,794 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

^(b)  Net exposure represents the net receivable (payable) that would be due from/to the counterparty in the event of a default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a fund’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a fund’s obligation to repurchase the securities.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

NOTESTO FINANCIAL STATEMENTS 25

Notes to Financial Statements  (continued)

Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: The Fund enters into forward foreign currency exchange contracts to gain or reduce exposure, to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Fund purchases and writes call and put options to increase or decrease its exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value – unaffiliated and options written at value, respectively, in the Statement of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statement of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statement of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Fund writes a call option, such option is typically “covered,” meaning that it holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

• Swaptions — The Fund purchases and writes options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Fund’s holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

• Foreign currency options — The Fund purchases and writes foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

In purchasing and writing options, the Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that it may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: The Fund enters into swap contracts to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular

26 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statement of Operations.

• Credit default swaps — Credit default swaps are entered into credit default swaps to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk).

The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Fund will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• Total return swaps — The Fund enters into total return swaps to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed income) with another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Fund receives payment from or makes a payment to the counterparty.

• Interest rate swaps — The Fund enters into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

• Forward swaps — The Fund enters into forward interest rate swaps and forward total return swaps. In a forward swap, the Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

NOTESTO FINANCIAL STATEMENTS 27

Notes to Financial Statements  (continued)

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Company, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:

Average Daily Net Assets	Investment Advisory Fees
First $1 Billion		0.50	%
$1 Billion — $3 Billion		0.47
$3 Billion — $5 Billion		0.45
$5 Billion — $10 Billion		0.44
Greater than $10 Billion		0.43

Distribution Fees: The Company, on behalf of the Fund, entered into a Distribution Agreement and a Distribution Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing distribution fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Class III.

For the year ended December 31, 2017, the class specific distribution fees borne directly by Class III were $4,767.

Transfer Agent: The Manager, on behalf of the Fund, entered into agreements with insurance companies and other financial intermediaries (“Service Organizations”), some of which may be affiliates. Pursuant to these agreements, the Service Organizations provide the Fund with administrative, networking, recordkeeping, sub-transfer agency and shareholder services to sub-accounts they service. For these services, the Service Organizations receive an annual fee per shareholder account, which will vary depending on share class and/or net assets of Fund shareholders serviced by the Service Organizations, which is shown as transfer agent — class specific. For the year ended December 31, 2017, the Fund did not pay any amounts to affiliates in return for these services.

In addition, the Fund pays the transfer agent, which is not an affiliate, a fee for issuance, transfer and redemption of shares and the opening and maintenance of shareholder accounts, which is included in transfer agent in the Statement of Operations.

For the year ended December 31, 2017, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Class I		Class III	Total
$	133,790	$2,181	$	135,971

Expense Limitations and Waivers: The Manager has agreed to voluntarily waive 0.10% of its investment advisory fee by the Fund. This voluntary waiver may be reduced or discontinued at any time without notice. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $71,226.

With respect to the Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2017, the amount waived was $828.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2018. The contractual agreement may be terminated upon 90 days’ notice by a majority of independent directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Directors”) or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived by the Manager.

For the year ended December 31, 2017, the Fund reimbursed the Manager $943 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Manager has contractually agreed to reimburse transfer agent fees in order to limit such expenses as a percentage of average daily net assets as follows:

Class I	0.00	%
Class III	0.06	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation through April 30, 2018, unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund.

28 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

These amounts waived and/or reimbursed are shown as transfer agent fees reimbursed — class specific in the Statement of Operations. For the year ended December 31, 2017, class specific expense waivers and/or reimbursements were as follows:

	Class I		Class III		Total
Transfer Agent Fees Reimbursed	$	133,790	$	1,035	$	134,825

With respect to the Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Class I	Class III
1.25%		1.50	%

The Manager has agreed not to reduce or discontinue this contractual expense limitation prior to April 30, 2018 unless approved by the Board, including a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended December 31, 2017, there were no fees waived and/or reimbursed by the Manager.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets, to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the year ended December 31, 2017, the Fund did not participate in the Interfund Lending Program.

Officers and Directors: Certain directors and/or officers of the Company are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Company’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.

Other Transactions: The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2017, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

Purchases	$	4,949,423
Sales		5,080,267
Net Realized Gain		(14,260	)

7. PURCHASES AND SALES

For the year ended December 31, 2017, purchases and sales of investments, including paydowns and mortgage dollar rolls and excluding short-term securities, were as follows:

	Purchases		Sales
Non-U.S Government Securities	$	637,385,184	$	643,797,430
U.S. Government Securities		177,530,259		176,858,654

For the year ended December 31, 2017, purchases and sales related to mortgage dollar rolls were $287,555,890 and $287,536,428, respectively.

8. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended December 31, 2017. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of December 31, 2017, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

NOTESTO FINANCIAL STATEMENTS 29

Notes to Financial Statements  (continued)

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the accounting for swap agreements, net paydown losses and foreign currency transactions were reclassified to the following accounts:

Paid-in capital	$	672
Undistributed net investment income		216,823
Accumulated net realized loss		(217,495	)

The tax character of distributions paid was as follows:

	12/31/2017		12/31/2016
Ordinary income	$	1,468,939	$	1,517,662

As of December 31, 2017, the tax components of accumulated net earnings (losses) were as follows:

Undistributed ordinary income	$	152,161
Capital loss carryforward		(4,410,129	)
Net unrealized losses(a)		(262,011	)
	$	(4,519,979	)

^(a)  The difference between book-basis and tax-basis net unrealized losses was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain futures, options and foreign currency contracts and the accounting for swap agreements.

As of December 31, 2017, the Fund had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains of $4,410,129.

As of December 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	93,511,307
Gross unrealized appreciation	$	558,947
Gross unrealized depreciation		(837,080	)
Net unrealized depreciation	$	(278,133	)

9. BANK BORROWINGS

The Company, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2018 unless extended or renewed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2017, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

30 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Notes to Financial Statements  (continued)

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

For OTC options purchased, the Fund bears the risk of loss of the amount in the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty, to perform. The Fund may be exposed to counterparty credit risk with respect to options written to the extent the Fund deposits collateral with its counterparty to a written option.

With exchange-traded options purchased, futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: The Fund invests a significant portion of its assets in fixed income securities and/or uses derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. 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. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 12/31/2017						Year Ended 12/31/2016
Share Class	Shares			Amount			Shares			Amount
Class I
Shares sold		191,307		$	1,952,213			298,687		$	3,117,025
Shares issued in reinvestment of distributions		143,198			1,460,104			142,901			1,488,883
Shares redeemed		(1,014,221	)		(10,349,406	)		(1,443,563	)		(15,070,332	)
Net decrease		(679,716	)	$	(6,937,089	)		(1,001,975	)	$	(10,464,424	)
Class III
Shares sold		98,593		$	1,004,254			869,182		$	9,025,554
Shares issued in reinvestment of distributions		3,378			34,390			6,710			70,048
Shares redeemed		(196,442	)		(2,000,886	)		(790,237	)		(8,272,721	)
Net decrease/increase		(94,471	)	$	(962,242	)		85,655		$	822,881
Total Net Decrease		(774,187	)	$	(7,899,331	)		(916,320	)	$	(9,641,543	)

At December 31, 2017, 1,963 Class III Shares of the Fund were owned by BlackRock HoldCo 2, Inc., an affiliate of the Fund.

12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

NOTESTO FINANCIAL STATEMENTS 31

Report of the Independent Registered Public Accounting Firm

To the Shareholders of BlackRock U.S. Government Bond V.I. Fund and the Board of Directors of

BlackRock Variable Series Funds, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock U.S. Government Bond V.I. Fund of BlackRock Variable Series Funds, Inc. (the “Fund”), as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

February 19, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

32 2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Glossary of Terms Used in this Report

Currency
AUD	Australian Dollar
BRL	Brazilian Real
CAD	Canadian Dollar
CLP	Chilean Peso
CNY	Chinese Yuan
COP	Colombian Peso
EUR	Euro
GBP	British Pound
HUF	Hungarian Forint
IDR	Indonesian Rupiah
KRW	South Korean Won
MXN	Mexican Peso
MYR	Malaysia Ringgit
RUB	Russian Ruble
SEK	Swedish Krona
TRY	Turkish Lira
TWD	Taiwan Dollar
USD	United States Dollar
ZAR	South African Rand
Portfolio Abbreviations
CDI	One-Day Brazil Interbank Deposit
CLO	Collateralized Loan Obligation
LIBOR	London Interbank Offered Rate
OTC	Over-the-counter
TBA	To-be-announced
TIIE	Interbank Equilibrium Interest Rate
UK RPI	United Kingdom Retail Price Index

GLOSSARYOF TERMS USEDINTHIS REPORT 33

Director and Officer Information

Independent Directors (a)
Name  (b) Year of Birth	Position(s) Held (Length of Service) (c)	Principal Occupation(s) During Past Five Years	Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting  of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Robert M. Hernandez 1944	Chair of the Board and Director (Since 2007)	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director and non-executive Chairman, RTI International Metals, Inc. from 1990 to 2015; Director, TE Connectivity (electronics) from 2006 to 2012.	27 RICs consisting of 98 Portfolios	Chubb Limited (insurance company); Eastman Chemical Company
James H. Bodurtha 1944	Director (Since 2007)	Director, The China Business Group, Inc. (consulting and investing firm) from 1996 to 2013 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980; Director, ICI Mutual since 2010.	27 RICs consisting of 98 Portfolios	None
Bruce R. Bond 1940	Director (Since 2007)	Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	27 RICs consisting of 98 Portfolios	None
Donald W. Burton 1944	Director (Since 2007)	Managing General Partner, The Burton Partnership, LP (an investment partnership) from 1979 to 2017; Managing General Partner, The Burton Partnership (QP), LP (an investment partnership) since 2000; Managing General Partner, The South Atlantic Venture Funds from 1983 to 2012; Director, IDology, Inc. (technology solutions) since 2006; Director, Knology, Inc. (telecommunications) from 1996 to 2012; Director, Capital Southwest (financial) from 2006 to 2012; Director, Burton Grill (restaurant) since 2013; Director, PDQ South Texas (restaurant) since 2013; Director, ITC/Talon (data) since 2015.	27 RICs consisting of 98 Portfolios	None
Honorable Stuart E. Eizenstat 1943	Director (Since 2007)	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca-Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide, LLC (risk management) from 2007 to 2012; Member of the International Advisory Board GML Ltd. (energy) since 2003.	27 RICs consisting of 98 Portfolios	Alcatel-Lucent (telecommunications); Global Specialty Metallurgical; UPS Corporation (delivery service); Ferroglobe (Metals)
Henry Gabbay 1947	Director (Since 2007)	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	27 RICs consisting of 98 Portfolios	None
Lena G. Goldberg 1949	Director (Since 2016)	Senior Lecturer, Harvard Business School since 2008; Executive Vice President, FMR LLC/Fidelity Investments (financial services) from 2007 to 2008, Executive Vice President and General Counsel thereof from 2002 to 2007, Senior Vice President and General Counsel thereof from 1999 to 2002, Vice President and General Counsel thereof from 1997 to 1999, Senior Vice President and Deputy General Counsel thereof in 1997, and Vice President and Corporate Counsel thereof from 1996 to 1997; Partner, Sullivan & Worcester LLP from 1985 to 1996 and Associate thereof from 1979 to 1985.	27 RICs consisting of 98 Portfolios	None

DIRECTORAND OFFICER INFORMATION

Director and Officer Information  (continued)

Independent Directors (a)
Name  (b) Year of Birth	Position(s) Held (Length of Service) (c)	Principal Occupation(s) During Past Five Years	Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting  of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Henry R. Keizer 1956	Director (Since 2016)	Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, Montpelier Re Holdings, Ltd. (publicly held property and casual reinsurance) from 2013 to 2015; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) from 2004 to 2005 and 2010 to 2012; Director, KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010.	27 RICs consisting of 98 Portfolios	Hertz Global Holdings (car rental); WABCO (commercial vehicle safety systems)
John F O’Brien 1947	Director (Since 2007)	Trustee, Woods Hole Oceanographic Institute since 2003 and Chairman thereof from 2009 to 2015; Co-Founder and Managing Director, Board Leaders LLC (director education) since 2005.	27 RICs consisting of 98 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)
Donald C. Opatrny 1952	Director (Since 2015)	Trustee, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; Member of the Board and Investment Committee, University School since 2007; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; President and Trustee, the Center for the Arts, Jackson Hole since 2011; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Trustee, Artst or (a Mellon Foundation affiliate) from 2010 to 2015; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014.	27 RICs consisting of 98 Portfolios	None
Roberta Cooper Ramo 1942	Director (Since 2007)	Shareholder and Attorney, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Director, ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; Vice President, Santa Fe Opera (non-profit) since 2011; Chair, Think New Mexico (non-profit) since 2013; Chairman of the Board, Cooper’s Inc. (retail) from 1999 to 2011.	27 RICs consisting of 98 Portfolios	None

2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Director and Officer Information  (continued)

Interested Directors (a)(d)
Name  (b) Year of Birth	Position(s) Held (Length of Service) (c)	Principal Occupation(s) During Past Five Years	Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Robert Fairbairn 1965	Director (Since 2015)	Senior Managing Director of BlackRock, Inc. since 2010; oversees BlackRock’s Strategic Partner Program and Strategic Product Management Group; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s Human Capital Committee; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016; Head of BlackRock’s Global Client Group from 2009 to 2012; Chairman of BlackRock’s international businesses from 2007 to 2010.	27 RICs consisting of 98 Portfolios	None
John M. Perlowski 1964	Director (Since 2015), President and Chief Executive Officer (Since 2010)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009.	127 RICs consisting of 316 Portfolios	None
(a) The address of each Director is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
(b) Each Independent Director holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Company’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. The Board may determine to extend the terms of Independent Directors on a case-by-case basis, as appropriate. Interested Directors serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Company’s by-laws or statute, or until December 31 of the year in which they turn 72.
(c)  Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Directors as joining the Corporation’s board in 2007, those Directors first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Honorable Stuart E. Eizenstat, 2001; Robert M. Hernandez, 1996; John F. O’Brien, 2005; and Roberta Cooper Ramo, 1999.
(d) Messrs. Fairbairn and Perlowski are both “interested persons,” as defined in the 1940 Act, of the Company based on their positions with BlackRock, Inc. and its affiliates. Mr. Perlowski is also a board member of the BlackRock Closed-End Complex and the BlackRock Equity-Liquidity Complex.

DIRECTORAND OFFICER INFORMATION

Director and Officer Information  (continued)

Officers Who Are Not Directors (a)
Name (b) Year of Birth	Position(s) Held (Length of Service)	Principal Occupation(s) During Past Five Years
Jennifer McGovern 1977	Vice President (Since 2014)	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer (Since 2007)	Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay M. Fife 1970	Treasurer (Since 2007)	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer (Since 2014)	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer (Since 2015)	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary (Since 2012)	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
(a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
(b) Officers of the Company serve at the pleasure of the Board.

Further information about the Company’s Officers and Directors is available in the Company’s Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.

Effective December 31, 2017, Roberta Cooper Ramo retired and Donald W. Burton resigned as Directors of the Company.

Investment Adviser	Custodians
BlackRock Advisors, LLC Wilmington, DE 19809	JPMorgan Chase Bank, N.A.(c) New York, NY 10179 The Bank of New York Mellon(c) New York, NY 10286
Sub-Advisers
BlackRock International Limited(a) Edinburgh, United Kingdom	Brown Brothers Harriman & Co.(d) Boston, MA 02109
	Accounting Agent and Transfer Agent
BlackRock Asset Management North Asia Limited(b) Hong Kong	BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809
	Independent Registered Public Accounting Firm
BlackRock (Singapore) Limited(b) 079912 Singapore	Deloitte & Touche LLP Philadelphia, PA 19103
	Distributor
	BlackRock Investments, LLC New York, NY 10022
	Legal Counsel
	Willkie Farr & Gallagher LLP New York, NY 10019
	Address of the Funds
	100 Bellevue Parkway Wilmington, DE 19809

^(a)  For BlackRock International V.I. Fund and BlackRock Managed Volatility V.I Fund.

^(b)  For BlackRock Managed Volatility V.I. Fund.

^(c)  For all Funds except BlackRock Global Allocation V.I. Fund, BlackRock International V.I. Fund and BlackRock Large Cap Growth V.I. Fund.

^(d)  For BlackRock Global Allocation V.I. Fund, BlackRock International V.I. Fund and BlackRock Large Cap Growth V.I. Fund.

2017 BLACKROCK ANNUAL REPORTTO SHAREHOLDERS

Additional Information

General Information

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com/prospectus/insurance; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com/prospectus/insurance or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safe-guarding their non-public 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 non-public 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 websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by lawor as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

DIRECTORAND OFFICER INFORMATION

This report is only for distribution to shareholders of the Funds of BlackRock Variable Series Funds, Inc. Past performance results shown in this report should not be considered a representation of future performance. Investment return and principal value of non-money market fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. An investment in the BlackRock Government Money Market V.I. Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market funds. Statements and other information herein are as dated and are subject to change.

VS-12/17-AR

Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to clarify an inconsistency as to whom persons covered by the code should report suspected violations of the code. The amendment clarifies that such reporting should be made to BlackRock Advisors, LLC’s (“Investment Adviser” or “BlackRock”) General Counsel, and retains the alternative option of anonymous reporting following “whistleblower” policies. Other non-material changes were also made in connection with this amendment. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls 1-800-441-7762.

Item 3 – Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

Robert M. Hernandez

Henry R. Keizer

Stuart E. Eizenstat

Bruce R. Bond

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.

Item 4 – Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

	(a) Audit Fees		(b) Audit-Related Fees1		(c) Tax Fees2		(d) All Other Fees
Entity Name	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End	Current Fiscal Year End	Previous Fiscal Year End
BlackRock Advantage Large Cap Core V.I. Fund	$30,826	$31,506	$0	$0	$13,107	$13,107	$0	$0
BlackRock Advantage Large Cap Value V.I. Fund	$22,024	$23,244	$0	$0	$13,107	$13,107	$0	$0
BlackRock Advantage U.S. Total Market V.I. Fund	$27,226	$28,446	$0	$0	$13,107	$13,107	$0	$0
BlackRock Basic Value V.I. Fund	$37,528	$38,748	$0	$0	$13,107	$13,107	$0	$0

2

BlackRock Capital Appreciation V.I. Fund	$24,701	$25,921	$0	$0	$13,107	$13,107	$0	$0
BlackRock Equity Dividend V.I. Fund	$19,627	$20,847	$0	$0	$8,160	$8,160	$0	$0
BlackRock Global Allocation V.I. Fund	$51,332	$53,359	$0	$0	$20,000	$20,000	$0	$0
BlackRock Global Opportunities V.I. Fund	$35,870	$37,090	$0	$0	$9,690	$9,690	$0	$0
BlackRock Government Money Market V.I. Fund	$24,302	$23,652	$0	$0	$9,792	$9,792	$0	$0
BlackRock High Yield V.I. Fund	$39,959	$44,307	$0	$0	$14,025	$14,025	$0	$0
BlackRock International V.I. Fund	$30,107	$31,327	$0	$0	$14,127	$14,127	$0	$0
BlackRock iShares Alternative Strategies V.I. Fund	$29,006	$28,356	$0	$0	$13,850	$13,850	$0	$0
BlackRock iShares Dynamic Allocation V.I. Fund	$29,006	$28,356	$0	$0	$13,850	$13,850	$0	$0
BlackRock iShares Dynamic Fixed Income V.I. Fund	$25,859	$24,939	$0	$0	$13,107	$13,107	$0	$0
BlackRock iShares Equity Appreciation V.I. Fund	$25,859	$24,939	$0	$0	$13,107	$13,107	$0	$0
BlackRock Large Cap Focus Growth V.I. Fund	$22,024	$23,244	$0	$0	$13,107	$13,107	$0	$0
BlackRock Managed Volatility V.I. Fund	$29,427	$31,455	$0	$0	$8,976	$8,976	$0	$0
BlackRock S&P 500 Index V.I. Fund	$30,286	$31,506	$0	$0	$13,107	$13,107	$0	$0
BlackRock Total Return V.I. Fund	$50,924	$40,992	$0	$0	$15,402	$15,402	$0	$0
BlackRock U.S. Government Bond V.I. Fund	$38,352	$31,990	$0	$0	$15,402	$15,402	$0	$0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):

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	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$0	$0
(c) Tax Fees2	$0	$0
(d) All Other Fees3	$2,129,000	$2,154,000

¹ The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.

² The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.

³ Non-audit fees of $2,129,000 and $2,154,000 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:

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	Current Fiscal Year	Previous Fiscal Year
Entity Name	End	End
BlackRock Advantage Large Cap Core V.I. Fund	$13,107	$13,107
BlackRock Advantage Large Cap Growth V.I. Fund	$13,107	$13,107
BlackRock Advantage U.S. Total Market V.I. Fund	$13,107	$13,107
BlackRock Basic Value V.I. Fund	$13,107	$13,107
BlackRock Capital Appreciation V.I. Fund	$13,107	$13,107
BlackRock Equity Dividend V.I. Fund	$8,160	$8,160
BlackRock Global Allocation V.I. Fund	$20,000	$20,000
BlackRock Global Opportunities V.I. Fund	$9,690	$9,690
BlackRock Government Money Market V.I. Fund	$9,792	$9,792
BlackRock High Yield V.I. Fund	$14,025	$14,025
BlackRock International V.I. Fund	$14,127	$14,127
BlackRock iShares Alternative Strategies V.I. Fund	$13,850	$13,850
BlackRock iShares Dynamic Allocation V.I. Fund	$13,850	$13,850
BlackRock iShares Dynamic Fixed Income V.I. Fund	$13,107	$13,107
BlackRock iShares Equity Appreciation Fund	$13,107	$13,107
BlackRock Large Cap Focus Growth V.I. Fund	$13,107	$13,107
BlackRock Managed Volatility V.I. Fund	$8,976	$8,976
BlackRock S&P 500 Index V.I. Fund	$13,107	$13,107
BlackRock Total Return V.I. Fund	$15,402	$15,402
BlackRock U.S. Government Bond V.I. Fund	$15,402	$15,402

Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored and advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:

Current Fiscal Year	Previous Fiscal Year
End	End
$2,129,000	$2,154,000

These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

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(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5 – Audit Committee of Listed Registrants – Not Applicable

Item 6 – Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable

Item 8 – Portfolio Managers of Closed-End Management Investment Companies – Not Applicable

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable

Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

Item 11 – Controls and Procedures

(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in

Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 – Disclosure of Securities Lending Activities for Closed-End Management Investment Companies – Not Applicable to the registrant.

Item 13 – Exhibits attached hereto

(a)(1) Code of Ethics – See Item 2

(a)(2) Certifications – Attached hereto

(a)(3) Not Applicable

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(a)(4) Not Applicable

(b) Certifications – Attached hereto

7

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock Variable Series Funds, Inc.
By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Variable Series Funds, Inc.

Date: February 28, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Variable Series Funds, Inc.

Date: February 28, 2018

By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Variable Series Funds, Inc.

Date: February 28, 2018

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